Craft Wins 2011? Not So Fast

FILED JANUARY 9, 2012

Dear Client:

Barrels of ink have been spilled over the past year describing how big beer has lost out to craft. It was the driving storyline of 2011. And while it's true A-B lost 0.8 share points and MillerCoors lost 0.4 market share points in YTD Symphony IRI all-channel scans to Christmas Day, and craft and imports gained 0.4 points each, the fact remains that both A-B and MillerCoors didn't perform too badly where it matters: premium lights and super-premiums. That's where the money is made. Most of A-B's and MillerCoors' share losses were in sub-premiums (losing 0.8 share points), and that was by design not blunder. It brings to mind the Pink song: "So raise your glass if you are wrong, in all the right ways."

Consider this by example: Boston Beer Co. had one of the best growth years of its history. Indeed, it added more barrels than any other craft brewer in 2011. And yet a single light beer brand gained twice as many barrels as the entire Boston Beer Co. did, at least in off-premise SIG scans. That brand is Coors Light. Modelo Especial also accomplished that feat. Kinda puts it in perspective when a single second-tier imported Mexican brand gains twice as much barrelage as the fastest growing craft brewery in the country.

In fact, those two brands -- Coors Light and Modelo Especial -- grew by more barrels than the entire craft category did in 2011 in the off-premise.

The fact remains that premium lights performed fairly well considering the sour economy. Bud Light maintained flat share, Miller Lite lost 0.1 points and Coors Light gained 0.2 points for a net gain for premium lights of 0.1 points. I know, it doesn't set your underpants on fire, but it's better than losing share. The notion that premium lights are dead is a bit premature.

ANHEUSER-BUSCH ... HEARD OF IT? For A-B, the share gainers were Michelob Ultra, Rolling Rock (on pricing), Stella Artois, Shock Top, and of course that red-headed stepchild Bud Ice (Really? Bud Ice still exists as they are turning around Budweiser? We're always watching you, Bud Ice). All of those gained a tenth of a share point each.

MILLERCORS ... HEARD OF IT? For MillerCoors, of course Coors Light carried the day, gaining 0.2 share points, and Blue Moon gained 0.1 points.

CROWN IMPORTS ... HEARD OF IT? But who really won 2011? On the supplier level, clearly it was Crown Imports. As a supplier, they gained the most market share points, up 0.3 in SIG scans in both cases and dollars. In fact, Crown's cases were up 7.2% and their dollars were up 8.3%, suggesting that they were not as promotional as previously thought, and they also saw some seriously positive mix shift due to the rocking performance of Modelo Especial, which was up nearly 20% on a huge base, gaining 0.2 share points. Modelo Especial is now the 14 largest beer brand in SIG rankings, and it was the second largest share gainer for the year behind Coors Light. Indeed, even Corona was up 4% on positive pricing. And look at Victoria, gaining 0.1 share points.

HOT SUPPLIERS. Other suppliers that fared well were Mark Anthony Brands and D.G. Yuengling, each gaining 0.2 share points, and Pabst Brewing and Boston Beer Co., each gaining 0.1 points in 2011. Pretty impressive share gains given the relative size of those suppliers. Also, private label purveyor World Brews gained 0.1 points.

BRAND WINNERS. Which brands gained the most share in 2011? Rocky Mountain spring water meets the Rio Grande. As indicated, Coors Light and Modelo Especial both gained 0.2 share points. After that, we have twelve brands that gained 0.1 share points or in the neighborhood. In order of growth they are: Mich Ultra, Yuengling, PBR, Corona, Bud Ice (0_0), Shock Top, Stella, Blue Moon, Vicky, Dos Equis, Rolling Rock, and what's this? Yes, Yuengling Light gained 0.1 share points, officially making it a big playa. Twisted Tea just barely missed making it in the tenth-of-a-point club.

I should note here that Yuengling was up 70% in December, gaining nearly half a share point. Thank you, Ohio. I've never, in my entire 20 year beer industry career, seen a brand gain so much volume in such a short amount of time. It truly is something to behold. I've seen some incredible NEW product launches in my day -- Mich Ultra, Mike's, Smirnoff Ice, Bud Light Lime, Miller Red (just kidding) - But I've never seen an established brand gain so much so fast. No wonder Brito was offended.

STRAIGHT UP GROWTH BRANDS. Now let's just talk about brands that grew the most off their base instead of just market share. Market share clearly is the most important single metric in the beer industry, both on the brewer and especially the distributor side. Because as my pop taught me long ago, it's not how many cases you sell, but how many cases per account. But the thing about market share ... it favors big guys. It's why Coors Light can gain the most share points in the industry and yet be up only 2.3%. But we should also honor those established brands that saw impressive percentage case volume growth.

Here we have Victoria, Blue Moon Variety Pack, Tilt, and Shock Top all being up over 100%. Below that, we have Mike's Hard Berry, Yuengling Light, Sierra Nevada Torpedo, Leine's seasonals, Twisted Tea Half n Half, and Stella Artois (up nearly 40% but on lower pricing). Yuengling was up 24% for the year, Rolling Rock was up 24%, and Dos Equis was up 22%.

So while craft was indeed the category winner within beer in 2011 -- no question about that -- there are many other bright spots within the industry outside of vaulted craft. This industry still has some big scale winners in it.

PBR STRIKES DEAL WITH PBR FOR A PBR

Pabst Blue Ribbon has struck a deal to be the official beer of the Professional Bull Riders for a Perfect Beer Relationship, (I know, it's a terrible journalistic pun. Deal with it). PBR unveiled the sponsorship at the Madison Square Garden Invitational in N.Y., releasing bulls from beneath a 10-foot tall replica of a PBR Tall Boy can. The brewery also will sponsor a Pabst Blue Ribbon Bull Award, handed out to the top scoring bull at each stop on the 29-event Built Ford Tough Series. At eight tour stops, PBR will host an in-arena "Pabst Party Zone," where fans who are chosen via text-to-win and other sign-up opportunities will receive backstage access, upgraded seating and meet the rider. The deal is estimated to be worth about a million dollars.

"There was obviously the connection with the name," said Daren Metropoulos to Sports Business Daily. "Everybody talks to us about, 'hey, you guys ought to be involved with PBR.' What better fit?"

They've been without a national beer sponsor since 2007, when A-B opted not to renew. They brought in Tecate as a sponsor at some events last year, but was not able to expand that into a national deal. However, Jorge Cornejo, Tecate's field marketing director, moved from HUSA to Pabst late last year and helped grease the deal.

BEER BRIEFS:

SPECIAL THANKS to the good folks at Deloitte, the largest accounting/consulting firm in the U.S., who invited a few industry folks to help judge their annual national MBA case study competition, where the best and brightest from the top business schools across the country compete to present a case study on a company within an industry. We converged upon their brand-spanking-new high tech $400 million training facility near Dallas - Deloitte University - for the weekend to hear some impressive presentations from the newest crop of freshly tubbed-and-scrubbed b-school kids. This year the topic was managing the explosive growth at SweetWater Brewing in Atlanta. Joining several Deloitte partners as judges, we had top industry execs from SweetWater, Dogfish Head, MillerCoors, Avion Tequila, FEMSA Coca-Cola, Ben E. Keith Beers, and little ol' me. Yes, I was way out of my league. But it was a great learning experience, more for me than the students I fear.

IT WOULD APPEAR THAT WE ARE NOT ALONE. A new report from Bernstein Research shows Household & Personal Products and US Beverage/Snacks companies have reason to be concerned about affordability due to higher unemployment levels and stagnant income growth. Generally, consumer packaged goods don't seem in danger of affordability problems because of their small and declining share of total consumer spending, long term price growth below inflation and disposable income growth. However, this newest report shows a deceleration of income growth and an acceleration of inflation on these products deems them "less affordable" over the past decade. Some of the categories that have seen the greatest decline in affordability include: disposable razors, cigarettes, facial skin care, bleach, dog food etc, while water, batteries, sports drinks and diapers have become more affordable over time.

Until tomorrow, Harry

"The problem with quotes on the internet is that you can never be sure of their authenticity" -Abraham Lincoln


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