Beer Industry News

Saturday, May 10, 2008

The Beer Industry has obviously been changing a lot in the last decade, well actually the last couple of decades (I just wasn't old enough to enough to experience the first craft beer boom).

Obviously the Craft Beer segment has been enjoying rather lucrative and remarkable success of late. However, signs are starting to show that the growth of that success may be slowing. Specifically, craft beer sales in Supermarkets (a decent indicator of mass market beer purchasing trends) appears to be slower this year than last (disclosure: that blog is "supported" by Miller). Is the "non-beergeek" market reaching saturation? Or is this simply a sign of the declining economy? Personally, I think it's an economic indicator. There's not much indication that American hunger and thirst for higher quality foods and goods is waining, simply that we don't have the fricken cash to buy the good stuff as often! Combine this with increased prices due to rising fuel, hop, and barley prices, and you've got the all the ingredients for Market Stagnation Sour Ale all sitting in a pot, ready to brew!

It seems to me that perhaps some of the Big Boys on the block are on the same page. The big 3 (Anheuser, Miller, and Coors, just to be sure...) have been dabbling in the craft market for some time, with varying degrees of success.

Coors has had good success with Blue Moon, including double digit growth last year.

Miller is trying... something with Miller Chill, and apparently making money on it... but has always had Leinenkugel in the craft segment as well, not to mention being a part of SABMiller which makes lots of brands like... Well lots of stuff most of us probably haven't heard of...

Anheuser-Busch has never seemed to have as strong a presence in the craft segment. They've had some true craft brews, but no big movers. Their Green Valley Brewing Company Organics brews are pretty decent, if you're into the whole organic thing (I prefer local, but that's a different post...), but AB has had troubles with flagship Budweiser, whose sales have been steadily declining. Michelob has some decent craft brews, but they're not very widely recognized, as most people think Michelob makes only , ahem, Michelob (Lager) and Light and Ultra, and Amber Bock and Ultra. AB responded in different ways to the craft beer "phenomenon" in the past, leveraging it's exclusive distribution chain by obtaining the rights to distribute Inbev beer in America, which includes lots of good stuff like Bass, Beck's, Franziskaner (a personal fav!) and more. I think, a smart move on AB's part, really shows that they know how to utilize their resources to some degree rather than always resort the crass humor and sex to sell product.

It seems AB has decided that approaching this market directly is a good idea. They're going to let Michelob go more their own way, and send them off with the encouraging advice "Now remember Son, that craft beer market is new and it's growing, and it's all for you! Go get 'em tiger!" Here's what Andy Crouch of Beer Advocate Magazine had to say about that in the May 2008 issue(I couldn't find this online, so here it is verbatim):

"Michelob Wins Independence"

Anheuser-Busch is stepping up efforts to match the shifting American beer Palate and address the success of craft brewers. The saint Louis based brewer, recently announced plans to spin off its 112 year old Michelob family of brand into an autonomous division. The new unit, to be called the Michelob Brewing Co., will promote its existing brands including Michelob AmberBock and Porter, as well as the breweries line of seasonal ales and lagers including Beach Bum Blonde. The Michelob Brewing Company will also focus on producing a diverse range of more flavorful beers in the craft style. The first release will be the Michelob Dunkel Weisse a take off on a similar style beer called a cent 54 brewed exclusively for the Colorado markets. The brewery has registered label applications for several additional brands including a Brown Ale, Red Ale and a Bohemian Pilsener. Michelob Pale Ale will also be expanding into a year-round offering.

(Props to Jott.com for it's sweet cellphone driven free transcription service, which even did a respectable job with Dunkel Weisse even though it was expecting me to speak English!)

I for one, and excited about this Dunkel Weisse. Ascent 54, the beer on which Michelob Dunkel Weisse is said to be based, scores well on BeerAdvocate.com, and I'm a big fan of the style! Also, Brown ales. If they do a decent job of distributing the Michelob brands, this could mean decent brews available in a lot more locations. Like how about a rotating Michelob tab in a bar with 3 or 4 taps? Or the local store in a community of 2-3000 carrying 3 Michelob brands, Lager, D-Weisse and Red or something. Cool enough for me! This will hopefully prevent us from having to go as far out of our way to get something decent to drink.

To be honest, I think that craft brewers need to embrace the fact that Extreme beer is not going to be able to carry a business. It seems that a lot of breweries rely on the success of one or two extreme beers, and the market conditions dictate that this is not a sustainable model right now. I think breweries need to embrace the traditions of brewing and look into less expensive but just as good alternatives to extremes such as Altbiers and Milds and Bitters. Or how about Berliner Weisse? There's a good "extreme" style (brewer w/Lactobacillus) that should be relatively inexpensive to make due to it's low malt bill, it only ends 4.5% or so, so it doesn't need much grain. This is the kind of thinking that a brewery needs get new beer drinkers and continue to grow in today's beer market (IMO). The craft brewers can't continue to market so directly to the "beergeek" market, as that is too small of a market for them to be successful in the long run.

Budweiser is also releasing a new Ale, Budweiser American Ale. Supposed to be amber colored and use Cascade hops, I'll give it a shot!

Remember the exclusive distribution deal AB has with it's Distros? AB is loosening the hold, according to Andy Crouch. AB is going to allow distributors to carry non-AB craft brands, but only in markets where there is not a competing AB/Mich brew or Inbev import. That's still pretty limiting IMHO... but as I was saying earlier, AB's exclusivity with their distros has worked to their advantage!

Mergers are one way some breweries have been dealing with all of the recent market and price crunches. Of course in 2005 there was the Molson Coors merger, and some of you may not have heard of the Redhook/Widmer merger announced in 2007. This year though, it's Pyramid, the fourth brewery to go public the same year as Redhook, Pete's, and Boston (Sam Adams), is being bought by privately held Magic Hat out of Vermont. Interestingly, R. Martin Kelly, current CEO of Magic Hat, used to be the CEO of Pyramid.

Speaking of Boston Brewing Company, I'd like to commend them on the dealings with Freetown, Massachusetts. BBC has worked with Freetown for over a year on a deal to establish a new Samuel Adams Brewery there, and has instead decided to buy the Lehigh Valley Brewery in Pennsylvania. BBC has pledged $50,000 to the city of Freetown "to purchase an item or items for the town that [they] would not normally be able to afford." Cool! They're obviously not hurting for cash either...

All-in-all, I think the brewing industry is learning how to deal with the current market constraints, and the big boys (read:AB) are taking notice of the craft market for real. The brewing industry will be fine, the economy is the biggest deterring factor. Drink beer! Drink local! (when you can...)

8 comments:

Mike 9:09 AM  

I'm curious to try the Michelob craft brews. I remember back in college thinking that Michelob made the best beer -- it's "regular lager" and Special Dark. Rarely bought them, of course, because taste had nothing to do with my standard twin goals of saving money & getting fucked up. But the rare time I snuck into a bar I'd usually order a Michelob.

Have you tried them, Smitty?

Bob "Chief Beer Advocate" 7:12 PM  

Excellent post Sopor.

I learned a lot. One of the things I learned was if I am going to continue to boycott all products of the Coors family, I have to make sure I quit buying Blue Moon. oops...had no idea it was Coors. Guess I need to learn to read a label.

My Dad has often raved about the old, dark Michelob beers that he used to get by the keg and keep chilled in his Kegerator at our old house in Warren.

He told me a story going back to the 1960's about having to call the City of Warren to repair a sewer break in his basement on New Years Eve before guests arrived for a party. Some work guys showed up, not wanting to work that day. They fixed his problem then told him the city would have to bill him since it was really his part of the line that was broken.

A few Michelobs later at his wetbar and the workmen informed him that his repair was free.

Again, nice post. I hope to read more industry news in the future.

Sopor 7:06 AM  

Thanks Bob.

I didn't realize it, but there were still a few spelling and grammar errors left in that quote from BeerAdvocate MAg. That Jott service is pretty sweet, even if the spelling is a little bad... I I wasn't talking about beer, it would've picked things up easier.

I, for one, would like to see Michelob brews regain some of this quality of old, that I hear about. I'll be buying a sixer of the Dunkel, and probably the Brown as soon as I see them, as I'm real curious!

B Mac 1:00 PM  

I'll be interested to see how the Michelob craft brews play with the non-beerdork segment of the population.

Beers like "Wild Blue" from AB and some other supposed "specialty beers" might scare the average beer drinker away from craft beers. Having a couple of good brews coming from a macro-brew label like Michelob could be a nice introduction to the world beyond dog-flavored-water/macro-lagers.

Sopor 2:45 PM  

By the way Bob, did you know that Killian's in the USA is a Coors product also?

Bob "Chief Beer Advocate" 3:01 PM  

"By the way Bob, did you know that Killian's in the USA is a Coors product also?

That I DID know. Foruntely, I am not fond of it. And since Coors label stuff just plain sucks, (beer-flavored water)that is not hard to avoid.

Tbim 4:09 PM  

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Sopor 6:32 AM  

Here I am replying all over my own post... but I was just checking out Tbim's blog, and noticed a story about Samuel Adams that slipped below my radar...

Apparently the Boston Brewing Company found glass slivers in less than 1% of their bottles, only in bottles from one out of the five plants they buy from. So they've recalled all bottles from that plant! Check it out: BBC Official Word

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