Mega-Brands Continue Free Fall
Is There an End in Sight?


Dear Client:

Since first BBD reported the colossal weakness in five of the six mega-brands a month ago, the numbers have only worsened. Consider these daunting volume figures for the four weeks ending August 9 in IRI all-scans (food, drug, c-store) released yesterday:

-Overall beer volumes are down 4.1%.
-Bud Light volumes down 8.6%, losing an entire share point. Pricing up 67 cents per case.
-Budweiser down 13.8%, losing an entire share point. Pricing up 78 cents a case.
-Miller Lite down 11.5%, losing 0.6 share, with pricing up 79 cents per case.
-Corona Extra down 4%, flat share, but with pricing down 74 cents a case.
-Heineken down 12.8%, share 0.2, with pricing up 34 cents a case.

Only Coors Light was up, 1.1%, gaining 0.4 share points at 35 cents a case higher pricing. But that volume trend is a marked slowdown from previous periods, and Coors Light could -- I'm gasping for breath -- conceivably go into negative territory next month. The six mega-brands, which represent half the industry volume, lost a collective 2.3 share points. If you extrapolate that trend over the entire industry (which may be conservative given the weak on-premise performance), that means the top six mega-brands are losing about 250,000 case equivalents every sell day.

I haven't seen trends this ghastly since the doubling of the federal excise tax in 1991. And what's amazing is how pricing has held up so far. While there are sporadic deals (and more deals involving sub-premiums), average pricing per case is almost universally up at least 30 cents and in most cases much more than that. And there are already GI letters out their for October. Boston Beer's Jim Koch said recently that the best strategy is to increase prices during economic downturns (when everybody expects you to be down anyway), so that when things get better, you're sitting pretty with a big fat margin.

And yet craft beers and sub-premiums continue to roll. Sub-premiums are up 1.8% despite healthy pricing of north of 50 cents a case. Leading the way are Key Light and Bud Ice. Crafts are up 12%, gaining 0.6 share points. It's a two-legged stool out there, with the very cheap and the very expensive leading the way.

But wait. Maybe the third leg that holds the stool up is the two in-between brands that defy categorization, the brands that are neither premium nor craft nor sub-premium nor import. I'm talking about Yuengling and Pabst Blue Ribbon, and both are doing great. Yuengling and PBR are both up 31% in July on similar off-premise bases, with Yuengling up 85 cents a case and PBR up 90 cents a case. All I can say that that is: zootalo!

FOOD STORE TRENDS MUCH BETTER. Beer volumes were much better when you take out the pitiful c-store numbers. Food/drug IRI scans for the month ending August 9 (July basically) indicate that beer volumes were up 1.1%, which is a softening from the 2.3% YTD number. Still, some interesting trends emerge when you tease out the moribund c-store noise. So let's just look at food/drug scans, even if it only serves to make all of us feel a little better.

For one, imports are starting to show some signs of life in supermarkets, albeit with cheaper pricing. Imports rose 2.8% in July, which is quite an acceleration from being slightly down year-to-date. Femsa lead the way with volumes up 12$ and pricing up 3%. Crown's volumes were up 8.8% although pricing was down 2.8% due to more promos and more Modelo Especial cans in the mix. Corona family up 9.3% on -3.5% pricing/mix. Heineken volumes were down 2.8%.

In food and drug stores, MillerCoors and A-B fared decidedly better than in all-scans. A-B only lost 0.6 share points, and Bud Light was only off 0.4% with Bud Light Lime up 7%, making up for BL softness. MillerCoors gained 0.1%, with Coors Light up 4.4% and Miller Lite down 9.4%. So still not anything to write home about.


Proof positive that public relations can sometimes actually sell beer, a look at the brands that were featured in Obama's beer summit on June 30 show that their sales were helped by the media frenzy. Dan Wandell from IRI says that "there is no doubt that the brands involved (Sam Adams Light, Blue Moon, Buckler NA and Bud Light) and their brand families received a boost in sales."

Let's look at the trends leading up to the beer summit (uncapitalized because the "real" Beer Summit is our conference to be held March 1, 2010 in Phoenix). Sam Adams Light's negative trends were cut considerably, from being down around 20% to being down around 6%. Blue Moon when from being up around 5% to being up 22%. Buckler NA went from being down around 5% to being up 8%. Bud Light's trends were essentially steady, as it is such a big brand that it's tough to tease out what was due to the beer summit, and what was due to promos, comps, timing, etc.

But perhaps the biggest percentage gainer (albeit on a smaller base) was Diageo's Red Stripe, which wasn't even served at the White House but was mentioned as a candidate. It went from being down around 1% to being up 27%.

But aside from the brands, perhaps the entire American craft segment picked up some notoriety, since craft sales ballooned during the period. Dan characterizes it as craft beer "in essence has picked up an extra sales holiday in the aftermath of the beer summit, as its sales and velocity.... are better than the strong Memorial Day results it posted."


"Dozens of colleges are up in arms over a new Anheuser-Busch marketing campaign that features Bud Light beer cans emblazoned with local schools' team colors," fronts the Wall Street Journal this morning that's got to give A-B brass a headache. A-B responds that the cans are only aimed at fans who can legally drink and don't bear any school's name or logo.

The promo includes 27 different color combinations. "Show your true colors with Bud Light," say internal marketing materials. "This year, only Bud Light is delivering superior drinkability in 12-ounce cans that were made for Game Day." A-B says the program is voluntary and roughly half of distributors have chosen to participate. Besides making colleges mad, the general counsel of the Collegiate Licensing Co. has sent a letter to A-B about potential trademark violations. At least 25 schools have also sent letters to A-B asking them to drop the campaign. Of course, it would be difficult for A-B to just drop the campaign at this point without a very expensive recall and destruction of product.


Felix Williams left Miami-area blue-silver distributor Gold Coast as the CEO, according to a memo to suppliers. Felix had replaced Art Friedman, who left Gold Coast in January. Frank Schwiep will start at the company in the position of Senior Vice President and General Manager. Frank was most recently Senior Vice President, Sales & Marketing for J.J. Taylor. Alfonso Fernandez will be serving as Interim CEO until "we determine the best management structure for the company," writes chairman Steve Levine.

Until tomorrow, Harry

"We are here to add what we can to life, not to get what we can from life."
-William Osler

--------- Sell Day Calendar ----------
Today's Sell Day: 16
Sell days this month: 21
Sell days this month last year: 21
This month ends on a: Mon
This month last year ended on a: Fri
YTD sell days Over/Under: 0

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