AB spending about flat in 2001, sez AB. CMR data showed 7% decline, but while CMR?s numbers for network and spot tv are mostly accurate, CMR doesn?t catch lotsa local radio, stadium signage and outdoor ads, sez AB. (Other suppliers have said the same.) AB dominates those areas and spent lots extra there in non-Olympics yr 2001. Means CMR also misses lotsa distribs? cents per case expenditures which are local. CMR reported AB total spending of $328 mil; around $150 mil low as AB total spending near $500 mil. (CMR doesn?t track stadium signs.)

SAB only moved out of South Africa and listed on London exchange in 99. SAB ceo Graham Mackay first met Miller prexy John Bowlin at London brewing conference in 2000. Their 1st serious discussions were 14 mos ago at a Chicago steakhouse. "We personally clicked?. We professionally clicked," Miller prexy John Bowlin told Mil Jnl Sentinel. A month later they met with PM execs. From beginning, Graham?s proposal involved PM keeping a stake. PM "had to get comfortable with that idea?. It was ?don?t call us, we?ll call you," Graham told JS. Then Graham got call a few mos later and ball got rolling. By Jan, they thought they had deal worked out. "You have no idea what relief there is once it?s done," John said.

Here's a judge who's not buying "alcohol is alcohol is alcohol." "From the beginning of this country," a state court judge in Illinois recently wrote, "laws that tax or regulate liquor have identified at least wine, spirits and beer as different classifications?. There is historical precedent as well as Illinois Supreme Court rulings that support this Court?s decision" that state liquor control act that taxes beer, wine and spirits differently does not violate state "uniformity" law. That uniformity law requires "like" objects be taxed uniformly. But with these few lines, circuit ct judge in Cook County tossed an Illinois taxpayer?s attempt to equalize alc bev taxes. Judge ruled state?s 1999 tax hike did violate other state laws, but he didn?t buy the equivalence argument. The lawsuit, filed by an individual taxpayer (without apparent distiller backing), charged that the state?s different "classifications" of beer, wine and spirits were "not supported by real and substantial differences" and that differential tax rates did not support the state?s interest in temperance. Interestingly, AB had intervened in case late last year (any tax change would affect its branch in Chi, it said). It filed lengthy brief that detailed "concrete product differences" between bevs, as well as legal, historical and regulatory differences. Both sides hired economic experts. In the end, judge didn?t do much analysis---most of 37-page decision focused on how legislators improperly rammed tax hike through---but he agreed with AB. Differences between alc bevs are "real and substantial," he concluded. All states that regulate alc bevs regulate them differently, he added, and history supports "different classifications." Obviously, this would have been much bigger story if it went other way or was heard in US Sup Ct, but good to get an anti-equivalence legal opinion.

Diageo execs recently told analysts that ready-to-drink segment could grow to 10% of US mkt or more by 2007. But other research and data raise questions whether such large #s likely. For Diageo, Smirnoff Ice in US a home run that will provide nearly 25% of Diageo EBIT growth (earnings before income taxes) in fiscal yr ending June 2002, according to recent estimate by HSBC. HSBC analyst expects Smirnoff EBIT to grow $101 mil in US while giant Diageo total alc bev EBIT will jump $432 mil. And Smirnoff Ice volume also continues strong so far in 2002. Up 178% in supers thru Mar 31^st, according to IRI, tho "only" 79% last 4 weeks. But it has held 1 share of volume for 4-week periods since last Jun, points out Morgan Stanley analyst Bill Pecoriello. So Smirnoff not really building additional share in last 9 mos or so. It?s still way up compared to last yr as it laps tiny intro numbers and faces onslaught of competitive brands. How are those new brands doing in early going? Bacardi at 0.5 share of cases while SKYY Blue at 0.3 share in most recent 4-week period thru Mar 31^st in supers. Mike?s slowed to 25% growth for 4 weeks, compared to 36% yr-to-date; held at 0.3 share. Those brands dominate segment which totals about 2.5 share of volume and 4 share of $$ in supers YTD. Not all these brands (let alone other smaller brands) likely to do well as several more high profile entries will hit this summer. Already lotsa earlier entries like Zima, Doc, Tequiza, Hooch, and Rick?s Spiked takin? it on chin. Emerging clutter was subject of Apr 22 Ad Age article which had sub-head: "Some warn category is in for a hangover." Extensive survey of 1300 consumers and several focus groups by Morgan Stanley also suggested that key young male drinker not really "adopting" malternatives and that winning over this demographic will be necessary in order to reach lofty projections. A final issue: state regulators? concerns about what?s in malternatives ain't going away, even tho BATF formalized position that suppliers gotta remove words "vodka," "rum," etc from labels by fall. In fact, Tenn ABC just wrote suppliers that changing label alone "is insufficient to support the products? current manner of distribution." Its "initial determination": malternatives which contain alcohol from spirits flavors "are alcoholic beverages and are being improperly distributed and sold" in Tenn. Required specific alcohol content/formulation info on products by Jun 18. Stay tuned.

Tho Reuters, Mil Jnl, AP etc reported Miller deal with SAB "imminent," turns out "no certainty" deal will get done, PM?s incoming ceo Louis Camilleri told Wall St on April 17, the very day deal widely expected to be announced. Many distribs and execs also believed deal virtually done. At NBWA/Brewers Spring Legis Conf, word of upcoming announcement was rampant and as it turns out incorrect. As it met with its distribs at NBWA, Miller didn?t say one word officially about deal. Immediately following, at Miller distrib council meeting, Miller execs just reissued statement PM had already released confirming negotiations and would say no more. Both SAB and PM have consistently been circumspect in their public statements about deal. So what gives? Hard to say, but there's talk of renewed 3d party interest. Meanwhile, Miller employees and distribs in limbo as peak-selling season approaches.

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Miller "continued to show improvement" with "gains in both volume and income for the 2d quarter in a row," said incoming PM ceo Louis Camilleri. Turnaround is "on plan," he added. Miller oper income up $6 mil, 5% to $130 mil, even with "increased marketing expenses." (Can?t figure per-bbl income because don?t know what Miller makes on Pabst contract production.) And revs jumped a surprising $105 mil, 9.4% to $1.2 bil. While Miller volume up 150,000 bbls, 1.6%, that gain attributable to pipeline-filling on SKYY Blue. Yet core brands also up 1.6%, with only Gen Draft down. Still, all was not rosy. PM took a $23 mil charge for "separation programs and asset impairment." That dropped "beer net" to $107 mil, down 14%. Miller quietly had early retirement program in late 2001 (as did AB and Coors). That?s the "separation program." But which assets were impaired? No comment from Miller or PM. Despite Miller?s recent improvement, it continued to lose share in supers. Down 0.5 share of cases thru Mar 31^st, according to IRI. Miller Lite and High Life each up 0.1 share, but Gen Draft down 0.2 share. Lite gains accelerated to 14% and 0.4 share last 4 weeks as avg price paid dropped 11 cents, 1% to $15.47, 73 cents below Bud Light.