The New Beer Business Challenges Old Assumptions
FILED DECEMBER 7, 2012Dear Client:
Nielsen is reporting that beer volumes in their expanded off-premise channel coverage is up 2% for the four weeks ending November 24 (which includes Thanksgiving), in line with the 12 week trend (per UBS). Average case price was up 1.6%, and dollar sales are up a healthy 3.6%.
A-B's volumes were up 1.7%, which is an acceleration, and average pricing was up 1.2%. Bud Light was up 1.2%, and Platinum maintains its 1.1% market share. MillerCoors was flat for the period, a slight deceleration, and average price per case was up only 0.6%. But Coors Light volumes were up a big 6.3% while Miller Lite was down 2.3%. Crown was up 5.3% with pricing up 0.2%, which is an improvement.
Let's look at the 52 week topline trends and see what we can scare up. What struck me the most about the year-long trends is how many long-held industry assumptions are now turned on their head. You know that old saying: The word "assume" can be broken down to making an "ass" out of "u" and "me".
Assumption 1: Full calorie beer is dead, light beer rules.
Not anymore. Of course, brands like Yuengling and PBR have long bucked the light beer trend. But throw in crafts and growing import flagships, and you've now got a situation where light beer has lost 0.3 share points, and regular full calorie beer has gained 0.3 share points, according to Nielsen 52 week scans.
Assumption 2: Okay, but premium lights still outperform premium regular, right?
Again, not anymore. While both premium lights and premium regular beers are both losing share, premium light is losing slightly more share, down 0.4 points, versus premium regular beer down 0.3 points.
Assumption 3: Price is the most important volume driver on beer, particularly during a recession.
This recession is different. The bifurcation of the American consumer, where the well-off have been largely insulated from the recession while lower end consumers are hardest hit, means that high priced beer continues to rock. And with the A-B/MC-lead price increases (with sub-premium pricing growing even faster than premium), the entire industry has moved up. The fastest growing segments in the beer industry are the highest priced: cider gaining 0.1 share points at $36 a case on average, FMBs gaining 0.3 points at $32 a case, craft up 0.7 points at $33 a case, imports up 0.3 points at $28 a case, and super premiums up the most, 0.9 share points, at $25 a case.
Assumption 4: Cans are the dominant package.
They still sell more, but they are losing share to draft and bottles. In the off-premise alone, cans have lost 0.4 share points while glass has gained 0.2 points.
Assumption 5: 30 packs fly during a recession.
The mighty 30 pack, that California value pack that has been used for years to move more volume at cheap prices, is now losing share to 15 packs. 12 packs, 18 packs, and suitcases are also losing share. The big gainer is singles up 0.4 share points, 4 packs up 0.2 points, and 15 packs up 0.4 points.
Assumption 6: FMBs are a fad.
Okay, this is kind of an old assumption, but if there's anybody still out there that thinks FMBs are a fad, here's the proof that they're not: FMBs are up 0.3 share points and accelerating.
Assumption 7: Domestic premiums won't break the $19.99 average case price anytime soon.
For the 52 weeks, the average case price for premium beer is $19.55 a case. For the latest 12 weeks, it's $19.61, and for the latest four weeks, it's $19.94. While price/mix increases have slowed a bit in the latest scans, they are still increasing. Some of that may be seasonal (12 and 52 weeks have summer in them) but there's no question that it won't be long before premium beer cracks the magic $20 a case mark.
JIM KOCH ON ODDS AND ENDS
Sometimes non-beer mainstream reporters can make you flinch when interviewing a beer industry person, because they inevitably make the frat-house jokes about former glory days with references to intoxication, and their faux pas can sometimes be rough. Like when this Reuters TV host, when interviewing Jim Koch, asked if Utopias were the "Red Bull of beer." Wince.
But Jim did provide some interesting nuggets in the interview about his history. We highlight:
JIM ON WHY HE CHOSE TO GO PUBLIC. "We went public in 1995 basically because at that point … I didn't have any banks or institutions or venture capitalists, I just had friends and family and drinking buddies who had put their money in. Some in thousand or two thousand dollar investments, because when I started I said, 'I don't know if we're going to make any money on this, but you're going to get free beer, unless it goes broke and then we'll have an awesome party.' And they were like, 'I'm in.' So people had had their money in for eleven years with no return, and now it had become a pretty significant chunk of change for people who were trying to figure out how to pay their mortgage or buy a new care for their wife. So going public for me allowed my friends and family and drinking buddies to actually make some money. So I was fine with that."
WHY DID YOU CALL IT SAM ADAMS? "Because Sam Adams was this wonderful but largely forgotten historical figure when I started the beer. And when you actually read the history of the American revolution, he was the radical, the firebrand, the propagandist. He was the one who started the revolution. And he was also a brewer. And that's what I wanted Sam Adams the beer to do, to start a revolution of beer independence for America. So we didn't have to think that the only good beer was imported beer."
JIM ON NEW INGREDIENTS IN BEER. "You have to think about beer differently. When I started Sam Adams, people thought beer was cold and fizzy and in a can. Eventually Sam Adams and the rest of us have expanded people's notion of what beer is. I'm going to take it to a different level. You're an investment banker so you probably drink wine. The poor winemaker basically just has one ingredient: grapes. And there's not that much you can do. Basically your choice is skins or no skins [red or white], and stainless or wood. And that's it. And that's why red wine kind of tastes like red wine, and white wine kinda tastes like white wine. But a brewer has a different model. A brewer is like a chef. I can use any ingredient I want. We 're working on using this very interesting wood from Japan that's sort of a juniper/ceder like, that has some very interesting flavors. Japan also has this interesting citrus fruit.... If I can dream it, I can brew it."
FISCAL CLIFF RAISES CONCERNS ON EXCISE TAXES
Although it's looking more and more like the Administration and Congress are going to allow the country to go off the "fiscal cliff" on December 31, there's no doubt that at some point there are going to be tax negotiations, and everything's game. The left-leaning Center for American Progress, which has some influential heavy-hitters on its side, issued a report which recommends several revenue-generating tax increases, such as a top marginal 40% rate for top earners, corporate tax reform, a 50 cent a pack cigarette tax increase, taxes in internet gambling, closing S-corporation Medicare loopholes, etc. But the clincher is a recommendation of a $16 per proof gallon "uniform" tax on alcohol beverages. That's equivalency. Not only does it raise the tax on hard liquor, but it vastly increases the taxes on beer by about 150%, or even 300% for higher ABV beers. Take away small brewer tax break, it's even more. So lots of wringing of hands out there.
BEER BRIEFS:
WATCH THE VERY FIRST Heineken ad which aired in Amsterdam on January 1, 1968 (after an ad ban on beer was lifted). Courtesy of Ad Age: http://adage.com/article/rewind/rewind-watch-heineken-s-tv-ad/238636/
ONLY NINE SEATS left for the Beer Summit. Just added the final speaker, longtime A-B exec Andy Goeler, new chief of Goose Island. Check out the agenda here: https://docs.google.com/file/d/0B_AxpKotj17vdUdETWlFVGRpMVU/edit
Register here: https://www.beernet.com/register.php?id=7
Or call Kim at 210-805-8006 ext 11
Until Monday, Harry
"Writing well mean never having to say, 'I guess you had to be there.'"
-Jeff Mallett
Make yourself heard, your opinions count. Anonymous feedback and tipster form: http://www.beernet.com/hotline.php
BEER SUMMIT, JAN 28 - 29, 2013. Register today here: https://www.beernet.com/register.php?id=7
Or call Kim at 210-805-8006 ext 11. Also, don't forget to book your hotel at the Westin Riverwalk at 210-224-6500.
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