Is Craft Out-Punting It's Coverage?

FILED JUNE 7, 2013

Dear Client:

It's been long understood that brands are built in the on-premise, and you make the serious money in the off-premise. If the former is true, then there may be some early warning clouds that craft brewers are out-punting their coverage in the on-premise.

Here are the facts, according to POS transactions from GuestMetrics.

1. The number of craft brewers in on-premise grew by nearly 17% in 2012 and first quarter 2013.

2. The number of craft beer brands sold in on-premise grew about 22% in 2012 and first quarter 2013.

3. Craft beer volume, on the other hand, grew high single digits in 2012 and mid-single digits in the first quarter.

"While we don't necessarily see a shake-out in the near term, looking out at the next 3-5 years, the question will be the sustainability of the economics of a lot of the new entrants given the declining volume per available brand. We will likely see consolidation within the segment," writes Bill Pecoriello of GuestMetrics. (GM uses the BA definition of craft for this data set).

LOWER CASES SOLD PER BREWER. They also put the figures to an index for perspective, setting the average number of units sold per craft brewer at 100 for the first quarter of 2011. The overall index for all of 2011 was 95, then 88 for 2012, and then 82 for the first quarter of 2013. Craft brewers are, on average, selling much less beer per brewer on-premise.

"The overall attractiveness of the economics for the average craft brewer has diminished fairly significantly over the course of just two years," says Peter Reidhead, VP of Strategy and Insights at GuestMetrics.

Is it over-saturation of craft brewers, or just more taps out there, or both?


"I don't think it's going out on a limb to say that any and all innovation that drives consumer engagement is good for the category." So writes retiring vp-insights for MillerCoors, Scott Hughes, referring to our column on Tuesday which suggested a possible causal relationship between innovation and stagnant flagship sales (see BBD 06/04/2013).

"Not all innovation will stick long term," writes Scott, "but if it drives consumers to talk about, reconsider and experience new things, it keeps them engaged in beer and in many cases, educates them about the complexity of beer. So we've always had a position that all innovation is a net positive -- be it marketing, packaging or liquid-focused. And in fact, many innovations that the big brewers are currently bringing to market, be it Redd's or Straw-ber-ita, are clearly bringing in women and younger adult consumers...and are measurably incremental, sourcing somewhat from outside of beer.

RIGHT SIZING INNOVATION. "The challenge comes when we as an industry fail to 'right size' the availability of beer offerings to suit the consumers' complex set of needs. Just about every consumer research study that crossed my desk shows that nearly all beer drinkers have occasions that suggest light, refreshing, sessionable beers that are popular and familiar to serve to others....and many of those consumers also have different needs on some occasions when they want to savor or explore a more "challenging" beer. Sometimes they want flavor exploration and sometimes they want the comfort of the familiar. It is true that consumers drink fewer beers overall when they consume more caloric, high ABV beers to a greater degree, but that variety is what the consumer truly wants and seeks.

PROTECTING THE BIG FLANK. "So, the most healthy path forward is to innovate across the spectrum of the category, but to get the assortment right at the point of decision. And that is where the minefield is as it relates to the big, mainstream brands. If the big, high penetration light brands (Bud Light, Coors Light, and Miller Lite) that most consumers have in their repertoire (and often seek out even after a craft beer or two on the same drinking occasion) are less noticed, less displayed or recede on premise due to a tap handle phenomemon (where something totally new is always switched out on tap), then the consumer doesn't always get what they truly want. If I could wave my magic wand, I would both innovate like crazy AND do everything in my power to make sure that the big brands maintain the rate of big, volume enhancing displays at retail and keep a proportionate presence of tap handles. That is the surest way to match the choices to the segmentation of needs. When we trade out a display on a big brand like Bud Light or Miller Lite for a mid-tier one like Michelob Ultra or Bud Light Platinum, we lose some consumer volume due to lower penetration/relevance. When we have 16 tap handles and 15 are craft brands that the consumers is only now learning to form a relationship to -- and only one of those is sessionable, light beer -- then we lose consumption volume and even consumers staying on premise longer."

Your thoughts on above two articles at Also, send in those Fall price letters.


SABMiller's board has granted medical leave of absence to its Chairman, Graham Mackay, so that he can focus on his continuing treatment following his brain tumor surgery on April 2013. For the time being, John Manser, Deputy Chairman, would continue as acting Chairman.
The board would keep the position under review as Graham's treatment progresses, and an announcement about the future would be made as soon as any definitive decisions are taken.

Considering John Manser's increased time commitments and responsibilities as acting Chairman, Manser stood down as chairman of the audit committee on June 5, 2013, a year before than originally planned, and retired from the audit and remuneration committees, with Mark Armour succeeding Manser as the audit committee's chairman.

Our thoughts go out to Graham during this trying time.


PIPING ALL HANDS. A 9 million case Beer/Wine/Spirit Wholesaler based in Madison WI (Frank Beverage Group) is looking for a CFO, qualified and interested candidates please send resumes in confidence to

Until tomorrow, Harry

"To invent, you need a good imagination and a pile of junk."
-Thomas A. Edison

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