Trends, and the Trendy People Who Are Trending Them

A rare cross-posting from my Session Beer Project blog, because there's more here than just session beer. 

"Not Even Justin Timberlake Can Save Bud Light Platinum"

You know how I know session beer is the smart new trend for craft brewers?

Because the big brewers are making higher ABV beers.

Check out this story in Ad Age. ABInBev and Miller Coors are betting big on boozier beers.

That appears to be part of the playbook for MillerCoors and Anheuser-Busch InBev, which have turned to pricier, higher-alcohol line extensions to recapture share from growing liquor brands. The latest entry: Miller Fortune, which will debut next year at 6.9% alcohol by volume with a marketing strategy aimed at luring millennial males during nighttime drinking occasions.

The brew, in the works for months, follows A-B InBev's recent launches of Bud Light Platinum and Budweiser Black Crown, which both check in at 6% ABV, compared with 4.2% for most light beers. The goal for brewers is to reach variety-seeking drinkers whose habits lead them to the liquor shelf and away from beers their fathers drank. 

(Can anyone tell me what the latest sales curves are like on Platinum? Thought I heard they sucked. Oh, here it is: "Not Even Justin Timberlake Can Save Bud Light Platinum")

Guys, guys, guys...People don't want beer with more alcohol. They want beer with more flavor. And Bud Light Platinum doesn't have beer flavor, it has added flavor, artificial flavor. Session beers have real flavor, and that's what people want. Good luck with the big beers; you're only about eight years behind the curve.

Cider Explodes in U.S. Market

Updated: I forgot to add in the analysis...sorry!
 
I've been noting an explosion in small -- and not-so-small -- cidermakers, and it's reflecting a huge category growth. According to a story in today's Shanken News Daily, cider sales in the U.S. rose by 23% last year (that's 5.7 million cases sold in 2011...and for those of you who, like me, are used to thinking in barrels, it's about 414,000 bbls.). Pretty amazing, and probably explains why A-B and Boston Beer both rolled out ciders this year (Michelob Ultra Light Cider and Angry Orchard, respectively). It's amazing what cider can do when it gets proper distribution, too: they report that Crispin cider, after being bought by MillerCoors' Tenth & Blake craft/import unit in February, has been growing at about 300% per month since the purchase. That's frickin' amazing.

Anyway you slice it, the 800 pound gorilla is Vermont Hard Cider, which makes Woodchuck and Wyders, and imports Strongbow and Woodpecker. From the SND story:

“We didn’t have much competition in the cider category for almost 20 years,” says Bret Williams, president and CEO of Vermont Hard Cider Co., the U.S. market’s leading cider player. “It’s a very unique time ['very unique', it makes the editor in me shudder...], with more brands coming into the mix. But competition is good for the category. It’s building awareness and bringing in new consumers.”

Vermont Hard Cider’s top brand is the Woodchuck label ($8.99-$9.99 a six-pack), which last year grew 32.8% to surpass the 2-million-case mark [with Strongbow, that's half the market]. The brand—which includes a range of seasonals and private reserve offerings—is trending at more than 28% growth for the first half of 2012, according to Williams, and is expected to hit 3 million cases by year-end. Vermont Hard Cider is breaking ground next month on an expansion project at its Middlebury, Vermont production facility that will grow capacity from 4 million cases to 10 million cases annually. Vermont Hard Cider is also investing heavily in innovation, recently launching Woodchuck in a 12-ounce can format. In addition, the company has started production on an aged cider matured in Bourbon barrels, set to roll out later this year.

Kinda sounds like craft beer, don't it? You'd almost expect them to be announcing plans to open a second facility in North Carolina or something... Anyway, there's also flavors coming -- Crispin's Fox Barrel pear cider is kinda tasty -- and you'll likely see more draft options, breaking out of the single handle most places offer. 

Vermont Hard Cider’s Williams says the on-premise will be a key battleground as cider continues to expand. “On-premise accounts won’t have several ciders on tap—they’ll only have one,” he says, adding that he sees cider ultimately gaining upwards of a 10% share of the U.S. beer market. “In the past 20-plus years, I’ve never been more bullish on the category.”

What's driving it? Couple things. First, it's simply taste. Cidermakers are making better-tasting cider, just like the craft brewers made better-tasting beer. They're making more interesting ciders, robust, dry, flavored with other fruits and spices, big ciders and session ciders, and like craft beer, variety sells. Woodchuck's making seasonals, and they sell. Secondly, you've got sales to people who just flat-out don't like beer, and never will -- they're out there, just like the folks that don't like wine or whiskey -- or can't drink it: cider is increasingly picked as a natural choice for the growing number of diagnosed celiacs, who cannot digest the gluten in beer, and are actually harmed by it. Cider tastes good, it's fizzy and you drink it cold, and it has about the same ABV as beer; a very acceptable substitute for some.

Is this growth bad news for craft beer? No! Getting people to choose different things is good for craft. Which brings up a much bigger question: is the rise of really large craft brewers -- Boston Beer, Sierra Nevada, New Belgium, Boulevard -- bad news for craft beer? That's a topic for another day. For now, let's have a glass of cider.

MGD 64 Lemonade: I'm not kidding

"MillerCoors Plans Lemonade Beer"

That's an actual headline from the Wall Street Journal. I'm not making this up. Let's get a couple relevant quotes, and then shred this. Here's a  beauty from the Chicago Tribune:

The company expects the brew to attract new consumers to the beer category and to capitalize “on the growing consumer interest in flavored beers,” Andy England, chief marketing officer for Chicago-based MillerCoors, said in a memo to employees Friday.

They better hope something works, because:

Miller Genuine Draft 64, named for the number of calories it contains, got off to an auspicious start after its national rollout in 2008. But sales have cooled. The brand’s unit sales to retailers fell by a double-digit rate in the third quarter, the company said in November, while MillerCoors’s overall sales to retailers declined 4 percent. 

Does that sound familiar? Chillingly familiar? That's right!

MillerCoors, a joint venture of U.K. beer giant SABMiller PLC and U.S.-Canadian brewer Molson Coors Brewing Co., has struggled with another fruit-flavored brand: Miller Chill. The lime-infused light lager enjoyed a strong debut in 2007, but its sales slid after larger rival Anheuser-Busch Inc. unveiled Bud Light Lime the next year.

Hey, if ABIB 'steals' lime (i.e., does it better, which Bud Light Lime did: Chill was poorly executed), just go to lemon! They'll never think of copying that! 

The two/three (your call: is "MillerCoors" one big brewer, or two?) big brewers are having a bad time of it. The economy is clobbering their main consumers, and craft beer has apparently reached a tipping point that has consumers across the spectrum interested, despite higher prices. Mainstream beer is taking an ass-whipping, even light beer sales are down (they're actually up over the last two quarters, I believe...but only because the previous year's numbers were so bad), and the mainstream imports are having their damned lunch eaten (and getting kicked around the schoolyard to boot). 

No, wait...Yuengling is pretty much mainstream -- a bit out of it, but it's essentially a light lager made with a substantial amount of corn, and they do have a light beer -- and they're kicking ass and looking for a new production plant. Could it be that it's actually...the big brewers' marketing that sucks? Oh, man, if the marketing fails...

Here's what happens when the marketing fails. ABIB's sales dropped 3.1% last year (MillerCoors fell 3.4% over that period). But things are not unhappy at the big brewers. Why?

The two brewers, which together account for nearly four out of every five beers sold in the U.S., still have managed to record steady profit growth, offsetting their weaker sales volumes by raising prices and cutting costs. 

Sound business practice, leading to expansion...well, no. What this really leads to is retiring debt, and then going to look for other breweries to buy and ravage -- sorry, lead to new heights of world domination. Rumors are rife that Diageo may finally be ready to unload Guinness (there are even some rumors that ABIB might be ready to just eat Diageo whole), and Grupo Modelo is a likely target. Carlsberg and Heineken are probably safe from takeover because of their ownership structure, but analysts are predicting that the final round of consolidation may at last be upon us, as the signs from the Book of Revelations appear. (It's getting tighter in spirits, too: Diageo, Pernod Ricard, Bacardi, LVMH (who seems more interested in buying up more luxury goods than booze lately), United, and Gruppo Campari are circling like wrasslers in a huge cage match, while Brown-Forman and Fortune hang out in the corners. That one's gonna get bloody.)

Who will win? I guarantee it won't be the consumer, and government anti-monopoly agencies seem to be nowhere in sight.

Meanwhile, that "growing consumer interest in flavored beers"? Like the smartass fish used to tell Charlie the Tuna, consumers aren't interested in flavored beer, they're interested in beer with flavor.
 

Hey, Mister Kiely: which of your kids do you like best? Huh? Which one?

Interesting piece in Crain's Chicago Business this week on the struggle MillerCoors boss Leo Kiely is facing. There are a number of components, but the key factor, the big Wahooni, is this: how do you grow both Miller Lite and Coors Light, two beers that are obviously in direct competition with each other...and with the best-selling beer in America, Bud Light. How do you put together a business plan that keeps Coors Light chugging along (the brand grew 6% in the last 12 months, very impressive indeed) and also lights a fire of focus under the flailing Miller Lite (down 4% over the same period)?

This is exactly what I was talking about almost two years ago when I called an impending MillerCoors merger a shotgun wedding. This was a merger that simply had to take place; when you're at this level in a highly consolidated business -- as mainstream brewing certainly is -- the only way to survive is to be the biggest sumbitch in the jungle. SABMiller and Molson Coors weren't big enough alone -- amazing, but true -- to take on A-B, let alone the ABIB juggernaut that was starting to look ever more real at that point. They had to merge to have a hope of winning.

And that's the sad thing about what this business has become. It's not enough to do well any more. It's about the guys at the top winning. It's about the shareholders getting a big pay-out (and taking the money and buying more stocks in hope of hitting the jackpot again when some company gets gutted). The best thing I see about the current deep recession is that these damnable masters of the universe are no longer celebrities. I hope it lasts, and we make much of people who create something other than marketing campaigns and buy-out deals.

MillerCoors caves in to New Dry pressure

MillerCoors has announced that they will "voluntarily" reformulate Sparks, their citrusy 'energy' beer...and take out the caffeine, ginseng, taurine, and guarana. A guy's gotta ask: if you do, what's the point? The stuff's packaged in a big orange can that looks like a battery, you called it Sparks. If it's not an energy/stimulo beer...it's just a fruit beer, and a lousy one at that. Crap.

I don't care for Sparks, never have, but I despise the thought of MillerCoors knuckling under to these slanderous hand-wringers. All that stuff is legal, this is just Red Bull/Rock Star/Monster with a little alcohol, which is also legal. There is nothing less legal about putting them together: bars do it all the time (I talked to a whiskey brand guy, who said part of his job was going out to bars to make sure that Red Bull and vodka isn't really the only cocktail nightclubs make any more...I think he was kidding).

But the New Drys leaned on a collection of state attorney generals (sic, as in yeah, I meant to pluralize it that way) to get them all fired up about how caffeinated booze was dangerous to children!!! And the AGs, rolled by planted newspaper stories (does anyone in the newspaper biz take the time to think about press releases anymore?), started pounding on the podium to get these dangerous drinks taken off the shelf.

"Attorneys general [sic...] from around the country are gravely concerned about pre-mixed alcoholic energy drinks because these products are dangerous and look and taste like popular non-alcoholic energy drinks," Maine Attorney General Steve Rowe said in a prepared statement. "They're popular with young people who wrongly believe that the caffeine will counteract the intoxicating effects of the alcohol."

"Gravely concerned." Why don't they get "gravely concerned" about schmucks like Bernard Madoff, or sleazy jackoffs like Rod Blagojevich? Instead, the AGs are wasting their time issuing threats about fruity beer-based energy drinks, because of fears based on loose research and casual speculation from fanatical anti-alcohol groups. Why, they're gravely concerned about it!

But MillerCoors... Their statement rightly pointed out that there was no evidence or even indication that Sparks had been marketed to underage drinkers, and called the AGs allegations of such marketing "inaccurate." And then they turn around and pull the "energy" component out of their "energy beer", and agree to pay the AGs $550,000 in legal costs! WTF!

I don't drink energy drinks. I'm a man, I drink coffee. And when I want to catch a buzz with my buzz, I put liquor in my coffee. I don't think it's going to keep me from getting drunk, I think it's warm, I think it smells great. It also does balance out the sleepy-time effect of the alcohol to an extent: no kidding, AGs, New Drys, that's why we drink coffee. It tastes good, but it's also deadline in a mug, hot black zing.

If all the little posers who hang out at Starbucks pounding triple espressos and buzzing all night long suddenly started dosing it with flasks of Irish whiskey, would we hear a cry to outlaw that? MillerCoors has let us all down here. I was proud of them when they initially told the New Drys to take a hike on this issue; I'm correspondingly let down that they caved.

Easy for me to say, sure, but if the big guys continue to cave in, we will have no allies to fight the New Drys. Beer tax increases are being discussed in many states, despite the proven track record they have of being bad for both employment and revenue generation. We just celebrated 75 years of Repeal, but I can't help noticing that we got Prohibition by not taking the Drys seriously. Their descendants are well-funded, and they're not going away.

Interesting shifts among the Big Boys

A-B maybe should have held out.

That's overstating things for effect, but A-B is looking very good right now, in its last days as an independent company before the meeting at the end of the month that will seal its acquisition by InBev. I see in a report from Morgan Stanley this morning that A-B kicked macrobrewer ass over Labor Day, up 1.2% in volume. Coors continued to do well, but big declines on the Miller side of the house put MillerCoors down 3.9% overall. Corona continued its slide: volume is down 7.3% (maybe they shouldn't have been so quick to dump long-time importer Gambrinus Company?). This, in the shadow of an overall beer market decline of 1.6%.

What's behind a lot of this? Surprise: Bud Light Lime. The new lime light is doing well, and throttling last year's macrobeer success story, Miller Chill, while apparently sucking share from Corona as well. Pretty strong moves for a beer that just came out in May. BLL will probably fade when the weather cools, like Chill did, but after blowing up this summer like it did, I'm hesitant to count the stuff out.

Oh, and craft beer? The numbers for the first half of 2008 from the Brewers Association (which, remember, don't count sales of Goose Island, Craft Brewers Alliance, Old Dominion, Blue Moon...) show craft beer up 11%. So, guys: are we at 4% of the market yet?