Green Bottle Beer Pricing
Plus, Cali Scanbacks Making a Comeback

FILED APRIL 5, 2012

Dear Client:

Let's talk pricing for a minute for beers that come in green bottles. Why green bottles? Why not? Well, it just so happens that green bottle beers had interesting pricing actions from 2011 to 2012. I can't imagine that it's related to the color of the bottles, but rather a coincidence. But it makes for a good title. Let me clarify that we're looking at pricing and mix of green bottled beers, because when looking at the pricing changes for beer in the aggregated data it's tough to tease out which is pricing and which is mix shift. But for certain brands, you gotta figure it's mostly pricing.

ROLLING ROCK. A-B tried like hell to make Rolling Rock and super-premium beer. It didn't work. Sales suffered. So for the past two-plus years A-B has been rolling Rock's average pricing back down. You might want to read that sentence again, it has a pun in it.

In fact, while two years ago Rolling Rock was (almost) at super-premium pricing, last year Rolling Rock's pricing was at about premium beer levels, and today it's just under premium. In all channel scans, Rolling Rock has seen the most dramatic price decreases of any other top brand, down $1.19 per case on average this year per year-to-date to late March Symphony IRI for all off-premise channels. The average case of RR is going for $19.51 in off-premise outlets, 50 cents less than Bud Light, Miller Lite, or Coors Light. Last year at this time, Rolling Rock was selling at $20.50 a case, down $2 a case from two years ago. So it's been a steady slide. Is some of that c-store singles? Maybe, but the story is nearly the same if you take out c-stores and package stores and look at just grocery data. Selling cheaper beer in bigger packs brings down average price.

HEINEKEN. Heineken has also taken pricing, albeit only in the last year. In fact, it looks like Heineken basically gave back the price increases it took in 2011, and got quite a bump for it. So far this year, Heineken's average pricing is down 18 cents a case to $30.42. Volumes are up 9.4%, according to SIG all channel scans. Last year Heineken's average pricing was up 20 cents a case and the brand was running down 3%. That's a 12 point swing for just 18 cents a case. If they can sustain it, that math works.

HEINEKEN LIGHT. Heineken Light in 2011 took a 26 cent increase in price at retail and was down 20% in volumes. This year so far, Heineken Light's pricing and mix are down 55 cents a case and volumes are still down 10%. While that's not as sexy as Heineken's results, it's still a 10 point swing. Again, the math works.

DOS EQUIS. Dos Equis has of course enjoyed increased pricing and increased volumes. But the dynamic is interesting. Last year at this time, SIG scans show Dos Equis average pricing up 62 cents a case, to $29.40 a case. This year, Dos Equis is up "only" 43 cents a case, to $29.82, and yet volumes are up a big 42%. That math really works for everybody. The slower increase in price this year, incidentally, could be attributed to mix shift, i.e. more Dos Equis being sold in 12 packs.

STELLA ARTOIS. In the first quarter of 2011, Stella Artois' average SIG all channel pricing was up about a quarter a case to $35.46, while volumes were up 24%. While Stella may also be seeing more 12 pack and can sales, there's no denying it's average pricing in 2012 so far has dropped precipitously, down 78 cents a case to $34.69, taking 2011's gains back and then some. But volumes are up a huge 42.2%, nearly a 20 point improvement in trend. While that's pretty good, there's no telling what it does to the brand equity of Stella which, after all, sold itself for years on being "reassuringly expensive."

Green bottles aside, out of the top 100 brands in Symphony IRI all channel scans, 22 of them have negative pricing/mix. Out of those, 8 are A-B brands, three are craft, and eight are imports.

CALIFORNIA PRICE WAR HEATING UP, SCANBACKS COMING BACK

Lots of weird stuff going in California. A-B is going deeper on 18 pack cans and 24oz cans to get back specifically volume and share specifically in indie liquor stores and c-stores, and specifically targeting Corona and Modelo Especial, respectively. Since many California A-B distributors are also Crown distributors, many aren't happy trading higher margin products down to lower, but that's the reality.

Not to be outdone, MillerCoors last week presented summer programs to some chain grocery stores proposing to bring back electronic scan-backs on 30 packs and 36 packs of premiums, according to sources. Remember scan-backs? The brewer pays 100% of them, and they don't show up on syndicated scan data, so it's a back door discount.

In response, A-B told its distributors it would NOT do electronic scanbacks, presumably since it would have to pay for 100% of those, but would attempt to match with a deeper post-off, so now distributors participate, say sources. However, in order to sweeten the deal and forestall a revolt by distributors, A-B said that instead of splitting the discount 50-50 as in the past, for this particular deal the first 70% of the post-off is going to be a 70-30 brewery-distributor split, and the next 30% will be a 50-50 split. So distributors getting a little relief there.

So why scanbacks? The conspiracy theorists among us theorize that an ex-A-B exec, who took a haircut on his house after A-B stopped their employee mortgage program, moved over to MillerCoors' pricing strategy and is sticking it to his former employer. Of course, that's akin to Jack MacDonough being a spy. But it makes for interesting bar talk anyway. More likely, as one MC exec said, they're using scanbacks because "they're more targeted and more efficient."


BEER BRIEFS:

SHANDIES AND CIDERS EVERYWHERE. Can't look up without seeing shandy and cider news. Alchemy & Science, Boston Beer's and Alan Newman's brainchild/laboratory, is rolling out its first product: Curious Traveler Shandy, under the House of Shandy umbrella, in several markets in the Northeast and Midwest later this month. It's being brewed by Boston Beer in Cincinnati. Leine's proved that shandies can be big business, selling 200k of their version last year.

Boston Beer also announced it is taking their Angry Orchard hard cider national later this week. Lots of coasters hitting bars as we speak.

LOOKS LIKE NEW BELGIUM may be announcing their new brewery will be in Asheville, NC later today, becoming Sierra Nevada's neighbor, if the chatter on the Net has any veritas. Certainly the Guv Perdue has said she's making an economic announcement today. Stay tuned.

NEXT ISSUE on Monday. Have a great Easter/Passover weekend.

Until then, Harry

"I have a theory that the truth is never told during the 9-5 hours." -Hunter S. Thompson

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