## SHOW NOTES

**Top Stories**

- **Pernod Ricard & Brown-Forman confirm merger talks** — potential $31B combined entity; Citi puts deal odds at 50/50; Jefferies projects $450M in synergies; governance and balance sheet challenges remain

- **E. & J. Gallo closes $775M Four Roses acquisition** — highest price ever for a Kentucky bourbon distillery; returns brand to US family ownership after 83 years

- **Diageo North America CEO Sally Grimes departs suddenly** — replaced by 30-year veteran John O'Keefe; comes as Diageo US spirits sales fall 11.6%

- **Southern Glazer's acquires ~22M ABI beer cases in under a year** — Clare Rose, Eagle Rock, and ABI's NY distributorship; building parallel beer empire

- **Reyes Beverage Group acquires RNDC operations across 11 markets** — names Brian Albenze as market president

**Market Data**

- US bev-alc volume fell 5% in 2025 (IWSR); off-premise dollar sales down 2.7% in latest 4-week period (NIQ)

- Spirits ex-prepared cocktails: -6.1% dollars, -4.8% volume

- Wine: -5.1% dollars, -5.9% volume

- Beer: -1.3% dollars, -3.0% volume (improving sequentially)

- Prepared cocktails: +5.4% dollars — sole growth category

- Spirits-based RTDs: +35% value, +36% volume

- RTD share of total bev-alc: 6% (2019) ? 13% (2025)

- Only 54% of Americans report drinking alcohol (Gallup — new low)

**American Whiskey**

- Production down 28% YoY through August 2025; lowest since 2018

- 16.1M aging barrels in Kentucky — all-time record

- Exports down 19% ($250M decline); EU exports -35%, Canada -70%

- Jim Beam, Diageo, Brown-Forman all curtailing production; MGP contract business cut by more than half

- Green River lays off head distiller; LF Heritage ordered into foreclosure; Goodwood seeks merger

**Flavored Bev-Alc Power Rankings**

- Top 10 vendors control 81.2% of dollar sales

- BuzzBallz: $794M (+50.1%); Cutwater: $585M (+100.5%); BeatBox: $413M (+31.4%); Surfside: $191M (+115%)

- High-ABV (8%+) sub-segment: 36.9% of total, up 19.3% to $5.5B

**Wine**

- California 2025 crush: 2.62M tons (above expectations); 18 months of supply projected

- 38M US beer/spirits drinkers cite taste aversion as barrier to wine

- DtC wines above $50 = 71% of total shipment value (up from 52% in 2020)

- Imported wine volumes down ~8% Oct-Jan vs. domestic wines down 3%

**M&A & Deals**

- Tilray completes BrewDog acquisition at £41M (~$54.5M)

- Firestone Walker acquires Trumer Pils US rights from Gambrinus

- Hood River Distillers acquires Crater Lake Spirits

- Constellation acquires remaining HOPWTR stake

- KDP completes JDE Peet's acquisition; planning separation into Coffee Co. and Beverage Co.

- Sysco acquires Jetro Restaurant Depot for $29.1B

- Breakthru Beverage enters hemp THC beverage distribution in Minnesota

**Key Consumer & Macro Signals**

- Jefferies Consumer Pulse: 89 (lowest since Nov 2023)

- 31% of drinkers cite financial pressure as moderation driver

- GLP-1 drugs: 23% of users drink less dining out; 39% drink less overall

- Gen Z unemployment: 9.2%; cocktail prices exceeding $20 dampening on-premise occasions

**Legal & Regulatory**

- Oz Trading permanently enjoined from counterfeit Modelo/Corona labels

- Tito's Vodka ordered to pay $749K Maine back taxes

- ABI pays $2.3M Fairfield brewery emissions penalty

- TTB recommends delaying Q1 2026 CBMA claims due to data error

- Colorado bev-alc fee bill defeated in committee

- Treasury Wine Estates: shares down 63%; near-$1B US asset write-down flagged

**Major Themes This Week:**

- **Distribution consolidation accelerates:** Reyes Beverage Group expands RNDC acquisition to 10 states plus D.C.; SGWS acquires Clare Rose on Long Island; A-B InBev acquires Advance Beverage in Bakersfield, CA; SGWS faces federal indictment of former executives

- **Off-premise sales still declining:** Total alcohol dollars down -2.4% (NIQ 4-week) to -3.4% (TD Cowen 2-week); spirits ex-RTDs deepest at -6.6%; wine -5.3%; beer most resilient at -0.8%

- **RTDs are the only growth category:** Prepared cocktails +5.4% in dollars; Cutwater +116.3%, Surfside +240.3%, BuzzBallz +32.3%

- **Non-alcoholic beer surging:** +18.1% in latest Circana week, +9.1% in NIQ 4-week data

**Notable Company Moves:**

- **Constellation Brands:** Modelo accelerated to +6.9%, Pacifico +33.2%; Jefferies raised price target to $162; Hispanic consumer sentiment improving

- **Tilray:** Acquiring BrewDog's US assets (Columbus brewery/pubs, Las Vegas brewpub), completing global BrewDog brand ownership

- **Sazerac:** Acquired Dirty Shirley RTD brand, adding to portfolio alongside BuzzBallz, Buffalo Trace, Fireball, Southern Comfort, SVEDKA

- **Boston Beer:** New $25M share buyback plan; $50M total with prior plan; ~$215M remaining on $1.6B authorization

- **Brown-Forman:** Named Jim Peters (ex-Whirlpool) as new CFO, effective March 31; focus on operational discipline

- **Diageo:** New CEO Dave Lewis receives first LTIP; Jefferies models -12% North America EBIT in F27; shares at 25% discount to staples peers

- **Celsius/Alani Nu:** Combined share gained 141 bps to 15.7%; Alani Nu alone +58.9%

**Supply & Trade:**

- **California grape crush:** 2.76M tons — lowest since 1994; 23% below 5-year average; 57,000 acres removed; crop value down 16% to $2.414B

- **Italian wine exports to US:** Down -9.2% in value; H2 2025 down -23%; bottled red wine -28%

- **US TBA inventories:** Hit lowest level since Sept 2022 but remain 37% above 2019 average; prolonged normalization expected

**Consumer & Macro:**

- **Health-forward demand:** 58% of consumers scrutinize ingredients; 52% pay premium for wellness; 66% choosing lower-sugar options (EY survey)

- **NRF projects +4.4% US retail sales growth** in 2026 to $5.6 trillion; premium segments expected to outpace value

- **Scope Ratings:** Beer industry in "long-term structural stagnation"; pricing power exhausted

**Regulatory:**

- **New York wine-in-grocery legislation** faces unified opposition from UFCW and Metropolitan Package Store Association

**Legal:**

- **Uncle Nearest:** Bankruptcy petitions dismissed; receiver alleges $200M+ in debt; potential $75K sanctions against founder Fawn Weaver; receivership expansion pending; defamation countersuit filed

**Key Themes This Week:**

- US alcohol consumption hits record-low 54% of adults; structural demographic shift, not cyclical downturn

- Off-premise dollar sales declining across nearly all segments; prepared cocktails and RTDs the sole growth category

- Non-alcoholic beer continues double-digit growth but shows early signs of maturation

**Major Company Moves:**

- **Reyes Beverage Group** expands RNDC acquisition to 11 states (adding AZ, CO, LA, OK, TX); closing expected May 2026

- **Tilray Brands** acquires global BrewDog brand, Scottish brewery, and 11 UK pubs for ~$44M (~$66/bbl)

- **Diageo** outlines RTD-first growth strategy under new CEO Sir Dave Lewis; meaningful results not expected before FY2027

- **Brown-Forman** downgraded by Bernstein to Market Perform; wins Sixth Circuit labor ruling invalidating NLRB Cemex standard

- **A-B InBev** shares near five-year highs; spirits portfolio now 3% of US revenue, growing at 2x category rate

- **Boston Beer** closing Angel City brewery in LA (66 layoffs); brand sale has not materialized

- **Mercer Wine Estates** acquires four Washington wine brands from Avallé

- **Johnson Brothers** expands distribution partnership with Maisons Marques & Domaines into Colorado

- **Barboursville Vineyards** (VA) sold to investor group at 50th anniversary

**Wine Industry Crisis:**

- $1B+ revenue loss in 2025; ~6M case production drop; CA vineyard footprint down to ~477K acres

- Jackson Family Wines, E&J Gallo, Mission Bell Winery closures and layoffs

- DTC shipments fell 10% in 2024 — steepest decline ever recorded

- Wine at-home CPI in deflation at -1.5% YoY

**Craft Beer Update:**

- YTD craft dollar sales cooled to +0.3% (from +2.3% in Jan); volume now -1.6%

- Olfactory Brewing (SF) and Rotten Little Bastard (SC) filed Chapter 7 bankruptcy

- Standouts: Voodoo Ranger Fruit Force (+59.7% L4W), Georgetown Bodhizafa (+17.5%), Athletic Brewing (+18.3%)

**Legal & Regulatory:**

- Federal grand jury indicts five former Southern Glazer's employees in Albertsons bribery scheme (2016–2024)

- Uncle Nearest receivership deepens; Jay-Z's $20M secret loan surfaces; Farm Credit alleges fraud; federal ruling pending

- SCOTUS poised to rule on Arizona DTC wine shipping law

- New York opens retail-to-retail wine and liquor sales (up to 6 bottles/week)

- Florida Supreme Court ends 2026 cannabis ballot initiative

- Sixth Circuit Ream v. Treasury case could legalize home distilling

**Macro & Consumer Data:**

- Feb nonfarm payrolls: -92K; unemployment: 4.4%; CPI near 3%

- Wells Fargo expects 50bps of Fed rate cuts (June, September)

- NFIB Small Business Optimism declined for second straight month

- Kroger, Costco, BJ's post mixed retail results

- PwC: consumers willing to pay ~9.7% sustainability premium

- University of Evansville study: alcohol brand associations are culturally learned, not physiological

**Big Takeaways:**

1. Portfolio diversification across RTD, NA, and spirits is now a structural imperative — not a growth strategy

2. Wine's contraction is simultaneous across DTC and traditional distribution; surviving producers must pivot to experiential and premium DTC models

3. The Reyes-RNDC deal reshapes middle-tier economics across 11 states; affected suppliers must engage proactively before May close

4. Legal and compliance risk is elevated on multiple fronts; TTB trade practice enforcement should be treated as an active organizational priority

**Key Themes This Week:**

- Structural US alcohol market contraction deepens across spirits, beer, and wine

- RTD/Prepared Cocktails surge 30%+ as the only consistent growth category

- Southern Glazer's federal bribery indictment sends shockwaves through distribution

- Diageo abandons premiumization playbook; cuts hospitality team and dividend

- Tequila growth story stalls: Casamigos -24%, Jose Cuervo -15%

- Wine industry in worst structural correction in decades

**Major Corporate Moves:**

- AB InBev closes BeatBox acquisition for up to $490M

- Four Loko parent Phusion Projects exploring ~$400M sale via JPMorgan

- Tilray acquires BrewDog global IP and UK operations for £33M

- Brown-Forman ends Pabst FMB partnership, brings RTDs in-house

- Constellation Brands targets 75M cases for Pacifico by 2030

**Earnings & Financial Highlights:**

- Brown-Forman Q3 beats estimates but flags 100-150bps FY27 margin headwind; shares hit 52-week low

- Becle Q4 net sales -14.1%; US/Canada revenue -8.4%

- Campari full-year organic sales +2.4%; adjusted operating earnings +5.3%

- Monster Beverage writes off $232M of $330M CANarchy investment

- Treasury Wine Estates takes ~$550M US impairment

**Market Data (NIQ through Feb 21):**

- Total alcohol: -2.3% dollars, -3.3% volume

- Spirits ex-RTD: -4.9% dollars, -3.7% volume

- Beer/FMB/Cider/Seltzer: -2.2% dollars, -3.8% volume

- Wine: -3.8% dollars, -5.1% volume

- Spirits-based RTDs: +30.3% dollars, +33.5% volume

- Energy drinks: +16.6% dollars, +10.2% volume

**Brand Standouts:**

- Cutwater +160%, Sun Cruiser +247%, Surfside +87% (RTD)

- Pacifico +19% volume (7th consecutive year of double-digit growth)

- Victoria +16% depletions; Michelob Ultra +4.4%

- Alani Nu +81.1% (energy); Ghost Energy +37.6%

- Bud Light -9.7%; Heineken Original -13%; Casamigos -23.8%

**Wine & Spirits Industry Distress:**

- 40,000+ California vineyard acres targeted for removal

- Gallo, Constellation, Jackson Family all closing facilities

- Breakthru Beverage: 500 layoffs; Speyside Bourbon Cooperage: facility closure

- Uncle Nearest: $220M+ in alleged debts; receivership deepens

- Aloria Vineyards files Chapter 11; Arista Winery ends production

**Consumer Trends:**

- 54% of US adults report drinking — lowest in ~90 years

- Weekly consumption: 2.8 drinks, lowest since 1996

- 53% believe moderate drinking is harmful (up from 28% in 2018)

- Private label liquor unit sales +4.4%; Gen Z share rising rapidly

**Regulatory & Legal:**

- TTB issues AI advertising guidance for beverage alcohol

- Bardstown Bourbon faces whistleblower discrimination lawsuit

- Mississippi ABC warehouse disruption strains retailers statewide

- Former Napa winemaker sentenced for appellation fraud

**Key Themes This Week:**

- US bev-alc market showing tentative recovery; January 2026 comps turned positive for first time in over a year

- RTD cocktails dominate growth: spirits-based RTDs +39.4%, wine-based RTDs +23.7%

- Premium spirits correction deepening: Diageo US sales -6.8%, MGP brown goods -52%

- Generational consumption shift accelerating; binge drinking among 21-34 year olds down ~3.9 million people over decade

- Regulatory uncertainty compounding across THC, tariffs, distribution, and state-level wine sales

**Notable Stories:**

- **Diageo** — New CEO Dave Lewis plans sweeping leadership overhaul; halves dividend; signals pivot away from premiumization; shares drop ~13%

- **MGP Ingredients** — FY25 sales collapse 24%; 2026 guidance misses consensus by wide margin; shares fall 21% intraday

- **Uncle Nearest** — Receivership escalates; ~$200M total debt; emergency asset sales underway; March federal court ruling expected

- **Stoli Group** — Amber Beverage Group confirms default; no permanent CEO since July 2025

- **Molson Coors** — Horizon 2030 strategy with $450M savings program; BofA downgrades to Underperform; M&A targets discussed

- **Boston Beer** — Q4 loss narrows; gross margin improves 360bps; 2026 guidance below consensus; tariff uncertainty flagged

- **Celsius Holdings** — Q4 revenue +117% YoY on Alani Nu strength; competitive pressure on bev-alc among younger consumers

- **Southern Glazer's & Breakthru Beverage** — Both announce workforce reductions

- **THC beverages** — Federal ban effective November 2026; industry mobilizing for legislative fix before summer recess

- **US wine exports** — Collapse 33.5% to $850M; Canada exports down 76.8%

- **California wine** — Major closures at Jackson Family Wines, Gallo, Foley, Constellation; Treasury Wine Estates pauses dividend

- **NA beer** — Growth decelerating; Michelob Ultra Zero +210%, Athletic Brewing holds lead but growth slows

- **Convenience stores** — Spirits +5.4%; THC beverages +134% to $200.5M; retailers cutting alcohol SKUs for THC shelf space

- **Supreme Court tariff ruling** — IEEPA authority struck down; effective rate drops to ~13%; Section 301 investigations pending

- **KDP/JDEP** — Acquisition targeting early April close; ~$9B debt, $8.5B equity, $4.5B convertible preferred

- **Key brand performers** — Cutwater, BuzzBallz, Surfside, BeatBox, Sun Cruiser (RTD); Modelo, Pacifico, Michelob Ultra (beer)

- **Distribution** — Barton & Guestier signs five-year exclusive with Southern Glazer's; Mississippi ABC warehouse in crisis

- **People** — Daniel Duckhorn passes at 87; Melanie Batchelor named William Grant US President; Robert Cullins elevated at Illva Saronno; Brandon Lieb named Aguasol CEO

- **Retail** — Sprouts Farmers Market plans 40+ new stores; NY wine-in-grocery legislation opposed; CA distribution law challenged

- **Compliance** — TTB "bottle marrying" prohibition gains national attention; risk reminder for on-premise operators

- **Wholesale inventories** — 43% above 2019 average per Evercore ISI; inventory-to-sales ratio remains elevated

**Big Takeaways:**

1. RTDs are redefining the volume story — growth is concentrated among scaled brands with major distribution networks

2. The US spirits correction is deeper and longer than consensus; MGP's guidance suggests no bottom until at least mid-2027

3. Regulatory and trade headwinds are compounding — THC ban, tariffs, state-level battles all demand proactive engagement

4. The generational shift away from alcohol consumption is structural, not cyclical — energy drinks, fitness, and moderation are permanent competitive forces

## SHOW NOTES

**Key Leadership & Corporate News**

- Constellation Brands CEO transition: Nicholas Fink succeeds Bill Newlands effective April 13, 2026

- Heineken announces 5,000-6,000 job cuts (7% of workforce) over two years; targets €400-500M annual savings

- AB InBev FY25 EBITDA at $21.2B; guides FY26 organic growth of 4-8%

- Coca-Cola consolidates Red Tree Beverages and BodyArmor under North American Operating Unit

**M&A Activity**

- E.&J. Gallo acquiring Four Roses Bourbon from Kirin for $775M

- Crimson Wine Group acquires Raeburn brand (~250K cases) from Purple Brands

- Carolina Premium Beverage and United Beverages NC merging to form 18M-case United Carolina Beverages

**Financial Distress & Restructuring**

- Uncle Nearest: $164M total debt; receiver alleges $30M revenue overstatement, unpaid taxes since 2018

- Stoli USA: Judge orders Chapter 11 trustees for orderly asset sale

- RNDC layoffs continue (~100 in FL, ~40 in TX); potential sale of 7 markets to Reyes Beverage Group

**Market Performance (4 weeks ending Jan. 31)**

- Total Alcohol: $7.2B (+0.6% dollars); 136M cases (-0.2% volume)

- RTD: +8.8% dollars, +3.0% volume

- Beer: +0.9% dollars, -0.4% volume

- Wine: +0.3% dollars, -1.4% volume

- Spirits: -2.8% dollars, -1.3% volume

- NA Beer: +7.0% dollars, +5.7% volume

**Wine Industry Reset**

- DTC wine: 5.4M cases, $3.7B in 2025 (down 15% volume, 6% value YoY)

- California vineyard removals: ~40,000 additional acres expected in 2026

- Average DTC bottle price: $56.78 (up 11%)

**Trade & Tariffs**

- US Scotch exports down 4% value, 9.2% volume in 2025

- Post-April tariff (10%): May-December shipments down 15% volume, 7% value

- Mexico tequila oversupply: ~500M liters unsold; agave prices collapsed from 30-32 pesos/kg to 2-5 pesos/kg

**Consumer Trends**

- Dry January: 88% adherence among participants; 17% overall participation (Gen Z 32%, Millennials 26%)

- Oral GLP-1 (Wegovy pill) availability in 2026 may accelerate medication adoption

- World Cup 2026: 58% plan to follow; 49% say beer will be drink of choice at bars/restaurants

**Regulatory Watch**

- Supreme Court case challenging Arizona's in-state retailer requirement for wine shipping

- New York grocery wine/spirits legislation gains momentum

- Chicago liquor tax changes effective March 1, 2026

- Heaven Hill defending Lunazul "100% agave" class action

**Key Takeaways**

1. Growth is increasingly mix-led—RTDs, NA, cider, and select imports carrying the market

2. Distribution restructuring is a first-order commercial variable affecting supplier strategy

3. Whiskey oversupply creating M&A opportunities and production adjustments

4. Wine's reset is structural—supply, DTC, and regulatory changes converging

5. Moderation is normalizing beyond January with potential GLP-1 acceleration