Friday 20 October 2017

It's not small beer: big profits being made from tiny labels

Clementine Fisher says brewing giants are getting in on the action as craft brews turn into America's trendiest tipples

Pictured at the Craft Collection Beer Hall at Indiependence were AnnMarie Liston and Tricia Liston. The event last year included a number of craft beers, including Blue Moon.
Pictured at the Craft Collection Beer Hall at Indiependence were AnnMarie Liston and Tricia Liston. The event last year included a number of craft beers, including Blue Moon.

Clementine Fisher

Goose Island is the new Bud. So are Shock Top and ZiegenBock. And Leinenkugel's and Blue Moon, for that matter, could be called the new Coors or Miller.

Those brands are all owned by the world's biggest brewers, which are aggressively rolling out products designed to appeal to fans of craft beer. But they're not putting the microbrewers who started the movement out of business.

Instead, the new labels are taking sales from already- troubled mass-market brands owned by the industry giants peddling these crafty brews. Analysts say that may actually be a boon for their owners as margins can be "considerably higher"for craft beers.

"I don't really drink Bud Light anymore," said one 27-year-old worker in New York. Instead, he's started sampling a wider range of brews such as Goose Island and Blue Moon. "Bud Light, Coors and all those others are like beer-flavoured water."

Sales of craft beers grew 16 per cent in volume over the past year versus a 1.7 per cent decline for the biggest US beer brands. Sales of Bud Light were off by 1.3 per cent and Miller Lite slid 4.4 per cent.

That's prompted multinationals like Anheuser-Busch and MillerCoors, with about 75 per cent of the US market between them, to introduce their own craft-like brews – many of which make little or no mention of their corporate parentage.

Anheuser-Busch paid $38.8m (€28.3m) for Goose Island in 2011, five years after it signed a distribution deal with the Chicago brewer. And in 2006 it created Shock Top, a Belgian-style wheat ale, to take on Blue Moon, the biggest of the craft-like labels owned by industry leaders. The Goose Island brands soared 69 per cent last year, while Shock Top beers jumped 14 per cent.

MillerCoors, co-owned by SABMiller and Molson Coors, in 2010 set up a unit called Tenth & Blake to focus on Blue Moon and other niche brews as well as premium imports such as Pilsner Urquell from the Czech Republic and Cusquena from Peru. Today, it has more than a dozen brands, including two hard ciders.

"We looked at where the growth sectors were, and craft was exploding," said Tom Cardella, president of Tenth & Blake. "When you look at the marketing of craft, it requires a different approach."

As the popularity of these beers cuts into sales of the biggest brands, it's fostering a new crop of mid-sized labels. Moreover, craft brews are wooing drinkers back from wine and spirits. While craft beer has only about 6 per cent of the market, that share could more than triple in the next five years.

That's not to say that the big brands are going to give up on their mass-market brews anytime soon. With about 21 per cent of the beer market by volume, Bud Light alone is about triple the size of the entire craft sector.

The US Brewers Association defines "craft" as beers with annual sales below 6 million barrels and ownership by a big player of no more than 25 per cent. Despite the industry's homespun image, 60 per cent of drinkers don't give much thought to what company owns the brand they drink, according to a survey by Anheuser-Busch.

Even as the giant brewers lose share with their leading brands, the shift could shore up their profits since their craft-like beers enjoy higher margins, analysts and the companies say. Goose Island retails for an average of about $33.10 per case versus $20.17 for Bud Light.

Some offshoots can be far pricier. Goose Island sells a brew called Bourbon County Stout one day a year (the Friday after Thanksgiving) at about $25 for a four-pack of 12oz bottles.

The higher prices help offset the added costs the industry's giants face in producing more small brands.

Irish Independent

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