Beer Marketer's Insights
This summer’s hefty Corona price increase had greater-than-anticipated effect on trends. More evidence of slowdown: Barton’s parent co Canandaigua just reported that its beer revs up $5.3 mil, 4.1% to $134 mil in 3 mos ended Nov 30. Since avg prices up over 4%, Barton beer shipments "actually down low single-digits" in qtr, wrote Salomon Smith Barney. For 9 mos, Barton beer revs up $69 mil, 18% to $458 mil. Note: all Mexican shipments to US were down over 20% in each of Sep and Oct; now up "only" 827,000 bbls, 16% for 10 mos. Canandaigua wrote: "unit volume growth was adversely impacted
First time we can recall Coors spending about same as AB on top brands for any period. (Figures below, compiled by Competitive Media Reporting data on spending in 11 media, do not include all brands or all corporate public service ads.) In 3d qtr, Coors spent $49.5 mil on top brands, eking out top spot, as AB spent $49.2 mil, Miller spent $31.4 mil. Spending trends in 3d qtr: Coors +8%, AB –7%, Miller –23%. But for 9 mos, AB still spent the most on top brands: $210 mil, down $28 mil, 12% going against Olympics yr. Coors 2d biggest spender YTD: $125 mil, up 18%, with entire $20-mil increase coming in 2d and 3d qtrs. Miller slashed YTD media spending by $69 mil, 41% to $101.3 mil. At same time, big importers really jumped spending in 99. Corona importers Barton/Gambrinus jumped media support by $9 mil, 55% Jan-Sep. Heineken jacked spending by $17 mil, 144%. And Labatt increased media $$ $6 mil, 40%. (Each made bigger % increases in 3d qtr.) Pabst spent almost nothing, Boston made slight spending cut and Guinness slashed media support by 50%.
Data raises some interesting questions about effect of timing and amount of media spending on sales. As AB reduced media spending 12%, it maintained same gain pace in 99 as 98. Coors trends also about same in 98 and 99 even while it boosted spending by 18%, tho Coors trends clearly improved later in 99 as ad spending increased. Miller trends actually improved in 99 despite severe 40% spending cut. And tho big importers boosted spending in 99, looks like 2d-half trends softened for most.
Look at some key brand spending trends. AB raised Bud spending slightly in 3d qtr, but down YTD $6 mil, 6%. Continued to cut Bud Light spending: down $23 mil, 23% YTD (but gotta note that hasn’t hurt brand trend at all). AB spent only $4 mil more on Bud Light than Coors spent on Coors Light Jan-Sep. And even tho Coors Light spending down slightly in 3d qtr, still got $7 mil more media support than Bud Light, $6 mil more than Miller Lite and virtually same spending as Bud. YTD, Coors Light spending up hefty $12 mil, 19%. While Miller slashed Lite spending $20 mil, 26% YTD, 3d-qtr spending on Lite even at $17.6 mil. Continued to make deep spending cuts on Gen Draft/GDL (-40% in 3d qtr, -66% YTD), Molson brands and Mil’s Best. Only Miller brand that got spending increase in 99 so far: High Life, +$3 mil, 40%. Icehouse got boost in 3d qtr, but spending still down 18% YTD. AB nearly quadrupled Busch spending YTD to $6 mil, but all of that was in 1st half. Continued to boost support of Michelob brands: up $9 mil, 44% YTD. Coors reduced Original Coors spending YTD by 7%, but jacked it by $7.2 mil, 73% in 3d qtr. Made big % increases in spending on Killian’s and Keystone spending too. No sign Pabst started media campaigns in 3d qtr, but big importers clearly becoming real media players.
Total beer biz grew just 11 mil bbls, 6% in 90s. (See chart on page 1 for 89 data.) Compare that to 80s, when industry up 18 mil bbls, 10%, and 70s when industry gained 52 mil bbls, 45%. Back to 90s, AB was big winner again: up over 16 mil bbls, 20% and built share from 41.8 to 47.5. Note tho: AB got most of that share gain in 2d half of 90s, and elusive 50-share goal still 2-3 years off, even if current trends hold. In 90s, AB built lead over #2 Miller to 53 mil bbls, 26 share. Back in 89, AB had 39-mil-bbl, 20-share lead. While AB built strength, 90s also great for imports. Shipments doubled from 9 mil bbls to 18 mil bbls and import share of US biz jumped from 4.7 to 9.1. What’s more, imports now get well over $1 of every $10 spent on beer in US. In 89, only 2 import suppliers sold over 1 mil bbls. In 99, Heineken, Labatt, Gambrinus and Barton each sold over 3 mil bbls in US. Only 2 top-10 suppliers in 89 were importers; half of top-10 are now primarily importers. So AB and imports gained 25 mil bbls—and 10 share—in 90s while industry up just 11 mil bbls. Other big winners in 90s, at least briefly, were specialty brewers, who went from almost nothing to about 6 mil bbls by end of decade.
Coors picked up 4.3 mil bbls, 24% in 90s. Despite that achievement, Coors’ competitive position improved only slightly: went from #4 with 9 share in 89 to #3 with 10.7 share in 99. Miller share moved even less: had 21.7 in 89, 21.6 in 99. And that’s despite purchasing about 1.5 mil bbls of Molson in 93, over 2 mil bbls (annualized basis) from Pabst-Stroh in May 99. We figure Miller brands down about 1.3 mil bbls, 3% 89-99, lost about 1.7 share of beer biz. That’s not great, but it’s a lot better than what happened to 2d-tier brewers. As a group, Stroh, Heileman, Pabst and Genny shipped over 40 mil bbls in 89; volume of same brands plummeted to just 15 mil bbls in 99. So 21 share of US beer biz shrunk to just 7.5.
In sum, looks like AB was by far best able to capitalize on decline of 2d-tier brewers in 90s. Coors grew in limited areas (primarily Mid-Atlantic, Puerto Rico and by entering Ind mkt.) Miller mostly ran in place. And importers and specialty brewers grabbed virtually all of growth in high-priced niche. Key question concerning volume for next decade: with lots less 2d-tier biz to grab, where will AB, Miller and Coors source growth? Better total industry trends may be coming at just the right time.
Industry Ends Century on Strong Note: US Biz Up 1.6%; 9 of Top 12 Suppliers Up 3% or More
1999 was clearly best year by far since 1990 for US beer industry. US shipments (domestic brewers
In recent US District Court decision to put Ill franchise law for wine/liquor distribs on hold until its constitutionality is decided, judge seemed to bring 21st Amendment up mostly to dismiss it in conflicts with Commerce and/or Contracts clauses. She wrote: "the Supreme Court made clear that the states’ authority in the matter of liquor-related regulations is not absolute.... Even with respect to state regulation intended to strengthen state liquor distribution systems, the 21st Amendment does not entirely displace federal commerce power.... This court concludes that the 21st Amendment does not empower the state of Illinois to abrogate rights under the Contracts Clause." On Jan 18, a state senator intro'd bill to repeal law, which DISCUS immediately applauded.
So far, Ill beer franchise law not implicated in this battle. But Bill Olson, exec veep of Associated Beer Distribs of Ill, told INSIGHTS: "There is concern that if the Act is revisited by the Illinois General Assembly, that other fair dealing laws, including the Illinois Beer Industry Fair Dealing Act, may be pulled in to the debate."
Fed ct judge acknowledged that "the state has an important interest in regulating liquor distribution" and that public interest is served "by a strong local distributorships network," but public "has at least an equal interest in the maintenance of the constitutional system of government embodied in the Commerce Clause and the Contracts Clause." She also seems to agree with suppliers that franchise law is "merely intended to protect local industries." Suppliers, she concluded, have a "strong likelihood" of proving it unconstitutional.
In legal fight vs AB, Maris attys talked to many ex-distribs trying to build case that AB pressured ‘em, threatened to terminate and then forced sale at low price. Memos on these talks are sealed, but looks like some guys did tell version of that story. Among ‘em: Hans Frey (Stockton, Calif); Neil Deppe (Ottumwa, IA); Roy Feltman (Omaha, Neb); Jack Fritz (Parker, Ariz); James Gurney (Calif); Rudy Herzog (Ashtabula, OH); Don Jones (Ind); Burt Zempsky (Dichello in Conn). Several of these go back to 60s. And Zempsky apparently testified he wanted to sell and that he got full asking price ($50 mil). The late Bill Crain, who had AB in San Antonio, testified he got his $40 mil asking price, which he thought was "fair." ..... AB refers to memos prepared by "bounty hunters" (private investigators hired by Maris) from talks with distribs as "inadmissible hearsay... Rambling and unproven grievances by hand-picked group of former AB wholesalers" and "totem pole hearsay." One such memo said one of these guys "will make an outstanding witness. He truly loathes AB..... Tho AB sez termination not at issue in fed ct case, Maris says AB papers indicate AB will try to prove "unfounded allegation" that Maris "underinvested," which resulted in deficiencies, and that AB intends to argue that "Rudy Maris and numerous other members of the Maris family routinely diverted millions of available investment dollars from the corporation into their own personal coffers..... AB sez data shows that Little and Burkhardt distribs, who split Maris territory, have subsequently outperformed Maris, who had 60+ share when terminated.
Latest Marketing Moves By Miller, AB, Pabst
First ads originated by new Miller mgt team debuted. Miller Gen Draft humor-based campaign created by some of same guys who used to work on Bud Light campaign. No new Miller Lite campaign yet; instead Miller created additional spots with current campaign, which appears to be helping brand (or is it just the absence of Dick?). Meanwhile, AB mktg veep August Busch IV told Forbes that AB looking to take "classy" approach to Bud Super Bowl ads this yr "for a more sophisticated Budweiser." Apparently, ads will be less humor-based. Forbes wrote that AB spent $17 mil for ten 30 second ads, and approx $13 mil more on labor and expenses for about 400 people from ad agencies and production cos. Produced a total of 30 spots to choose 10 from. Over at Pabst, not a lot of mktg yet, but it’s asking distribs to help pay. Came up with 5 cent a case assessment in 5 states (Ill, In, Oh, Pa and Wisc) and 4 cents in Tex.
Some mid-sized brewers really did well in 2d half of 90s, even after specialty segment slowed and other regionals tumbled. Biggest winner, Yuengling, jumped from 275,000 bbls in 94 to nearly 800,000 in 99. What’s more, Yuengling grabbed virtually all of its 25% growth in 99 in core mkts (mostly PA), at premium price. Meanwhile, #2 specialty player Sierra Nevada continues to roll along while most of the larger specialty competitors declined. Sierra up 15% in 99 to 438,000 bbls, up 280,000 bbls, 181% last 5 yrs. Leinenkugel (owned by Miller) and Shiner (owned by Gambrinus) slowed to about 2% growth each in 99, but Leinie up 89,000 bbls, 37% last 5 yrs, and Shiner up 145,000 bbls, 138%. So those 4 brewers gained 1 mil bbls in 5 yrs. While these 4 brewers did well, other brewers which shipped between 200,000 and 700,000-bbl range in 94 lost lots, like Falstaff-Pearl group, Pitts, and Minn. Rolling Rock up 100,000 bbls last 2 yrs to 1.1 mil bbls.
| Shipments 000 | Change 98-99 | Shipments 000 | Change 94-99 | |||||||
| 99 | 98 | bbls | % | 97 | 96 | 95 | 94 | bbls | % | |
| Yuengling | 789 | 630 | 159 | 25.2 | 475 | 418 | 320 | 275 | 514 | 186.9 |
| Sierra Nevada | 438 | 382 | 56 | 14.7 | 303 | 267 | 204 | 156 | 282 | 180.8 |
| Leinenkugel | 329 | 320 | 9 | 2.7 | 310 | 300 | 270 | 240 | 88 | 37 |
| Shiner | 250 | 246 | 4 | 1.6 | 220 | 185 | 135 | 105 | 145 | 138.1 |
Beer and Spirits CPI Up 2% Each in 99
Consumer Price Index annual avg for beer shot up 2.3% in 99 to 151.9. That’s best gain since 2.5% gain in 96. But still slightly below pace of inflation: overall CPI up 2.7% in 99. Spirits prices also up 2.3% for 99. Wine and soft drink prices each up just a little more than 1%. A fast look at last decade in CPI for beer: in late 80s and early 90s, 3-4% beer price increases were the norm (except in 1990 when excise tax doubled and beer CPI up 12%). Flattened out 93-95. Virtually no change as price war raged. Then a breather in 96, before price war resumed 97-98. And the fever finally broke in 99.
Whoa! Beer biz picked up shipments pace again in late 99. Domestic taxpaid shipments up 500,000 bbls, 4% in Dec 99, estimates Beer Inst’s Matt Hein. That followed 450,000-bbl, 3.4% gain in Nov. Means taxpaid shipments up 900,000 bbls, 3% in 4th qtr, following 2 down qtrs. So 99 turns out to have had unusual pattern. Started off with a bang! Domestic taxpaids up 1.8 mil bbls, 4% in 1st qtr 99, dropped slightly in 2d and 3d qtrs, before charging ahead again. Imports back on double-digit growth path for 1st time since May 99. Up 12%, 145,000 bbls in Nov. Up 9.8% for 11 mos.