The July Bump

FILED JULY 29, 2013

Dear Client:

While we can all put on our big boy pants and declare without too much rancor that the second quarter was the mayor of sucktown, the silver lining is that July is looking much better. Looking at the latest four week scans from all-channel IRI to July 14 (which contains two weeks of June and the July 4 holiday), beer volumes rebounded to positive territory, up 0.2% in volumes and 3.3% in dollars as above-premium grabs all of the gains. Yes, very healthy price/mix up 3.1%. So year-to-date beer volumes are still down 1.1%. But I think it's important to note that we have not given up all the volume we gained in 2012, at least not in IRI scanned off-premise accounts. We've given about a third of it back. Having said that, we still have some tough comps ahead.

Of course craft is still going strong, up 18%, and FMBs are up a huge 31% (thanks Straw-Ber-Rita and Redd's). But domestic premiums are still suffering, down 2.4%, as imports are up 5.3%.

For A-B, there were two data-points that jumped out at me: 1. Budweiser was only down 2.8% for the four weeks to July 14, only a slightly worse trend than Bud Light (-2%). The Independence Day packaging seems to be catching on and helped to halve Bud's year-to-date trend. 2. Bud Light Lime-A-Rita and Straw-Ber-Rita have a combined 1.4 market share in the latest IRI four weeks. That's larger than New Belgium, Gambrinus, CBA, Deschutes, Lagunitas, Stone, and Bell's combined, at least in the off-premise.

For MillerCoors, what jumped out at me was that their largest share gainer for the period was Leinenkugel Summer Shandy, follow by Redd's. The two together have gained 0.75 share points.

So the top flavored super-premium beers of the big guys are up over two share points, or the size of Pabst Brewing Co.

Another point: The high end (craft, imports, super-prem, PABs, and cider) gained 2.6 share. The premium and below segments (domestic premium, sub-premium, malt liquor, and non-alc) lost 2.6 share points. Literally ALL beer gains are in the high end at the exclusive expense of lower end beer.


MillerCoors was no doubt the victim of very poor weather in the second quarter, driving their depletions down 4.4% and their premium light portfolio down high single digits. The weather was particularly poor in the northeast (Coors Light's high share market) and in the Midwest (Miller Lite's high share market). The place where the weather was good -- California -- doesn't sell much domestic premium lights comparatively. ABI's stock took a hit at opening yesterday because they will no doubt post some tough US numbers as well when they announce July 31, particularly if MillerCoors gained share in the premium light category while being down high single digits like they reported. UPDATE: A-B's numbers weren't as bad as expected, and Bud Light actually gained share of premium lights.

But the turning of Coors Light into negative territory has to cause some alarm in Chicago. So when I wasn't busy getting John Coleman's name wrong, I was reaching out to a few blue-silver distributors yesterday and asked them what they thought of Coors Light's softness. Here is a sampling of their remarks:

"I would say Coors Light is just seeing maturity in some of its highest share markets and distribution saturation in other markets. It is still performing better than all other premium lights."

"Coors light grew from JV access to better availability on new distribution patterns and distributors picking Coors Light over Lite."

"$100M pumped into Miller64 over the last 3 years hasn't [helped]."

"It's really hard to get independent accounts to display Miller Lite and Coors Light separately. Most of them say 'You get a display and Bud gets a display, put whatever you want on it.'"

"It's the weather, the earth is moving under us with craft, all of the things you've been writing about. But it's also all the focus on all the new products. You can only focus on so much. You have to have new products of course, but it's going to make you take the eye off the premium lights."

"MC isn't doing too bad if they gained share in premium lights. That indicates to me that Bud Light will be down BIG for the quarter..... partially buttressed by all those line extensions they do." Editor: Bud Light was down 4.7%.

"Can you find one person who thinks that any of the big guys' marketing is breaking through?"

"You can't sell beer, even Coors Light, when it's raining every single weekend like it was. Coors Light's trends will return when the weather in the east returns and we're already seeing it happen."

Until tomorrow, Harry

"Any man who eats dessert is not drinking enough."
��- Ernest Hemingway

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