Brewers Take The Good With The Bad
Consumers trade up to crafts and imports while mainstream beers still look for opportunities
The U.S. beer industry experienced a slight decline in 2005, dropping total shipments 0.1 percent, according to the Beer Institute. But while general-market domestic beers continue to struggle, high-end products are enjoying growth in the high single-digits. Import beer shipments grew 7.2 percent, and craft beer shipments were up 9 percent — and they carried that momentum into the first part of this year.
“The micro/craft segment had its strongest month of January in the past five years, and this is coming off of a record year for them in 2005,” says Dan Wandel, vice president of Information Resources Inc.’s beer, wine and spirits practice. “So when we say the beer category is struggling, yes, overall it is struggling. But there are certain segments, particularly those in the high end that are not struggling and are actually thriving right now.”
Total industry shipments
(1,000s of 31-gallon barrels)
Domestic 178,800 -1.2%
Imports 25,566 7.2%
Exports 4,151 8.0%
Source: The Beer Institute
Through Feb. 19, 2005, IRI reports that retail dollar sales in the overall beer category, which includes ciders and non-alcoholic beers, is up 0.5 percent in supermarkets, drug stores and mass merchandisers (FDM), excluding Wal-Mart; and 1.9 percent in convenience stores vs. the prior year. Imports and micro/craft beers showed impressive gains through all channels, with imports growing almost 8 percent in FDM channels and nearly 22 percent in convenience stores. Micros/craft beers gained more than 9 percent in FDM channels and almost 7 percent in convenience.
Beer sales by category
  Dollar sales Market share
Category Dollar sales % change VS. prior year Market share % change VS. prior year
Channel: Food, drug and mass merchandise (excluding Wal-Mart)
DOMESTIC PREMIUM$4,014,843,3921.446.40.4
DOMESTIC SUPER PREMIUM$530,946,048(14.3)6.1(1.1)
DOMESTIC SUB-PREMIUM$1,488,742,272(3.3)17.2(0.7)
DOMESTIC MALT LIQUOR$60,605,344(8.1)0.7(0.1)
FDM CATEGORY TOTAL$8,658,013,1840.5100.00.0
Channel: Total U.S. Convenience
DOMESTIC PREMIUM$7,313,043,0002.957.90.6
DOMESTIC SPECIALTY$461,216,900(14.5)3.7(0.7)
DOMESTIC SUB PREMIUM-(Budget and Popular)$2,433,831,000(5.4)19.3(1.5)
MALT LIQUOR$419,838,9004.03.30.1
DOMESTIC NON-ALCOHOL$19,731,050(15.2)0.2(0.0)
CONVENIENCE CATEGORY TOTAL$12,621,310,0001.9100.00.0
Source: Information Resources Inc., Chicago; 52 weeks ending Feb. 19, 2006
Top domestic beers by brand
  Dollar sales Market share
Category Dollar sales % change VS prior year Market share % change VS prior year
Channel: Food, drug and mass merchandise (excluding Wal-Mart)
BUD LIGHT$1,332,337,664(1.1)15.4(0.2)
MILLER LITE$709,876,9921.88.20.1
COORS LIGHT$597,656,2562.36.90.1
NATURAL LIGHT$283,830,848(2.4)3.3(0.1)
MICHELOB ULTRA LIGHT$216,703,840(18.6)2.5(0.6)
BUSCH LIGHT$200,370,3521.62.30.0
MILLER GENUINE DRAFT$182,094,240(8.6)2.1(0.2)
MILLER HIGH LIFE$175,045,216(5.2)2.0(0.1)
FDM DOMESTIC TOTAL$6,524,097,536(0.8)75.4(1.0)
Channel: Total U.S. Convenience
BUD LIGHT$3,058,373,0002.224.20.1
MILLER LITE$889,248,5002.47.00.0
COORS LIGHT$792,121,7003.36.30.1
NATURAL LIGHT$584,294,0003.14.60.1
BUSCH LIGHT$311,773,700(8.7)2.5(0.3)
MILLER HIGH LIFE$267,140,100(2.0)2.1(0.1)
MICHELOB ULTRA$200,291,100(10.1)1.6(0.2)
BUDWEISER SELECT$189,115,50011,
CONVENIENCE DOMESTIC TOTAL$11,212,810,000(0.2)88.8(1.8)
Source: Information Resources Inc., Chicago; 52 weeks ending Feb. 19, 2006
Although shipments were down, retail dollar sales also improved for the domestic premium segment, which gained 1.4 percent vs. the prior year in FDM channels and almost 3 percent in convenience stores.
Wandel attributes the discrepancies between the segments’ performance to consumers’ willingness to trade up to more expensive products and their desire for choice. “I think the malternatives segment helped to promote choice among consumers because they started trying out different flavors,” he says. “Naturally those flavors led them to try different sorts of beverage alcohol drinks. It also got them accustomed to paying a high price.”
But he says, the big brewers, Anheuser-Busch in particular, have come out swinging this year. “They’ve got a number of new specialty type brands coming out appealing to choice,” Wandel says. “They’re looking at things that are not traditional beer offerings … They are definitely at the forefront of a lot of new innovation.”
Anheuser-Busch recently added Singapore’s Tiger Beer to its lineup to increase its position in the import market, and plans to increase Tiger’s currently limited distribution to nationwide exposure. The company also took over the Grolsch Lager business from United States Brewing this spring, several months ahead of schedule in order to get the brand in its system before the summer selling season. In addition, A-B introduced Peels, a malt beverage made with juice to appeal to female consumers. In a departure from its traditional big-budget, big media advertising, the company sampled the beer at high-end department stores such as Neiman Marcus and Nordstrom to hit Peels’ key demographic.
Other innovative A-B offerings include organic Wild Hop and Stone Mill beers, Spring Heat Spice Wheat, and Drink Innovations flavor shots, which are made to be mixed with beer so consumers can customize flavors. The company also has been rumored to be working with energy drink-maker Hansen’s Beverage Co., owner of the Monster brand, to develop an alcohol/energy drink.
In an effort to promote the entire industry, Anheuser-Busch partnered with the Beer Institute on a new non-branded “Here’s to Beer” Web site and ad campaign that was launched during the Super Bowl to promote the history and social aspects of beer.
As for its more traditional products, A-B’s Bud Light and Budweiser brands continue to lead the beer category, with nearly 25 percent combined market share in FDM channels and nearly 39 percent in convenience stores, according to IRI. Both brands saw sales declines in food, drug and mass during the past year, but Bud Light managed to grow 2.2 percent in convenience stores. Competitors Miller Lite and Coors Light pulled off sales gains in both retail segments, with Miller Lite picking up 1.8 percent sales gains in FDM channels and 2.4 percent in convenience, while Coors Light grew 2.3 percent in FDM and 3.3 percent in convenience.
Top imported beers by brand
  Dollar sales Market share
Category Dollar sales % change vs. prior year Market share % change vs. prior year
Channel: Food, drug and mass merchandise (excluding Wal-Mart)
CORONA EXTRA$454,581,6969.55.30.4
CORONA LIGHT$110,727,0168.31.30.1
LABATT BLUE$50,740,548(4.4)0.6(0.0)
AMSTEL LIGHT$48,223,9163.90.60.0
GUINNESS DRAUGHT$42,869,7604.40.50.0
MODELO ESPECIAL$42,027,12045.00.50.1
NEWCASTLE BROWN ALE$40,164,36018.40.50.1
FDM IMPORT TOTAL$1,683,525,6327.719.41.3
Channel: Total U.S. Convenience
CORONA EXTRA$517,123,30024.84.10.8
MODELO ESPECIAL$79,286,200103.60.60.3
LABATT BLUE$48,041,640(19.2)0.4(0.1)
CORONA LIGHT$37,478,4502.60.30.0
FOSTER’S LAGER$26,201,220(2.1)0.2(0.0))
CORONITA EXTRA$24,347,200218.30.20.1
LABATT BLUE LIGHT$21,693,560(14.7)0.2(0.0)
CONVENIENCE IMPORT TOTAL$1,408,500,00021.511.21.8
Source: Information Resources Inc., Chicago; 52 weeks ending Feb. 19, 2006
Miller Brewing Co. has taken a slightly different tack to Anheuser-Busch’s innovation efforts to help boost sales. The company has spent the past months revamping its brand images with advertising that plays up the premium quality of its products. Indicating that the beer industry has allowed its marketing to become too lowbrow, Miller Chief Executive Officer Norman Adami recently told a group of beer industry observers, “We believe the single biggest factor determining the success or failure of each of our brands is the quality of the marketing behind those brands.”
The company re-tagged its Miller Genuine Draft as “Beer. Grown Up.” and has put renewed focus behind import brands Peroni as “refreshment with Italian style and sophistication,” and Pilsner Urquell as “the beer aficionado’s beer.”
Adami also emphasized that he believes beer pricing wars are damaging to the industry. “Commoditized industries are usually governed by two laws —whoever is cheapest wins … and whoever has the scale is cheapest. As the much smaller player, we have every reason in the world to seek sensible pricing,” he said.
IRI’s Wandel agrees that pricing must be a priority if the beer industry is to make a true turnaround. “It’s gotten into this aggressive mode during the past year or so,” he says. “I know people are fighting for share, but we need to see the pricing stabilize.”
Coors Brewing Co. is focusing its efforts on its Rockies image with new packaging and a “Taste the Cold” tagline. The company will roll out new aluminum bottles with liners to keep beer colder longer. It also is said to be looking into a longneck bottle with “outlast technology” that insulates the beer to prevent it from getting warm in a consumer’s hand. At this spring’s Nightclub and Bar Show in Las Vegas, the company displayed Stay-Cold Glassware made from borosilicate glass for the on-premise market.
Top micro/craft beers by brand
  Dollar sales Market share
Category Dollar sales % change vs. prior year Market share % change vs. prior year
Channel: Food, drug and mass merchandise (excluding Wal-Mart)
SIERRA NEVADA PALE ALE$50,020,8486.80.60.0
SAMUEL ADAMS BOSTON LAGER$44,540,4880.50.50.0
SAMUEL ADAMS SEASONAL$20,961,29610.30.20.0
NEW BELGIUM FAT TIRE AMBER ALE$19,690,13416.90.20.0
SAMUEL ADAMS LIGHT$18,813,8761.80.20.0
SHINER BOCK$16,027,01510.90.20.0
WIDMER HEFEWEIZEN$15,790,13717.00.20.0
REDHOOK ESB$11,847,951(7.7)0.1(0.0)
PYRAMID HEFEWEIZEN ALE$7,526,19115.20.10.0
FDM MICRO/CRAFT TOTAL$428,906,3369.45.00.4
Channel: Total U.S. Convenience
SIERRA NEVADA PALE ALE$24,708,2206.00.20.0
SAMUEL ADAMS BOSTON LAGER$13,355,490(14.7)0.1(0.0)
SHINER BOCK$10,096,9204.00.10.0
FAT TIRE AMBER ALE$6,259,7645.10.00.0
SAMUEL ADAMS SEASONAL$6,221,16988.60.00.0
SAMUEL ADAMS LIGHT$4,622,3363.80.00.0
WIDMER HEFEWEIZEN$4,080,0148.50.00.0
RED HOOK ESB$2,372,0068.70.00.0
ALASKAN AMBER$1,748,67725.10.00.0
Source: Information Resources Inc., Chicago; 52 weeks ending Feb. 19, 2006
Top flavored malt beverages by brand
  Dollar sales Market share
Category Dollar sales % change vs. prior year Market share % change vs. prior year
Channel: Food, drug and mass merchandise (excluding Wal-Mart)
SMIRNOFF ICE$46,649,972(21.3)0.5(0.1)
MIKE’S HARD LEMONADE$35,831,756(10.1)0.4(0.0)
SMIRNOFF TWISTED V GREEN APPLE$23,841,922(26.5)0.3(0.1)
SMIRNOFF ICE TRIPLE BLACK$20,851,730(27.6)0.2(0.1)
MIKE’S HARD CRANBERRY LEMONADE$20,780,966(19.9)0.2(0.1)
SMIRNOFF TWISTED V RASPBERRY$20,625,514(19.1)0.2(0.1)
MIKE’S HARD LIME$13,741,756(9.6)0.2(0.0)
FDM MALTERNATIVE/FMB TOTAL$336,431,264(6.1)3.9(0.3)
Channel: Total U.S. Convenience
SMIRNOFF ICE$84,297,620(19.0)0.7(0.2)
SMIRNOFF ICE TRIPLE BLACK$31,373,920(31.5)0.2(0.1)
MIKE’S HARD LEMONADE$29,208,910(9.9)0.2(0.0)
SMIRNOFF TWISTED V RASPBERRY$21,248,720(7.8)0.2(0.0)
BACARDI SILVER RAZ$17,235,330(36.3)0.1(0.1)
MIKE’S HARD CRANBERRY LEMONADE$14,467,190(20.7)0.1(0.0)
BACARDI SILVER O3$10,710,090(52.0)0.1(0.1)
Source: Information Resources Inc., Chicago; 52 weeks ending Feb. 19, 2006
IRI’s Wandel points out that a lesser-known Coors brand, Blue Moon Belgian White, has quietly performed very well for the company. The brand has enjoyed double-digit growth during the past three years, and is particularly popular on-premise where it plays up its coriander and orange peel content by being served with an orange slice.
Leading growth
Craft beers boasted the largest growth of any beer segment, and according to a recent Citigroup wholesaler survey, beer distributors think the major brewers should consider adding micros to the mix. Sixty-four percent of wholesalers surveyed thought the major brewers should add craft beers through acquisition, but leave the smaller companies to operate independently.
The wholesalers also indicated that within more traditional offerings, seasonal beers have the best chance at raising the image of beer with consumers. IRI’s Wandel agrees, saying that seasonal beers and variety packs were especially popular last year, and future efforts should include better execution of more niche products at the retail level.
“There is still a tremendous amount of opportunity with retailers to better understand segments like the micro/craft and the import segments,” he says. “I don’t see those segments getting their fair share of merchandising activity… so even though micros and imports are growing, if they got the kind of merchandising support they deserve, they could do even better.”
Call him an optimist, but Wandel also anticipates better industry performance across the board. “I do not think the beer category is dead by any stretch of the imagination,” he says. “With the innovation going on this year, if pricing stabilizes and if the high-end continues to do well, I think beer is in line to have a strong, solid showing.” BI