Romancing the Beer

April 1, 2007
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Romancing the Beer

By SARAH THEODORE

U.S. brewers bring imagination back to the category

The U.S. beer industry is battling its way back from several years of sluggish sales. Brewers shipped 207.6 million 31-gallon barrels of beer last year, up from 2005’s 203.5 million, and per capita consumption of beer edged slightly higher to 30.3 gallons per person (age 21 and older) in the United Sates, according to the Beer Institute, based in Washington, D.C.
Imports and craft beers carried the day with double-digit sales increases, while domestic premiums had mixed results, according to retail sales data from Information Resources Inc., Chicago. Craft beers enjoyed almost 28 percent dollar sale growth through convenience stores, and an 18 percent increase in food, drug and mass merchandise (FDM) outlets. Imports grew more than 20 percent in convenience stores and 10 percent in FDM outlets, while domestic premiums  increased more than 8 percent in the convenience channel, but lost 1.2 percent through FDM outlets.
Bud Light held on to its place as the best-selling beer in the United States during the past year, with more than 12 percent dollar growth in the convenience channel and 3.2 percent in FDM outlets. But it is an overall change in thinking at St. Louis-based Anheuser-Busch that is pulling the company out of the doldrums, says Bump Williams, general manager of IRI’s beer, wine and spirits practice. “The jury is still out on them, but I think they have reinvented themselves and it will be a very positive year for Anheuser-Busch,” he says. Williams points to several changes at A-B as proof of the brewer’s new perspective, including the appointment of August Busch IV as president and chief executive officer.
“August IV is clearly in control,” Williams says. “His first move was to surround himself with people who are extremely smart and well respected in the industry, the wholesaler community and Anheuser-Busch corporate.”
That executive team has put a greater focus on new product development, new partnerships that have brought more import products and craft beers into the A-B portfolio, and restructuring the sales organization to be closer to key retail customers.
“They’ve gone out and acquired brands in the United States like Grolsch and Goose Island,” Williams says. “With their InBev purchase, they have Stella Artois, which is one of the hottest selling import beers in the United States. They’ve upgraded their portfolio of product offerings, and that’s a great thing for both the wholesalers, retailers and A-B corporate.”
In its full-year 2006 financial results, Anheuser-Busch indicated new additions Rolling Rock, Grolsch and Tiger beers each added 0.5 points of growth to the company’s bottom line.
Top beers by brand
Convenience
BRANDCase sales% change vs. prior year Dollar sales% change vs. prior year
BUD LIGHT198,168,65610.9%$3,712,473,34412.1%
BUDWEISER109,153,5683.9%$2,019,638,5284.2%
MILLER LITE55,763,3805.2%$1,018,563,7126.7%
COORS LIGHT54,573,54815.6%$1,002,694,14416.7%
NATURAL LIGHT53,448,99211.1%$698,866,8808.5%
BUSCH37,557,8881.4%$508,073,7921.2%
BUSCH LIGHT29,522,56212.8%$385,275,07211.9%
CORONA EXTRA22,400,30620.3%$655,278,08019.7%
MILLER HIGH LIFE21,928,1886.1%$307,250,7847.5%
KEYSTONE LIGHT16,584,12329.6%$209,521,90429.8%
TOTAL CATEGORY, CONVENIENCE827,500,1608.8%$14,793,484,2889.7%
 
Food, drug and mass merchandise
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
BUD LIGHT83,206,2081.3%$1,377,269,1203.2%
BUDWEISER45,518,376-7.8%$753,296,320-6.0%
MILLER LITE43,927,944-2.2%$711,507,712-0.9%
COORS LIGHT37,420,6960.1%$615,656,6402.3%
NATURAL LIGHT24,920,1941.4%$289,691,5202.0%
CORONA EXTRA17,914,8442.7%$481,141,8884.9%
BUSCH LIGHT17,213,5681.7%$207,545,9363.0%
MILLER HIGH LIFE14,078,062-3.5%$173,546,464-2.0%
BUSCH13,589,010-3.5%$167,244,688-2.4%
HEINEKEN11,114,5845.0%$299,283,5206.9 %
TOTAL CATEGORY, FDM512,073,760-0.7%$8,918,470,6562.4%
Source: Information Resources Inc., sales for the 52 weeks ending Feb. 25, 2007

Top domestic premium beers by brand
Convenience
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
BUD LIGHT198,168,65610.9%$3,712,473,34412.1%
BUDWEISER109,153,5683.9%$2,019,638,5284.2%
MILLER LITE55,763,3805.2%$1,018,563,7126.7%
COORS LIGHT54,573,54815.6%$1,002,694,14416.7%
ICEHOUSE13,799,6237.7%$207,018,1446.2%
BUDWEISER SELECT8,620,560-19.1%$165,257,472-17.5%
MILLER GENUINE DRAFT8,124,225-14.8%$151,196,864-12.3%
BUD ICE7,353,82711.6%$126,249,8249.9%
COORS3,988,9599.9%$72,865,89610.8%
YUENGLING TRADITIONAL LAGER1,279,72922.0%$25,914,97823.9%
TOTAL CATEGORY, CONVENIENCE463,503,4247.5%$8,547,257,8568.3%
 
Food, drug and mass merchandise
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
BUD LIGHT83,206,2081.3%$1,377,269,1203.2%
BUDWEISER45,518,376-7.8%$753,296,320-6.0%
MILLER LITE43,927,944-2.2%$711,507,712-0.9%
COORS LIGHT37,420,6960.1%$615,656,6402.3%
ICEHOUSE4,297,6591.6%$58,095,896-1.4%
BUDWEISER SELECT7,214,743-15.9%$122,349,248-14.8%
MILLER GENUINE DRAFT10,353,554-9.6%$169,089,712-8.5%
BUD ICE1,397,609-3.6%$23,974,710-3.4%
COORS3,718,214-12.8%$61,258,308-10.9%
YUENGLING TRADITIONAL LAGER1,949,52313.6%$35,517,84814.7 %
TOTAL CATEGORY, CONVENIENCE242,982,4322.8%$3,991,831,040-1.2%
Source: Information Resources Inc., sales for the 52 weeks ending Feb. 25, 2007

Top import beers by brand
Convenience
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
CORONA EXTRA22,400,30620.3%$655,278,08019.7%
HEINEKEN13,897,14921.9%$404,393,18420.1%
MODELO ESPECIAL4,599,02839.2%$115,873,32846.8%
TECATE4,182,35920.9%$83,759,88018.8%
LABATT BLUE2,811,70919.6%$51,380,17615.3%
CORONA LIGHT1,655,84020.6%$48,755,40821.6%
LABATT BLUE LIGHT1,608,30623.3%$28,733,04620.2%
HEINEKEN PREMIUM LIGHT LAGER1,594,8292075.5%$46,167,2762,039.6%
BECKS1,133,871-14.4%$29,440,338-14.9%
MOLSON CANADIAN962,11233.8%$17,674,68834.3%
TOTAL CATEGORY, CONVENIENCE63,911,01220.4%$1,732,590,59220.3%
 
Food, drug and mass merchandise
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
CORONA EXTRA17,914,8442.7%$481,141,8884.9%
HEINEKEN11,114,5845.0%$299,283,5206.9%
TECATE4,866,9441.8%$83,604,5204.1%
CORONA LIGHT4,532,2068.4%$123,261,00010.8%
LABATT BLUE2,829,712-4.3%$48,785,244-4.6%
MODELO ESPECIAL2,183,64819.1%$53,758,43224.6%
HEINEKEN PREMIUM LIGHT LAGER2,149,9952587.2%$58,382,8202,669.1%
BECKS1,918,9486.2%$48,680,2487.3%
LABATT BLUE LIGHT1,738,7840.3%$27,965,620-0.2%
PACIFICO1,673,7247.6%$42,335,8329.8%
TOTAL CATEGORY, FDM74,302,6727.6%$1,878,039,93610.4%
Source: Information Resources Inc., sales for the 52 weeks ending Feb. 25, 2007

Top micro/craft beers by brand
Convenience
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
SIERRA NEVADA PALE ALE1,132,57325.1%$31,741,54226.9%
SAMUEL ADAMS BOSTON LAGER503,39012.7%$14,708,38116.6%
SHINER BOCK479,1949.4%$12,632,57411.3%
NEW BELGIUM FAT TIRE AMBER ALE283,12016.4%$9,019,61228.7%
WIDMER HEFEWEIZEN222,56528.6%$6,948,18332.1%
DESCHUTES MIRROR POND PALE ALE172,62458.5%$4,975,50153.6%
REDHOOK ESB153,34168.1%$4,552,75166.7%
SAMUEL ADAMS SEASONAL148,22218.2%$4,333,65522.1%
SIERRA NEVADA SEASONALS145,235231.9%$3,662,164203.1%
SAMUEL ADAMS LIGHT118,048-16.5%$3,558,892-7.8%
TOTAL CATEGORY, CONVENIENCE5,855,55924.9$171,241,60027.7%
 
Food, drug and mass merchandise
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
SIERRA NEVADA PALE ALE1,962,5634.2%$53,809,9206.8%
SAMUEL ADAMS BOSTON LAGER1,867,9226.3%$49,449,94810.5%
SAMUEL ADAMS SEASONAL1,115,89037.5%$30,087,62441.7%
NEW BELGIUM FAT TIRE AMBER ALE838,26517.8%$24,164,59823.3%
SHINER BOCK813,02213.6%$18,624,65815.8%
SAMUEL ADAMS LIGHT773,8185.7%$20,682,9309.8%
WIDMER HEFEWEIZEN681,53712.7%$18,124,05813.3%
REDHOOK ESB465,795-1.5%$11,978,601-0.1%
SAMUEL ADAMS BREWMASTER COLLECTION372,10065.2%$9,869,63672.8%
PYRAMID HEFEWEIZEN ALE341,10616.6%$9,035,34218.3%
TOTAL CATEGORY, FDMN/A14.4%$511,056,92818.0%
Source: Information Resources Inc., sales for the 52 weeks ending Feb. 25, 2007

Importantly, Anheuser-Busch also has renewed its efforts in the on-premise channel of nightclubs, bars and restaurants. For many years, domestic brewers had focused on off-premise retail outlets, leaving room for wine and spirits to take over the on-premise market — at least in terms of creativity and the perception that those products were preferable for out-of-home entertainment.
“A-B is refocusing their efforts against the on-premise arena, whether it’s draft quality, tap handles, bottle distribution, point-of-sale, promotions or alliances with strong on-premise retailers,” Williams says. “A-B has made a strong effort in that field to recapture that lost share of voice.”
Out of the Blue
Another brewer that has used on-premise momentum to boost sales is Molson Coors Brewing Co., Golden, Colo. The company’s Blue Moon quietly has turned into one of the hottest brands in the beer business, selling a reported 400,000 barrels in 2006. The Belgian-style white beer has performed well in on- and off-premise outlets alike, but it is the on-premise presentation of Blue Moon, served with an orange slice, that caught the attention of many consumers.
“The real winner for them in ’06, and I think in ’07, is going to be Blue Moon,” Williams says. “It is priced, not at the craft price level, but higher than premium, almost at a super-premium [level]. Volume gains have been incredible, and there are distribution opportunities galore.
“They did a great job of merchandising the Blue Moon product on-premise,” he adds. “You’re going to get a slice of orange in it that brings out that coriander flavor. They romanticized that beer and there is a lot of room to grow.”
Coors’ flagship product, Coors Light, also fared well during the past year, with almost 17 percent dollar sales growth in convenience stores and 2.3 percent in FDM outlets. Bucking the category trend in sub-premium beers, Keystone Light also made substantial increases, with almost 30 percent dollar sale growth in the convenience channel and 7.4 percent in FDM stores.
Overall, the company reported a 4.1 percent increase in sales for 2006, leading President and Chief Executive Officer Leo Kiely to state: “We finished 2006 with even stronger brands, positive pricing, cost savings that exceeded our goals for the year, double-digit earnings growth and strong cash generation.”
Growth on the high end
Of the three major U.S. brewers, Miller Brewing Co., Milwaukee, Wis., saw relatively flat growth during the past year. During the first half of the 2007 financial year, SABMiller reported its North American operations lost 1 percent revenue. The company indicated full-year 2006 sales, for the year ending March 2006, were up 1 percent.
“Miller Brewing Co. continued to experience a difficult trading environment due to competitive pricing conditions, market share gains by import and craft beers, and significant increases in commodity input costs,” the company said in its half-year 2007 financial statement. “Miller has, however, sustained its marketing investment in major brands and continued to improve its overall organizational capabilities with a specific focus on brand marketing and main retailers.”
According to IRI, Miller Lite held onto its spot as the third-largest beer brand in the United States, and had almost 7 percent dollar sale increases through convenience outlets, but lost almost 1 percent in FDM channels. The bright spot for Miller has been its craft brewing division, Leinenkugel Brewing Co., Chippewa Falls, Wis., and its import products.
“Miller’s ‘worthmore’ brand portfolio grew volumes by 8 percent, which was driven by growth of the Leinenkugel’s franchise, following the successful launch of the Sunset Wheat variant, as well as continued rapid growth of Peroni Nastro Azzurro,” the company says.
The company is taking its lead from the wine industry for another import, Pilsner Urquell, which it recently placed in front of a panel of tasting experts at the Beverage Tasting Institute in Chicago. Touting a score of 93, the company plans to use the BTI rating in marketing for the brand. The company indicates the majority of consumers who buy import beers also purchase wine, making them familiar and receptive to such a rating system.
Imports keep rising
Overall, import beers picked up a full share of the beer market in 2006, says IRI’s Williams, who adds, “They had a stellar year last year.”
Mexico’s Corona Extra is the top import brand in the country and enjoyed almost 20 percent sales growth during the past year in the convenience channel, and nearly 5 percent in FDM outlets. The brand previously had been handled in the United States by the Gambrinus Co., San Antonio, Texas, and Barton Beers, Chicago. This year, Corona and the rest of the Grupo Modelo portfolio fall under one umbrella for national coverage, with the formation of Crown Imports, based in Chicago.
According to Williams, the distribution know-how of Crown Import’s veteran executive team, combined with the alignment made possible by one-company representation will take the brand to even greater heights.
“I continue to see Corona being the import leader and I see wholesalers getting aligned better with Crown Imports,” he says. “I think that a lot of retailers enjoy one person to talk to. Now it’s one-voice-serves-all and I think that’s a positive thing.”
Heineken Premium Light also was a stand-out success in the import category last year. The new product earned a spot on the list of Top 10 best sellers in its first year, and picked up 2.7 percent share of market. The product also managed to not cannibalize sales of flagship Heineken or the company’s Amstel Light, but instead pulled in incremental sales.
“[Heineken USA President] Andy Thomas did a phenomenal job at marketing this product and getting wholesalers’ attention,” Williams says. “It’s a target-rich environment for that high-end light segment. Andy saw that and when he introduced Heineken Premium Light, he had done his research and really believed that the Heineken Premium Light shopper was not going to come from the Heineken flagship brand. And it didn’t. It was incremental shoppers into the Heineken portfolio.”
Overall, the United States imports the most beer from Mexico, according to the Beer Institute. At 14 million barrels, Mexico sells twice as much beer in the United States as the Netherlands in second place. Germany, the United Kingdom and Ireland round out the Top 5, with 1.2 million barrels or less for each country. Likewise, U.S brewers export the most beer to Mexico, followed by Canada and Taiwan. Many of the largest brewers, however, hold licensing agreements to brew beer in other countries rather than export from the United States.
The craft connection
Craft beers were up almost 12 percent overall in 2006, according to the Brewers Association, based in Boulder, Colo. The industry produced more than 6.6 million barrels of beer last year, and while that is small in the context of the industry as a whole, Brewers Association Director Paul Gatza says it is indicative of the shift in American flavor preferences.
Top flavored malt beverages by brand
Convenience
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
SMIRNOFF ICE2,907,6420.2%$92,287,1842.4%
SPARKS2,139,57836.1%$60,493,83242.6%
SMIRNOFF TWISTED V GREEN APPLE1,352,129-15.5%$42,523,172-13.7%
SPARKS PLUS1,131,84245,223.4%$20,286,56227,313.3%
MIKE’S HARD LEMONADE990,095-1.2%$31,178,4503.6%
SMIRNOFF TWISTED V WILD GRAPE915,267580.7%$28,768,364595.9%
SMIRNOFF ICE TRIPLE BLACK900,760-23.4%$28,212,826-21.5%
TILT638,384216.7%$15,501,949216.2%
SMIRNOFF TWISTED V WATERMELON580,348-25.8%$18,366,420-25.3%
SMIRNOFF TWISTED V RASPBERRY567,666-22.3%$18,018,532-20.2%
TOTAL CATEGORY, CONVENIENCE18,385,31014.8%$537,761,28014.0%
 
Food, drug and mass merchandise
BRAND Case sales % change vs. prior year Dollar sales % change vs. prior year
SMIRNOFF ICE1,426,267-13.2%$41,760,180-10.3%
MIKE’S HARD LEMONADE1,133,280-8.8%$33,858,700-5.8%
MIKE’S HARD CRANBERRY LEMONADE614,355-14.6%$18,453,428-11.4%
SMIRNOFF TWISTED V GREEN APPLE593,273-27.7%$17,792,374-25.0%
SMIRNOFF TWISTED V VARIETY PACK592,48437.0%$15,983,45242.2%
SMIRNOFF ICE TRIPLE BLACK513,569-29.9%$15,038,392-27.6%
SMIRNOFF TWISTED V RASPBERRY508,782-28.0%$15,358,683-25.3%
SMIRNOFF TWISTED V WILD GRAPE491,306289.7%$14,749,315298.1%
MIKE’S HARD VARIETY PACK441,54738.8%$12,373,87742.5%
MIKE’S HARD LIME378,473-19.9%$11,383,463-17.7%
TOTAL CATEGORY, FDM11,726,082-2.2%$338,426,9120.3%
Source: Information Resources Inc., sales for the 52 weeks ending Feb. 25, 2007
“American tastes are clearly changing, thus the demand for more flavorful and diverse beers is exploding,” he said in a statement.
Sierra Nevada Pale Ale, from Sierra Nevada Brewing Co., Chico, Calif., is the top seller throughout measured retail channels, and enjoyed dollar sales gains of almost 27 percent in the convenience channel during the past year, and almost 7 percent in FDM outlets.
Boston Beer, maker of Samuel Adams Boston Lager, is the largest of the craft brewers, and its flagship product also pulled in large increases during the past year, with almost 17 percent dollar sale growth in the convenience channel, and 10.5 percent in FDM outlets.
IRI’s Williams gives Boston Beer founder Jim Koch credit for continually sparking enthusiasm among consumers with advertising and promotions such as the company’s LongShot product, which was based on recipes submitted by home brewers. The company also developed a new glass for its product last year, created to enhance the sensory experience of drinking a beer. Features of the glass include a rounded shape that collects aromas, laser etchings on the bottom of the glass to create bubbles for constant aroma release, a narrowing of the glass at the top to retain the hop aroma and the beer’s head, and an outward turned lip that delivers the beer to the front of the tongue where the sweetness of the malts is perceived.
“He’s doing a great job of romancing the beer category and particularly craft beers in the on- and off-premise,” Williams says.

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