Brew News

Brew Blog’s picks of news stories from the beer business and beyond.

Supermarket beer volume fell 0.4 percent during the four weeks ended April 26, according to beer sales statistics from Nielsen. Miller volume share fell 0.5 points while dollar share fell 0.3 points. Anheuser-Busch volume share declined 0.1 points and dollar share dropped 0.4 points. Coors volume and dollar share both increased by 0.8 points. Imports gained 0.1 points of volume share but dollar share slipped by 0.2 points. Craft volume share was up 0.3 points and dollar share was up 0.7 points.

The entry price for a Super Bowl commercial will be $3 million next year, the Wall Street Journal reports. But longtime buyers won’t necessarily have to pay that much. From the story: “Anheuser-Busch, for example, has locked in a rate of about $2 million for each of its spots, according to a person familiar with the matter.”

The St. Louis Post-Dispatch explores the potential impact of an economic slowdown on the beer business.

Constellation Cuts Outlook

Acquisition costs a factor.

Constellation Brands -- which markets brands including Svedka vodka and Robert Mondavi wines and owns a stake in Corona Extra’s importer -- on Tuesday cut its earnings outlook for its fiscal 2008.

Constellation cut its outlook to $1.06 to $1.11 per share. Previously it had forecast earnings of $1.16 to $1.24 per share.

The reduction was largely driven by costs related to its recent acquisition of Fortune Brands Inc.’s wine business.

Constellation reported third quarter earnings of 55 cents per share, in line with Wall Street estimates.

Beer Marketer’s Insights focuses on the performance of Crown Imports, the U.S. marketer of Corona and other Grupo Modelo brands (Crown has a stake in Crown). While sales-to-retailers were up low single digits, third quarter revenues slipped and fourth quarter comps were described as “difficult.”

Sopranos Wine?

Family business goes in new direction.

Fans of the recently departed HBO series The Sopranos can now ponder the show’s finale over a glass of wine named after the fictional crime family.

Duggan’s Distillers Products Corporation has received a number of label approval certificates from the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau for a line of Sopranos wines.

So far Duggan’s has received certificates for three Chiantis, two Pino Grigios and a Pinot Noir.

The labels bill the wines as being imported by the “Vesuvio Wine Company” – an allusion to an Italian restaurant that was a frequent setting for the show.

A label application can be seen here.

An image label can be seen here.

Wine, Spirits Keeping Up Pressure on Beer, Analyst Says

Cuts A-B’s stock price target, earnings forecast.

The domestic beer industry should expect continued pressure from wine and spirits, Morgan Stanley analyst Bill Pecoriello wrote in a report released Sunday.

The analyst identifies four trends as headwinds for the industry. First, among people who drink an alcohol beverage every week, the percentage of beer drinkers is declining while wine and spirits are increasing their share (beer still leads, however). Second, spirits is now the favorite alcohol beverage among weekly consumers. Third, beer is losing share of drinking occasions to wine and spirits. Finally, health conscious consumers are skewing toward wine.

The trends were identified in Morgan Stanley’s annual survey of consumer alcohol beverage trends.

Pecoriello also wrote that imports and crafts are expected to drive 200 percent of the beer category’s growth through 2009. Light beer is expected to continue to grow but that will be offset by weakness in the premium and economy segments. Overall the category is expected to grow at a 0.8 percent clip.

Based on the survey’s findings, Pecoriello reduced A-B’s stock price target and earnings per share forecast.

The reduction was based on the growing pressure on A-B’s core brands and A-B’s need to spend more to compete effectively, Pecoriello said.

“We are reducing our annual domestic beer volume forecast for A-B to down 0.5% from flat,” he wrote. “We believe that over the next several years, A-B will have to spend more to fight the pressure from wine and spirits, import and craft beers, and improve the image of its core trademarks.”

Wine, Spirits Gaining Trade Support

Poses challenge for beer.

The growing consumer interest in wine and spirits is being noticed by supermarket retailers, according to data from ACNielsen.

Wine and spirits are gaining increasing levels of feature ad, display and discount support. Indeed, wine is closing in on beer in total levels of support.

Wine already leads beer when it comes to store displays that aren’t connected to feature support. Spirits continues to make gains in this class.

Spirits also racked up a significant increase in discount-only support, broadening its incentive offers to consumers.

The upshot: The increased support will put pressure on the mainstream light segment, which risks losing ad and display support to wine and spirits.

The December 2006 issue of Brew Magazine laid out the economic case for retailers to focus on mainstream beers. A big reason is their velocity.

Mainstream beers turn much faster than wine and spirits. Speed counts for retailers because it fuels the gross margin return on inventory investment And every dollar invested annually in mainstream beer returns nearly $9 to the retailer, according to the consultancy Willard Bishop. That’s more than seven times the return for spirits or wine.

Go here to see a PDF version of the December 2006 issue of Brew.

Drop a line here if you'd like a free subscription to the print version of Brew.

Constellation Shares Plummet

Tough UK wine market causes it to miss Wall St. forecasts.

Constellation Brands Inc.’s shares nosedived by more than 11 percent on Thursday after it reported missing Wall Street’s earning expectations and lowered earnings targets.

Constellation, which is the world’s biggest winemaker and the U.S. importer of Corona Extra, said results were weakened by a tough UK wine market. One reason for the rough environment: Inexpensive Australian wines have fueled fierce competition. The release can be seen here.

Constellation reported earnings of 58 cents per share, not counting acquisition costs, charges and unusual items, for the three months ended November 30. The Street had been expecting 60 cents.

Moreover, the company said it expected fiscal 2007 earnings to come in between $1.65 per share and $1.70 per share, not counting acquisition costs. Analysts had forecast $1.75 per share.

Shares slid by 11.44 percent to $25.15.

Morgan Stanley analyst Bill Pecoriello wrote in a report that “we would remain on the sidelines for now given continued risk to the '08 consensus and lack of a shorter term catalyst. … We would need to see a lower share price or more comfort on stabilization of UK trends and Australian wine prices to become more constructive on the shares.”

California Wines Locking Up Premium Aisle, Report Says

“Fifteen dollars is the new $10.”

California wines increasingly are dominating the high-end wine market, according to a report in the Los Angeles Times.

California vintners control 85 percent of share for wines that cost $15 or more, the report says, citing a wine industry analysis by MKF Research.

The vintners are benefiting from the same trading up trend that has driven sales of spirits as well as craft and imported beers. From the story:

“Fifteen dollars is the new $10,” said Barbara Insel, managing director of MKF Research.

The report notes that California wines are losing ground in the $8 and below segment, due to competition from the likes of Australia’s Yellow Tail.

Has Spirits Growth Peaked? report asks

Crafts, imports may be biting into cocktails.

Beer Business Daily leads off the week with a provocative suggestion: That the rate of growth for spirits is decelerating (subscription only).
BBD dips into some pop cultural cues suggesting that spirits’ grip on the public imagination is weakening. He points to a piece in the Wall Street Journal (subscription only) over the weekend that sang the praises of the Shandy (beer mixed with lemonade) as a summer drink. Also, fewer characters in TV shows or movies are swilling Cosmopolitans.
BBD then turns to a recent report by Morgan Stanley analyst William Pecoriello that argues crafts and imports are biting into the growth of spirits.
From the report:
“Spirits growth is moderating as expected….. The same trends driving imports and craft [beers] drive our forecast for wine and spirits to significantly outperform beer …There exists a significant overlap among craft beer consumer and wine and spirits consumers. On the margin the acceleration in imports and crafts has slowed Spirits. Success of craft beers proves industry can target women and consumers “lost” to wine and spirits.”
Wine and spirits aren't going away. But the relative success of imports and crafts against wine and spirits once again shows that brands that positioned themselves at the high end (as opposed to the lowbrow tack of too much beer advertising of recent years) have thrived. And it points to the need for differentiated marketing within the beer category, with brewers emphasizing how their products offer a distinct experience.

Constellation CEO Nets $1.2 Million Bonus

Total cash compensation up 7.4%.

Richard Sands, CEO of Constellation Brands, pocketed a $1.2 million bonus for the year ended Feb. 28, up 6.5 percent from the year-earlier period, according to the company’s proxy statement filed on June 19 with the Securities and Exchange Commission.

Sands’ total cash compensation increased 7.4 percent to $2.5 million. That includes a salary of $1 million, up 5 percent from the year-earlier period, according to the filing.

The top exec of the marketer of wine, spirits and (though an importing arrangement) Corona Extra also realized about $13.9 million from exercising options to acquire 633,600 shares during the period, according the proxy.

Sands received 156,200 shares of class A stock underlying stock options, according to the filing.

The proxy can be viewed here.

What’s Good for the Grape…

Beer industry borrows ideas from vintners in marketing high-end brews.

Advertising Age (subscription only) describes how craft brewers are successfully using wine marketing techniques to push pricey beers. They’re introducing reserve lines, different vintages and, in the case of Allagash Brewing Co., using chardonnay grapes, the story says.

Ad Age quotes Ray Daniels, director of craft beer marketing for the Brewers Association.

"There's no question the people in this segment have looked to wine for lessons on how to market better," [Mr. Daniels said.]

These moves by craft brewers fit in with the broader trading up trend in the alcohol beverage world. It’s a trend Miller Brewing Company parent SABMiller plc is trying to capitalize on with a global push to position Peroni Nastro Azzurro at the upper end of the import segment.

Wine & Sunshine

Wine on the rise in Florida.

The Palm Beach Post gives an overview of the growing popularity of wine in Florida. The Sunshine State is the second-biggest wine market in the country, after California, with $1.8 billion in sales.

One reason for the growth, according to the story: Retailers are focusing on wine. For instance, regional grocer Publix has launched a free quarterly wine publication called "Publix Grape." Superstore chain Total Wine & More has cracked the South Florida market. A South Florida retailer called WineStyles Inc. has opened 60 stores nationwide with another 45 in the pipeline.

The growing popularity of wine at retail underscores how the beer industry must fight for share of mind and shelf at retail. One of the big selling points that needs to be made is that beer turns significantly faster with just a slightly lower margin than wine and spirits (from the September 2005 issue of "Brew" magazine).

Another important point from the story: It’s not just middle-aged consumers who are imbibing:

The Wine Market Council says the so-called Millennial generation – those born after 1976 – are showing the same interest in wine as Baby Boomers, who fueled a previous wine boom in the '70s and early '80s.

Oenophiles in Omaha

Yellow Tail sales jump in heartland

A story in the Omaha World-Herald (registration required) lays out how the growing popularity of wine crosses all sorts of lines, regional and otherwise.

And driving this trend: the low-price Australian brand Yellow Tail.

The story quotes Omaha retailers who say consumers can’t get enough of the wine brand, which retails for $5 to $7 a bottle. And it quotes one Robyn Kondrack, a 27-year-old pharmacy student, who raves about the brand.

Both their whites and their reds – just their entire selection of wines – are just really phenomenal. Some companies, I just buy one type of wine, but as far as the Yellow Tail, any bottle of wine you buy from them is excellent.

It’s that populist appeal that has driven Yellow Tail to be a wine industry phenomenon since it hit the U.S. five years ago. According to the story, W.J. Deutsch & Sons Ltd., which owns 50% of the brand, shipped 7.5 million cases in 2005, up from 225,000 in 2001.