Monday, May 21, 2007

Why Beverage Analysts Need to Drink More

Uncle Jack quotes and notes an AP wire story about beverage industry analysts' angst about major brewers', particularly A-B's, purported lack of focus on their "core brands." What this means is that major brewers aren't as profitable and the A-B juggernaut has stalled out short of total market domination: brilliant Wall Street thinking is that you have to pour more money into the things that aren't working, like slumping Budweiser, MGD, and Original Coors. It worked before, the reasoning is: make it work again.

This ignores the possibility of a whole new market dynamic, the split to light beer on one track and full-flavored beer on the other, with 'premium' beers falling badly in the middle, something that A-B actually seems to be seeing pretty well; their problem so far is with execution.

Jack finds a nugget in the story in one analyst's (Goldman-Sachs's Judy Hong) proposed cure: buy a large craft brewer, or buy Absolut in a joint venture with Fortune Brands to break into the spirits market. More brilliant Wall Street thinking: if you have a problem caused by a lack of focus on your core brands, the solution is to dilute your focus even more by getting into entirely new segments of the market. How much are these people getting paid, and how can I make some of this easy money?

But take a look at this. I found my own nugget. Coors gets a pat on the back from Citigroup analyst Bonnie Herzog for focusing on their "core three brands: Coors Light, Blue Moon, and Keystone Light..." Blue Moon a core brand? Blue Moon? Coor doesn't release figures on individual brands, but from what I've been able to glean, Blue Moon did between 200k and 300k bbls. last year (inexact, I know, but I got what I got (see the comments below; it's actually a much larger range of guesses)). That's core brand territory for a brewer like Boston Beer or Sierra Nevada, but Molson Coors?

I don't know if this means that Blue Moon is popular in Manhattan, or if Molson Coors is in such bad shape that 200,000 bbls. of beer is a major concern. Actually, I do know: it means that "beverage industry analysts" need to get out and about more often, and take a look at what's really going down.

Buying a large craft brewer is not going to help A-B: sales of that large craft brewer will plummet when folks find out it's now A-B. There are only a few craft brewers out there large enough to make a difference: Boston Beer, Sierra Nevada, New Belgium. Their whole image is built on things like craftsmanship, beer decisions made by brewers, and "we're not a megabrewer."

Blue Moon is not a core brand. I like the beer, I like some of their seasonals a lot (I really hope they bring out the chardonnay grape beer they had at GABF; I know, I know, but it was delicious), but it's got a long way to go before it's crucial to the success of Molson Coors.

Buying into spirits is not going to help sales of core brands. It's just diversification, something Wall Street dives into every twenty years or so, inevitably followed by some balding old guy being hailed as a contrarian genius when he says companies have to focus on their main business. Ho-hum. It's all about selling stock and making money on anything but actual production.

Wall Street: I'm available, call me.


Steven said...

Lew - the Bluemoon phenom is all over the Chicago area, people are drinking it like it's the new Stella Artois -- people who don't know beer, that is. I like to point out that the beer is made by Coors and watch the astonished looks appear, "Nooo!" Then the arguments of, "But it's Belgian!" sometimes develop...loads of fun. ;-)

I'm surprised that their sales are so low, but maybe Coors is sliding by on making people *think* this is a craft or import?

Stan Hieronymus said...

Lew - Not an official number, but I've heard 500,000 for Blue Moon in 2006, more than doubling 2005 (which was double 2004).

Not a core brand, but it has everybody thinking about White beer in a way Celis never did.

Lew Bryson said...

Stan first...

I heard the 500,000, but didn't want to overstate things. So hard to tell: I also heard 800,000 bbls. from one source.

But "doubling"? They released growth numbers for 2006 that were under 25%; still great, but not doubling.

I strongly agree that Blue Moon has folks thinking about witbier: Leinenkugel Sunset, Spring Heat, a new push on Hoegaarden.

Lew Bryson said...


It really bothers me that it makes a difference who makes it to a lot of people. Do you like the taste of it? Who cares who makes it? Sheep.

Coors is kind of caught in the PBR trap: it's growing, and you'd like to see it grow more (and your wholesalers would like to see it grow a lot more), but if you advertise suddenly loses cachet and becomes ordinary. Live by marketing, die by marketing.

I honestly don't think Coors is mis-representing Blue Moon -- it's on their main website, for instance -- but they don't know what to do with it. No surprise: none of the big brewers know what to do with craft-like brands.

Steven said...

"Do you like the taste of it? Who cares who makes it? Sheep."

While I agree (to a point), I don't think it's so much who's making it to them, as it is that it's not an import or craft. I think they feel like the air has been let out of their "prestige."

"None of the big brewers know what to do with craft-like brands."

Yeah, no surprise. And I've honestly never been a fan of the brew, maybe because I cut my Wit teeth on Hoegaarden and others -- Blue Moon always seemed "forced." And I don't even want to talk about the Sunset Wheat...

Bill said...

I think Coors _does_ know what it's doing with Blue Moon. Wheat beers are selling more each year, be they wits or weisse or American creations like Oberon. Coors might figure that the growth curve is great with their current no-TV strategy and likely wouldn't be improved with the added expense of TV, especially as SAB Miller and Anheuser-Busch aren't pushing similar products nearly as effectively. If Miller or AB suddenly pushes one with TV ads, then be prepared for Blue Moon to be advertised heavily.

Steven -- are you the Fritz Kreisler fan who once crushed stone?

Lew Bryson said...

You might be right Bill...except it surely looks like Coors is running after their product. This was a beer that drinkers discovered, and Coors would undoubtedly like to stoke it even more, but has a balancing act to deal with. Still, with growth figures like the ones it has, it's kind of hard to argue with hands-off.

Steven said...

Steven -- are you the Fritz Kreisler fan who once crushed stone?

Not sure if that's sarcasm or you actually know a violin afficionado with a heavy hammer... but no, I had to look up Fritz and I've never crushed stone - as gravel or the Micro brewery.

Bill said...

Sorry, Steven -- it wasn't sarcasm, and I did once know that fellow -- I described his online persona. Your geography, love of lagers, and writing style matched his somewhat -- thought I'd reconnect. My apologies, and thank you, Lew, for letting me get off topic.

Lew Bryson said...

You guys are nuts. Are we done now?!

Anonymous said...

Greetings Mr. Bryson,

Put a tablespoon of Cointreau in the glass, then add the Blue Moon. :)

With regards,
Ted Schiller

Steven said...

You guys are nuts. Are we done now?!

Hah -- wot, no violin music for Lew? ;-)

Lew Bryson said...

You know...the really interesting thing is that no one mentioned anything about Bud Select.

Dead Beer Walking.

WVbeergeek said...

Here's why I dig Blue Moon other than the fact that I live in WV where good craft beer can be hard to come by, the other reason being that when I bartend at Bocktown Beer and Grill in Pittsburgh I find so many people who come in fresh to the new beer scene. When I ask what do ya like everyone relates to Blue Moon as a yeah I like or I don't drink that crap stance. When I get the yeah instead of going for a typical BMC crossover beer like GLBC Dortmunder Gold or Blue Point Toasted Lager I suggest something from PA like Victory Whirlwind Wit or Troeg's Dreamweaver. That in short has made me respect Blue Moon a bit more recently.



Wall Street said...


I called, but you weren't home. I'll check in after the market closes tomorrow.


Steven said...

" one mentioned anything about Bud Select."

I still haven't straightened my score card out from Bud Select and/or World Select. Although, giving it some thought, I really don't care.

Anonymous said...

"No surprise: none of the big brewers know what to do with craft-like brands."

And they aren't really willing to go out on a limb and hire a beer geek for a sales rep position, either. I had a job interview with Gretz Beer Company in A-B contract distributor in Norristown...and I didn't get the job because I too focused on craft beer. I was overqualified apparently, they were "just looking for someone to sell Budweiser."

Anonymous said...

As a distributor of MolsonCoors I can tell you that Blue Moon is a core item because it represents the biggest "opportunity" for them. Wiht the growth in craft brands it provides their distributors with a higher margin item from a major supplier. Additionally, when they meet with their distributors they ask for three brands to get your effort: Coors Light, Blue Moon, and Keystone Light. The reason for this is that they are in distributors that carry a large number of brands all fighting for focus. By targeting the focus of distributors to three brands they can get more buy-in...not a bad approach in my opinion.

Lew Bryson said...

So it's a matter of semantics, then: what one means by "core brand." It's a matter of focus rather than essential importance. Then I'm curious: why Blue Moon is considered a "core brand" of Molson Coors, and not, for instance, Molson. Have they given up on Molson in the U.S.?

Anonymous said...

They've not given's one of those - oh by the way if your Sales Reps have some free time try and sell some Molson.