Category: beer news

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Yes, Anheuser-Busch InBev Hates Your Beer.

Since its emergence on the North American beer scene in the 1980s and, in force, in the 1990s, what is commonly called ‘craft beer’ has cost the big breweries millions upon millions of dollars in revenue from lost sales. They do not like this.

Sales of Budweiser in particular have fallen precipitously, declining from 50 million barrels in 1988 to only 18 million in 2013. Some of that volume has simply been transferred to Bud Light, for years now the best-selling beer in the United States, while large volumes have also been lost to Coors Light, but some has also gone over to craft beer. Anheuser-Busch InBev definitely does not like this.

Since almost the very start of the craft beer renaissance, brewers and beer marketers have been taking pot shots at the big breweries and their beers, often aided and abetted by the media. While initially it must have been easy for pre-InBev Anheuser-Busch to shrug these insults off, the volume of such criticism now, coupled with the recent boom in the growth of craft beer, must certainly be getting up their corporate nose.

In order to stay relevant, Anheuser-Busch InBev has been forced to spend tens of millions of dollars on brewery purchases, only to have every buy followed by loud and prolonged condemnations. Would they rather have spent this money on increasing sales of their existing brands? You bet your ass they would!

Anheuser-Busch InBev has also spent tens of millions of dollars, if not hundreds of millions, on new product development and marketing in order to have what are, for them, fringe brands that can play in the specialty beer market (which did not even exist as such forty years ago). It’s not hard to imagine they would have rather spent this money on growing their existing portfolio of brands or perhaps developing more logical and demographically-focused line extensions.

So yes, if you drink craft beer, Anheuser-Busch InBev does indeed hate your beer. And if they could end the craft beer segment tomorrow by taking a loss on all the brewery purchases they have made and craft beer-style brands they have developed, I firmly believe they would do so in an instant.

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Interesting Numbers from the World of Beer

Item 1: People keep asking me why I see a bright future for craft beer in Brazil despite all the significant obstacles – lack of distribution infrastructure, high prices, no “cold chain” of delivery in which the beer is kept cold from brewery to consumer – and sometimes I wonder about it myself.

Then I come across an article like this one in The Globe and Mail newspaper and it all comes together. In case you don’t want to read the whole story, or the link breaks because the Globe puts the story behind their pay wall, here’s the gist: With 50 million Brazilians joining the middle class in the last decade, that segment of the population is now about equal to the percentage that is poor, about 30% each.

This new middle class is aspirational, and they want to spend their money on items to which they previously had not enjoyed access – the story highlights perfume and cell phones – like craft beer. I’ve seen the gestation of this at bars like Melograno and FrangÓ in São Paulo and I expect to see a lot more of it on my next visit, whenever that might be.

Item 2: I continue to hear American brewers fret about the number of breweries popping up in their country, worried about the so-called “bust” that they think must surely follow the boom. Too many breweries, too many SKUs (brands listed with distributors) and too confusing for beer drinkers are a few of the concerns I regularly hear voiced.

Umm, folks, ever heard of the United Kingdom? It’s a land of about 62 million people, where the total number of breweries just surpassed 1,000! And while they have their own issues to deal with over there, I’ve not yet heard much in the way of griping about the number of breweries and possible saturation of the market.

To put that in perspective, to achieve the same ratio of breweries per capita, the United States would have to add about 2,900 breweries to their existing total, more than doubling the number in place today.

Item 3: This is not so much a numbers thing as it is a bit of a rant. Although it does relate to Item 2 above.

Yesterday’s Shanken News Daily carried a story headlined “Craft Controversy: Rotating Drafts Spark Concern Among Brewers,” in which it was suggested that “some craft brewers are beginning to show concern that the very diversity that they have long promoted…may actually be damaging to their companies and the craft beer category.”

The piece goes on to quote Bob Sullivan, vice president of sales and marketing at Kansas city’s Boulevard Brewing – a craft brewery I know and quite like and the tenth largest craft producer by volume in the U.S. – as saying that bars which rotate their draft taps rather than sticking with a specific line-up of brands are hurting the industry by not giving breweries an opportunity to build their brands.

More egregiously, the story quotes Jim Gray, national draft director at the beer importer Crown Imports, purveyors of Corona and Tsingtao, among other brands, as complaining that “retailers who are focused on rotating draft handles aren’t focused on building brands” and that these beer sellers are only interested in “the shiny new toy that is offered to them each month.”

Here’s a piece of advice for you, Jim and Bob and any other salesperson out there trying to flog draft beer: The job of the licensee is to keep their customers happy, not to build brands. (Ahem, that’s YOUR job.) And if customers want variety in their beer selection, as a vastly growing contingent of beers drinkers do, well, that’s just the new playing field. Get used to it!

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Global Craft Beer Future – India

During the beery explorations that resulted in The World Atlas of Beer, Tim Webb and I hit upon the two markets we consider most important to the future of brewing world-wide. Not craft brewing, mind, but brewing in general. They are China and India.

Neither has high per capita consumption levels – China drinks about 34 litres per person per year, while India languishes around one, yes, one litre per head annually – but both are growing markets and one, China, already produces more than twice as much beer as the second largest brewing nation in the world. India’s production sits at a very modest 26th place globally.

But beer consumption is growing, slowly, in both markets, partly because increased affluence allows for greater purchasing power among the middle class.

India, however, is primarily a spirits market, as evidenced by the fact that United Spirits, the country’s top distiller, is also the number two spirits company in the world when measured by volume of product sold. And now Diageo is poised to take control of it.

With an offer of $1.8 billion on the table, Diageo is expected to assume majority control of United Spirits and thus gain ownership of a vast portfolio of brands and, perhaps more importantly, access to an expansive distribution network for its own global brands. This will place the world’s largest drinks company in a steel cage match for market presence with its chief rival, Pernod Ricard.

It will also likely put on hold for possibly several years any significant growth in the Indian beer market. Why? Because with two spirits behemoths going head-to-head in what is primarily a spirits marketplace, there is likely to be little room left over for beer growth, especially when the inevitable marketing and price wars heat up.

The good news in all this is that I’m told reliably that a small but enthusiastic craft beer market is just beginning to develop in India, the existence of which will probably not even be noticed by the two Goliaths hammering each other for market share. Bad news for A-B InBev, SABMiller, Heineken and the rest, but good news for the small minority of Indians thirsting for good beer.

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Craft Beer Up Again, Mainstream Beer Down Again

More good news for craft beer brewers and fans, courtesy of Shanken News Daily:

The U.S. beer market continues to struggle, according to the latest numbers from Nielsen. Off-premise volumes declined 1.9% in the most recent 52-week period (ending November 12) to 1.38 billion cases. The outlook appeared brighter on a value basis, as dollar sales inched up 0.6% to $28.6 billion during the same time period. The average price of beer in the off-premise increased 2.4% to $19.82 a case.

Craft and specialty brews continue to be the most vibrant segment in the beer category, surging 16.6% by volume in the 52-week period, with even stronger value growth (+17.8%) on an average price of $31.80 a case. The craft/microbrew segment is priced higher, on average, than imported brands ($27.59), yet imports fell 0.6% by volume during the same time span. Mexico continues to be the largest-selling origin for imported brews off-premise, at 78.7 million cases (+0.4%), but the fastest-growing source was Belgium (+28.9%).

Domestic beer sales posted a 2.1% decline in the 52-week period, with the super-premium ($24.12 a case) and below-premium ($14.71) segments falling 4.5% and 4.2% by volume, respectively. Even domestic light beers fared worse than the industry average, down 2.9% during the same period.

Nielsen tracks beer sales in food/drug/liquor/convenience stores and other channels, with volumes accounting for just over half the size of the total U.S. beer market, as measured by Impact Databank.

Over 16.5% volume growth in the middle of an overall 1.9% volume decline tells you that this shit is for real!

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Interesting News From Brazil and the Netherlands

Just as I prepare to fly south to Argentina for the Great South Beer Cup and on to São Paulo for a couple of beer dinners comes word from Reuters that Heineken is seeking a second entry to the Brazilian beer market.

Already in bed with Cervejarias Kaiser, which it picked up from Molson after that latter’s disastrous foray into South America, Heineken is now reportedly mulling over the purchase of Brazil’s number two brewing company, Schincariol. If pursued, the purchase will reportedly cost in the area of $2 billion.

Even with Kaiser AND Schincariol, Heineken would still be trailing Anheuser-Busch InBev by a considerable margin in the rapidly developing market. But I’m betting the world’s largest brewing concern is paying very close attention to these developments nonetheless.

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Out of the Mouths of Financial Experts

Industry analysts more concerned with stock prices than flavour have not traditionally be the best of friends to craft brewers. (Remember the Wall Street Journal’s memorable mid-1990’s prediction that the whole microbrewery fad was over?) So when the likes of Goldman Sachs attends a brewing industry conference and walks away singing the praises of craft beer, it’s worthy of note.

After attending the 17th Annual Beer Insights Seminar, the financial mavens at Sachs reported five “key takeaways,” including the following at numero uno:

(1) The solid growth in the craft category was a main topic at the event with smaller craft brewers growing sales double-digits. Industry participants expect this trend to continue as the category is winning the “hearts and minds” of consumers by offering them innovation, choice, and high quality products at an affordable price.

But you already knew that…

 

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That Would be the B in BRIC

By now, I expect most people have heard of the BRIC countries – Brazil, Russia, India and China – which are cited regularly as the emerging economies that will power the global financial world further into this century. And here’s proof positive that for at least one international brewer, one of those nations is proving to be most vital to its bottom line.

Judging by several reports in the international media, just-drinks.com and the Wall Street Journal included, the global brewing leviathan Anheuser-Busch InBev has strong reason to be grateful to one of their three home markets, Brazil. According to the WSJ story, “a strong performance in Brazil offset weakness in the U.S. and Europe” lead to an increase in third quarter profits for ABIB, prompting optimism also for the fourth quarter. And exactly how strong was that performance? How about a 12.5% growth in volumes?!

Now here’s what interests me about all this. I couldn’t care less how Brahma and Antarctica are doing in Brazil, where ABIB controls an astounding 70% of the market, but I am fascinated with how overall volumes are growing in South America in general and Brazil in particular. Because last summer I discovered that there is a relatively small but thriving craft brewing scene in Brazil and elsewhere in the southern American hemisphere, and my sources there tell me that demand for premium beer is growing as fast or faster than they can manage.

Think about it: A still-growing major brewery market feeding off tremendous economic growth, a small but enthusiastic cadre of craft brewers, and growing demand for beers “outside the norm.” Remind you of anything, like North America a few decades ago?

Okay, so the majors in the 1980’s weren’t posting double digit growth, but still, there are parallels. Exactly to what degree I intend to find out later this month when I travel to Sao Paulo and elsewhere to host a few beer dinners, culminating in an all-Brazil beer festival in Blumenau. I’ll let you all know in December.

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Stuff You Need to Read

One of my rigid rules about blogging is not to repeat info detailed on other blogs unless I have some sort of insight to add. Which in both cases below, I don’t. Because you have likely read here or elsewhere about these topics, however, you should visit my colleagues and read what they have to say about…

1) That Westvleteren in the grocery store kerfuffle, courtesy of Stan “Brew Like a Monk” Hieronymus; and

2) The pseudo-science study about alcohol being allegedly more harmful than crack and heroin, thoroughly and entertainingly debunked by Mistah Jay Brooks.

Go. Read. I’ll have more here later on today.

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In Trappist Beer News Today…

The seven Trappist monastery brewery in Belgium and the Netherlands are, as you might expect, pretty conservative institutions, and so it’s seldom that we have game-changing news from the Trappist brewing world. Except for this week, however, when arose not one, but two tidbits of surprising Trappist-related info.

First, courtesy of the Flemish news website HLN.be, interpreted for me by my Belgian friend Joris, comes word that the renown Trappist monastery brewery at Westvleteren is in negotiations to sell their beers through one of the largest supermarket chains in the country, Colruyt. According to the story, the deal has not yet been finalized but appears to concern gift packs of the monastery’s ales, presumably one each of the three brands the brothers make, including the much, much, MUCH lauded Westvleteren 12.

This deal, if consummated, will immediately vault what are now some of the rarest beers in Belgium to the status of some of the most ubiquitous. As for what it will do to the abbey’s near-legendary status among certain segments of “beer tickers,” well, we’ll wait and see on that front.

Meanwhile, over in Austria, the national news reports that the Trappist abbey Stift Engelszell is pursuing the creation of a brewery to raise money for the restoration of one of their buildings. (My thanks to Chuma on the Burgundian Babble Belt for the foreign language interpretation this time.) Evidently, the monks are waiting only on approval of their use of the Authentic Trappist designation.

A potential eight Trappist breweries in three, rather than two, countries, and the ready availability of one of the most prized Trappist ales, now that’s a big news week in monastery brewing circles!

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Bad Beer Cocktails Redux

Oh dear, David Wondrich, what have you done, my friend? It’s bad enough when someone like Rachel Ray turns her ham-handed hand to beer cocktails and makes a farce of them, but when the same is done by one of our own!? Man, that hurts.

I refer, of course, to your April column in Esquire, which espouses five simple beer cocktails. ‘Nuff credit for including the Porteree, which is essentially a makeshift Baltic porter on ice, and for getting spicy ginger beer into the Shandy Gaff, in place of the all-too-often-substituted ginger ale or lemon soda. And throwing the Berliner Weiss into the mix was nice, even though it’s hardly “the kind of beer you can find at the local Kwik-E-Mart.”

But what’s up with your own creation, the Groundskeeper? Ardbeg and Bud? What a disservice you do to the fine spirit of Islay, dear sir. If you really can’t handle the peatiness of such a dram, may I suggest that you try instead a little water, or even soda? Please?

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Women, errr, Wenches & Beer, a Continuing Study

Over at her own site, my new protégé/assistant/social media tutor, the inescapable Beer Wench, has declared war on a new U.K. brew – let’s not call it beer, okay? – being developed specifically for women by MolsonCoors and something called the Bittersweet Partnership. She don’t like it one bit, do the Wench.

To her great credit, Ashley, as the Wench is known in certain circles, has rattled a few cages with her post and prompted much discussion, including multiple responses from someone named Kristy McCready of the Bittersweet Partnership and one early reply from yours truly.

Reading through it all, I find most of the comments, although certainly well-intentioned, do tend towards the invective, and while I am certainly sympathetic to the sentiments expressed by many of the posters, including the Wench, I also feel that a certain balance is lacking. And so, rather than continue one with the ever-growing list of comments at her site, I thought I’d cross-link here and add a little moderation to the debate, to wit:

  • I am no great fan of Coors Light or Molson Canadian, the two brands Ashley uses to illustrate her post, but neither should they be dismissed out-of-hand. They appeal to a big piece of the market, one which – contrary to what Ashley maintains – really does not care about what they put in their mouths. Or so dislikes the taste of conventional beer that they look for a brand with as little flavour as possible. (This has been shown true in beer market research, with most beer drinkers admitting to enjoying the social lubricant side of beer more than the actual taste.) Whether people dislike the taste of beer because of how companies like MolsonCoors have evolved it or companies like MolsonCoors have taken the taste of their brands in a given direction because that is what the consumer wants, well, that’s a chicken-and-egg argument we’ll never resolve.
  • The new beer proposed by Bittersweet and MolsonCoors is a marketing endeavour seeking to address a demographic they currently see as being underserved, or not served at all. That’s what companies their size do. If their market data showed that the demographic they’re wanting to exploit desired an Imperial stout or IPA, you can bet that’s what they’d be brewing.
  • That said, this experiment will most likely fail, as do most of the new brands the big brewers come out with. Occasionally one will stick around for a while and make a ton of cash for the company – hello, Bud Light Lime – but for the most part, new product launches spike and decline with astonishing speed. Speaking of which, anyone had a dry or ice beer lately?
  • This is deviating from the topic a bit, but having just recently spent a day in the British brewing town of Burton-on-Trent, I can say that MolsonCoors deserve credit on two counts – the development and spring opening of the National Brewery Centre on the grounds of their brewery and the relaunch and promotion of the White Shield Brewery. The former is a move no doubt contrived at least in part to reverse the horrible press the company received when it closed the old Bass Brewing Museum/Coors Visitors Centre a couple of years back, but the latter comes because MolsonCoors sees a growing market for bottle-conditioned and cask-conditioned ale, just as they and Bittersweet see an opportunity in the young female market.
  • And so, to close, this new beer launch is no more an attack on women than the reams and reels of beer advertising directed at males, portraying them as jocks and morons, is an attack on men. Which is to say, as insulting as it may be to those of us with senses of social responsibility, fairness and taste, both exist because they works.

Oh, and one final note, what’s the difference between drinking PBR, as I’ve seen so many craft beer industry types do, and drinking Canadian or Carling or Coors Light? Answer: nothing at all!

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Is the Economy Really to Blame, MillerCoors?

One of the web info services I subscribe to is just-drinks.com, a British-based site that covers drinks industry news primarily from a trade perspective. It’s a terrific operation and one occasionally gifted with razor-sharp insight. Like when editor Olly Wehring made the following observation this morning:

The continuing slide in beer sales in the US will not stop until more people are back in work – that has been the message since the turn of the year from industry leaders Anheuser-Busch InBev and MillerCoors.

“Until the economy shows some money in the pocket of our key beer drinkers, we’ve got a challenge,” said MillerCoors CEO Leo Kiely in the group’s full-year results conference call (http://www.just-drinks.com/article.aspx?id=99789) last month.

And yet, small-time craft brewers continue to report figures that are apparently untouched by the general market malaise. According to figures announced last week, sales of craft beer in the country rose by 7% in volume and 10% in value in 2009 (http://www.just-drinks.com/article.aspx?id=100081). That compares pretty favourably to 2% volume sales falls for A-B InBev and MillerCoors over the same period.

Granted, craft beers are working off a much smaller base and only constitute 4% of US beer market volume. But, looking at the disparity between the sales figures for 2009, is it really only the economy that is holding back the heavyweights?

(Note: You need be a registered member to follow the first link and a full member for the second.)

Indeed, it is worth asking why sales in one segment are falling while in another, albeit small segment, things are positively booming. Could it be, oh, I don’t know, maybe…taste!?!?