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.