American beer brands confront a changed marketplace

Whether the American beer market looks basically healthy or in decline depends very much on your vantage point. If you lead an international brewing corporation with multiple brands and markets, the global potential of American beers seems positive.

If your focus is the U.S. market, you worry that traditional brands are flabby, and the strategic diversification of the brewing portfolio is an appealing fix. If you are on the brand team watching one of the individual flagship brands lose ground, buttressing its support among traditional drinkers feels urgent. But if you are selling beer locally, faced with changing tastes and demographics, your task is to build the right brand mix to keep consumers coming back.

Whatever you perspective, the beer market is still dominated by a relatively small number of large-selling, well-established brands whose volume dwarfs everything else. The ten top-selling American beers on the market are all variants on the pale lager/light lager style; almost all have recently experienced one soft-to-bad year after another.

Mainstream beer experienced a similar slump in the 1980s and recovered. The question now is whether the current slump is cyclical or fundamentally transformative.

Big Brewers on Top

Six of the ten top-selling beers are produced by Anheuser-Busch InBev. Of these, four have lost market share, some modestly (Busch Light, down 0.1%, and top-seller Bud Light, down 1.7%) and others more dramatically (Budweiser, down 4.6% and Natural Light, down 6.8%).

The only beers to have grown in volume are two that would seem to be at opposite ends of the AB spectrum: value brand Busch (up 2%) and prestige brand Michelob Ultra (up 2.3%). All numbers are from The Beverage Information & Insight Group’s Handbook Advance 2015.

The remaining beers in the top ten, all produced by the other mega brewer, MillerCoors, faired worse, with the once-buoyant Coors Light retaining its number-two sales position over Budweiser, partly because its loss of 3.5% was less than Bud’s drop. Miller Light suffered moderate losses (1.6%), while Keystone Light and Miller High Life, at numbers nine and ten, sagged by 8% and 6% respectively.

Looking at a broader field of 25 top-sellers, the story continues of flat-to-discouraging numbers for many mainstream pale lagers and light lagers. Bucking the trend, Yuengling, which has been redefined into the craft beer club by the Brewers’ Association, saw healthy growth of 6.4% for its lager; whereas Samuel Adams, which itself defines the upper reaches of the craft beer club, watched its flagship Boston Lager slip 1.2%.

Once again this year, we look at the biggest-selling brands in the country and the message seems to be that mainstream lager may outsell every other style of beer—by a lot—and yet the wind continues to go out of the sails. But it’s worth asking: If you brew hundreds of millions of cases of beer in a year, does it matter if sales are a point or two lower than they were last year?

At MillerCoors, it mattered enough to warrant a big shake-up at the top of the company. According to Marty Maloney, media relations, “Interim CEO Gavin Hattersley has made it clear neither he nor the company’s board has been satisfied with volume performance for some time, and as such, appointed a new chief marketing officer (David Kroll) and president of sales and distributor operations (Kevin Doyle).”

Although both Coors Light and Miller Lite have grown relative to similar brands in their segment, Maloney adds, “The company is working hard to achieve both share and volume growth, and as such, plans to significantly increase investments in the second half of this year behind our Premium Light brands.”

In the fall, the company plans to bring back the 1975 Miller Steinie bottle. At the same time, “Coors Light will launch its ‘Always Game Ready’ football program with retail, social/digital, out-of-home and local experiential components,” Maloney says. If the retro feel and the nostalgic connection to sports sounds predictable, that may be a winning move: Coors Banquet, the company’s old school brand, is on track for its ninth straight year of growth.

Earlier this year, Anheuser-Busch took an eyebrow-raising approach to rebuilding Budweiser numbers. Instead of warming hearts with the Clydesdales, Bud’s 2014 Super Bowl ad sneered at craft beers and their drinkers, portraying both as effete and precious. Naturally, the ad caused indignation in the craft beer community, mixed with accusations of hypocrisy—particularly since A-B had just announced the purchase of a craft brewery known for brewing precisely the sort of beers the ad mocked. A-B clearly calculated that it could afford to offend craft beer lovers, so long as the ads reinforced the loyalty of wavering Bud fans with its “us and them” message.

The View from Behind the Counter

Retailers notice fluctuations in the fortunes of American beer brands, even as these domestic lagers are still the most popular beer choice with consumers.

“Our number one seller is Miller Lite 30-packs, hands down, out of everything in the store—beer, wine, liquor,” says James Campbell, the beer department manager at Bay Ridge Wine & Spirits in Annapolis, MD. “But going over the numbers from previous years, we are noticing a decline in sales on domestic kegs. A lot of people who are used to grabbing a 30-pack, now they’re only getting an 18-pack and they’re grabbing a six-pack of craft, because craft is just through the roof right now.”

Large packages with low prices were cited repeatedly by retailers as the big brewers’ greatest strength. In Boulder, Colorado, Hazel’s Beverage World caters to both university students on tight budgets and to fans of the town’s 20 craft breweries. Derek Ridge, the store’s beer manager, says “The big brands have definitely slowed down. The one domestic that keeps going is Pabst in 30-packs. They’re pretty strong. Thirty-packs are the ones that are really doing pretty well.”

However, in smaller package sizes, Ridge has noticed that some craft brands can compete with American lagers even on price—within limits. “You can get a good 12-pack of Sierra Nevada or Avery for pretty much the same price as Budweiser,” he notes. “Sure, it’s a little bit more, but it’s not much of a difference any more. The price is competitive and people like the 12-packs of craft a lot.”

If low prices appeal to budget-minded consumers, many of them young, this is also the same audience that gets credit for leading a shift from American domestics to craft beer, according to Jamie Piastuch, the beer consultant at the Merritt Island branch of ABC Fine Wine and Spirits, a Florida-based chain.

While admitting that “Bud Light is still huge,” she has noticed, “It’s definitely people my age, Millennials, who are almost exclusively drinking craft beer. Millennials like experimenting; they like trying new stuff.”

The Response from American Brewers

The big brewing companies have struggled for years with the craft beer insurgency. In past decades, they have ignored craft beer, mocked it, or tried to elbow it off the shelves.

Gradually at first and now increasingly, the strategy has been to add craft-style selections to their portfolios, either by brewing them in-house, in the case of AB’s Shock Top; or in semi-autonomous breweries, such as Coors-owned Blue Moon; or by purchasing heritage or craft companies outright, as MillerCoors did with Leinenkugel and AB has done on four recent occasions (Goose Island, Blue Point, 10 Barrel, and Elysian).

Bay Ridge’s Campbell said of the strategy, “I think they’re recognizing the way to keep their heads above water is by offering distribution to these smaller craft beers because of the decline in sales of Bud, Miller and Coors. People are just gravitating towards better taste. There’s a lot of good stuff.”

“While beer sales overall are down slightly, we have actually seen tremendous growth amongst our own craft families, the Blue Moon Brewing Company and Jacob Leinenkugel Brewing Company,” explains MillerCoors’ Maloney. Noting the growth of Leinenkugel’s shandy styles, he adds “This is certainly part of a trend in which beer drinkers savor high-end and more flavorful beverages.”

Blue Moon and Shock Top, both brewed in the Belgian wit beer style popularized by craft brewers, actually rank numbers 14 and 21 in brand sales overall, and the brands have grown by 3 and 4%, respectively. The two parent companies, in these cases, seem to have the best of both worlds, moving lots of volume even as most drinkers believe the beers are the products of craft companies.

Frustratingly for the big companies, however, many consumers regard the association with AB or MillerCoors as a minus.

“People are away from Bud because it’s InBev, you know?” says Piastuch, referring to the Brazilian-Belgian giant that purchased Anheuser-Busch in 2008. “They’re more likely to be okay drinking Yuengling, because it’s still an American company, but they’ll try to stay away from anything that’s macro – if they know it’s macro. Some people don’t know that Goose Island is owned by InBev, they think it’s craft, but once they find out that its owned by Anheuser-Busch, they’ll automatically go to craft, because of kind of a ‘drink-local, drink-small, don’t-drink-big’ attitude.”

Ridge at Hazel’s is blunt about the advice he’d give the big brewing companies if he could: “They’d have to lower their price, that’s for sure. They have already on their 30-packs, and that’s key. They’re having price wars, Budweiser and Coors, and that’s really helped sales a lot. But the prices of 12 packs and 18 packs go up every year. It’s like—you’re kidding me. It’s not every two years; it’s every year. What are they thinking? Their advantage is price.”

But for all the talk that craft beer is in the ascendancy and that the days of the big American beers are over, the truth is that brewing clout is more concentrated than ever before. Two massive international companies dominate the beer market in the US. Their acquisition of smaller breweries and addition of diverse styles allows them satisfy beer consumers’ every taste, while their lower-priced brands deliver the volume. BD

Julie Johnson was for many years the co-owner and editor of All About Beer Magazine. She has been writing about craft beer for over twenty years. She lives in North Carolina, where she was instrumental in the Pop the Cap campaign that modernized the state’s beer laws.