Sep 172019
 

Breweries will go to great lengths and spend millions of dollars to create internet meme for a brand. It is very difficult to simply create an effective branding tactic, not to mention having a brand’s identity become part of a generation’s lingo. If a brewery is fortunate enough to create such a marketing home run for a brand, then it becomes a question of how long can the brewery ride this success, and how does the marketing evolve?

Corona could be considered the personification of building a brand without losing its identity and core message.  After decades of touting the brand as “Beach in a Bottle,” the phrase still rings true today. 

Some great brands created slogans, and thus branding, that the consumer instantly connected to:  “When you are out of Schlitz, you are out of beer!” or “For all you do, this Bud is for you” and another, “If you got the time, we got the beer, Miller beer.” But with each of these brands, the advertising changed as the years passed and the brands’ popularity faded.

In 2006, Dos Equis discovered an internet meme that quickly became embedded into everyday language and drove the brand to double-digit growth. “The Most Interesting Man” campaign had great success with the line, “Stay thirsty my friends,” along with the myriad of impossible accomplishments that made up his stories.  Dos Equis rode this highly successful marketing campaign for 10 years. But when the man who played The Most Interesting Man part, Jonathan Goldsmith, was replaced with a younger version, the magic was lost and The Most Interesting Man campaign soon ended.

Now along comes the industries’ latest rocket ship, White Claw, which appears to be resistant to anything that will slow down its growth. While White Claw’s advertising is not unique, the brand has developed a strong online presence through ironic memes and parodies. There are a number of Instagrams devoted to jokes about White Claw, including whiteclawgang and itsawhiteclawsummer.  Retail accounts that either ran out of White Claw, or do not carry the product, are referred to as being “declawed.” It seems these White Claw memes are never ending. One truly cannot buy this kind of marketing, it is so unique. No doubt White Claw and its distinctive marketing have resonated with the millennial generation.  White Claw is a breweries’ marketing department dream product, and if played right, will remain that way for a number of years. Even the line extensions for White Claw could drive further sales. Think of the options:  Black Claw, Red Claw, Brown Claw, and others. The possibilities are endless.

White Claw, unlike Dos Equis might be a brand that the marketing people cannot mess up, however, that remains to be seen. Until that time comes, life is good for the White Claw distributors!

 Posted by at 6:00 am
Sep 102019
 

The frequently used statement  “People don’t leave jobs, they quit bosses” is often seen in today’s  social media posts, which makes one wonder, what goes through a boss’ mind upon seeing such a comment?

During Gambrinus’ hey days when Corona was on fire, many employees complained about the workload and the required correspondence with the brewery and wholesalers. Conversely, many employees enjoyed their time in the market for the simple fact that Gambrinus’ brands were on fire. Often employees were miserable until the annual bonuses were dispersed and only remained with the company until such time, typically at the end of the first quarter.  Once the bonuses were dispersed, the mass exodus began.

During the years that the Jos. Schlitz Brewing Co. was nipping at AB’s heals, Schlitz’s employee turnover was said to have been up to 70%. While it is difficult to quantify, it is safe to say that this loss and subsequent turnover of talent at Schlitz had to have a negative effect, resulting in the demise of the brand.

On the other hand, employees of the Mark Anthony Company are currently in the mist of one of the most incredible rides the industry has ever experienced. White Claw’s growth is remarkable. How does a company establish annual goals and bonuses when the growth is north of triple digits? One wonders what those numbers would look like if the White Claw production could be maintained. Tactical spending against While Claw would only be throwing gas on a roaring fire. Do the younger employees of Mark Anthony realize just how good it is for them?

Employees working for struggling companies express a completely different complaint. They know that their annual bonuses will not be paid, and they know that if their major brand is declining when the bonus goals are delivered, the internal pressure for management can be difficult. This despite the fact that in many cases, the brand’s decline started in the first place as a result of poor brand management.

Once again, AB announced another round of reorganizations, simply one of many, this time of their field sales teams. With the continued decline of Bud Light, at both the AB wholesalers’ and breweries’ level, pressure continues to mount. AB employees must be very thankful for Michelob Ultra. When Ultra growth slows or flattens, employees’ complaints will most definitely increase.

It seems a week does not go by without news of another craft brewery closing. Some of have been in business for three to five years. Many of the employees started with the craft, many of whom worked for free simply to get in the door. They put their heart and soul into a brewery only to see their dreams fail. One knows the complaints of these employees!

Employers and bosses need to be available to their employees and aware of their complaints, but employees also need to be aware of their environment.

There are times in life when, instead of complaining, you do something about your complaints. 

 Posted by at 6:00 am
Sep 032019
 

In the early 1970s, when Miller Lite hit the market and started to gain drinkers, Coors, and subsequently AB, jumped on board with their own versions of light beers. Both breweries’ first editions of light failed.  Coors Light redesigned their can color, changing it from a buff to silver; while AB changed their name from Budweiser Light to Bud Light. The rest is history.

At the time, Miller Lite was on fire, so both AB and Coors stayed the course. The light segment was viable but other breweries including Schlitz, Pabst, and regionals joined the trend with their respective versions of light beer. These beers, however, did not stick. When Corona caught fire and the industry realized that Corona was not a one-night stand, AB and Coors introduced Mexican-named beers in an effort to be competitive, both of which had little, if any success. 

Think about all the unique beers that have been tired over the decades, dry beers, ice beers, LA beers, even NA beers just to name a few.  None, however, have been successful. The beer industry has historically been nothing more than a copycat trade.  For example, Michelob Ultra, one of, if not thehottest brand around, has had multiple breweries attempt to copy Ultra’s success with their own low carb beers. MC, Heineken, Pabst, Modelo, and a slew of crafts have all introduced an Ultra knock-off. With the possible exception of Corona Premier, all the copy-cats have fallen by the wayside.

The talk of the beer industry is the unbelievable growth of the seltzer segment led by White Claw and Truly. White Claw is the hottest brand the industry has seen, while Truly currently represents approximately 40% of Boston Beers volume! This is remarkable. The growth of the seltzer segment has not gone unnoticed by the other players.  AB, MC, Pabst, and others have all introduced their own seltzer labels. To date, these brands have not even dented the growth of White Claw or Truly consequently these breweries are now moving to round two.

Pabst has introduced a higher ABV seltzer anticipating that this will drive sampling.  White Claw is now moving to a lower ABV with a higher price point. The real disruptor could be AB with Natural Light Seltzer. Natural Light is a long-established successful brand which is very popular with college students and millennials. With Natural Light’s Seltzer at a slightly higher ABV and with a price point much lower and in line with Bud Light, anticipate these younger drinkers to try the brand. A higher ABV and higher price point may play into the hands of White Claws and Truly with little to no success, but the Natural Lights Seltzer could be the label needed to crash their party.

Will the seltzer segment eventually pass the craft segment? Only time will tell, however, look for the major breweries to continue to bring new seltzers to market, all hoping to gain some traction. What is certain are the headaches and problems wholesalers and retailers will have with these new brands.

You should learn from your competitor but never copy. Copy and you die.

Editors note; This post was scheduled for August 20th but due to technical issues, it was not sent.

 Posted by at 6:00 am
Aug 272019
 

Here are the powerful brands that sit at the very top of the list:

RankBrandBrand Value ($B)1-Yr Value ChangeIndustry
#1Apple$205.5+12%Technology
#2Google$167.7+27%Technology
#3Microsoft$125.3+20%Technology
#4Amazon$97.0+37%Technology
#5Facebook$88.9-6%Technology
#6Coca-Cola$59.2+3%Beverages
#7Samsung$53.1+11%Technology
#8Disney$52.2+10%Leisure
#9Toyota$44.6+0%Automotive
#10McDonald’s$43.8+6%Restaurants

For many years “branding” has been the buzz word in the beer industry.   No doubt the branding of a brewery or a beer brand is the key to success. With the number of breweries in operation, in addition to the tens of thousands of brands and SKUs currently available, a beer product has only one chance to establish its branding.  The question for the beer industry is how does a company establish effective branding for itself or its brands? Just a simple package change or name change can create a monster. When Corona shifted from a simple brown bottle to a clear longneck bottle, it changed the industry.

Michelob has had success with two key packaging items. One of these success stories is Michelob Ultra’s thin, tall can which emphasizes their branding of low carb/low calorie. Ultra’s branding reflects that of Coors Banquet Beer from the 1960s , identified as America’s Fine Light beer. That Coors product came in a taller, yet thin can, similar to Ultra’s. Even today, many suppliers are attempting to market their products by using a similar style can, often referred to as the “Ultra style” can. Another product of Michelob which, at this point, causes one to wonder why AB has not reintroduced it into the market, is the famous tear-drop bottle. With the success of Michelob Ultra, what would happen if that tear-drop bottle were to be re-introduced into the market with a generation of drinkers who have never seen that bottle style?

The branding of seltzers, the current hot segment, is an interesting case study. Once the liquid is created the seltzer marketing experts build the branding around the key elements of the liquid. Similar to Ultra’s low carbs and calories, but with the addition of fruit flavor(s). The breweries are packaging the seltzer in a similar tall, thin Ultra-like-can, further emphasizing that the product is a light liquid. 

Branding a product that is created to play catch-up with an already existing hot segment could be difficult, at best. White Claw and Truly dominate the seltzer segment, but there is a great deal of competition in the seltzer market. How do these new products become viable against those already dominating the segment? Is that viability accomplished through branding? Some competitors see that a higher ABV, combined with the additional flavoring will help their branding and separate their liquid in the crowded market. Other competitors are going the opposite direction with much lower ABVs for their seltzers.

More importantly for the beer industry, however, are the struggles both AB and MC are experiencing with their current branding of Bud, Bud Light, Coors Light, and Miller Lite. The struggles of these two super-giants to update their brands has yet to be effective, Coors Light notwithstanding.

Once a successful brand starts to slide, just like creating branding for a new product, the beer industry has experienced the difficulty of re-branding. The surge of new products will continue for years to come, thus making the art of branding even more important.

Just ask all the former Schlitz executives or wholesalers!

Branding is a deliberate differentiation. 

 Posted by at 6:00 am
Aug 132019
 

Over the years many books have been written about the beer industry.  The majority of which have dealt with the industry’s history by focusing on brands, breweries, individuals, and historic cities including  Chicago, Milwaukee, St. Louis, and Cincinnati. One such historical piece was written by Maureen Ogle, Ambitious Brew.  Other books have centered on brands and importers from a more personal perspective, including Bitter Brew, by William Knoedelseder, which told the story of the rise and fall of AB. The Beer Monopoly, written by Ina Verstl and Ernst Faltermeier delineated the history of Interbrew’s transformation into InBev and the subsequent takeover of AB and the evolution of AB-InBev. All these books dealt with historic events which have shaped the beer industry and made it what it is today.

But why are there no books written on the history of beer distributors? Outside the NBWA, which represents the middle tier, not much has been written or acknowledgement given to beer distributors. One can glean the number of employees, tax dollars, community involvement, and other key metrics that wholesalers contribute to America through the NBWA site. 

The industry has been built on the backbone of beer distributors since the repeal of prohibition. There is very little, however, on the wholesalers’ history.  The consolidation of the middle tier means much of this valuable part of the beer industry has lost something. . Wholesalers, as with breweries and brands, are losing a segment of their history. 

GLI, a successful distributor created in 1982 with the purchase of the second largest Schlitz distributor in San Antonio, just announced it was selling out to Glazer’s Beer and Beverage. GLI survived all these years without MC or AB in their house. Another longtime wholesaler in Chicago, Skokie Valley, owned by the same family for four generations, sold out last year. Skokie Valley, like GLI, did not have MC or AB brands. They survived with Modelo, Old Style and other high-end crafts and NA’s. GLI, became successful through the distribution of Shiner, Dox Equis, Boston Beers, and other high-end crafts, but the distributor was also was one of Pabst largest distributors with Lone Star. Both these distributors, along with others still around like Skokie Valley and GLI, were successful growing their business, but have at some point decided the time was right to move on.

Each time one of these distributors sells out, the industry loses a little piece of itself. These companies were family-owned and their employees were part of their family. One could say it was the “little guys” against the “big guys.”  Such a culture is not evident in today’s mega wholesalers. Someday a book will be written about the importance and history of beer distributors. It is the least the industry can do to remember how it once was.

He who refuses to learn deserves extinction. 

 Posted by at 6:00 am
Aug 062019
 

The term “disruptor” or “disruption” is the current go-to expression for many industries that want to use the vernacular to describe new products or key employees. One might even consider the word “disruptor” the business model de jour!  The key question is: how does this label, “disruptor” apply to the beer industry? From a distance one might think the industry is nothing but disruptions, while in reality, it is just the opposite.

When thinking of major product launches that created a new segment, one would certainly think of the impact the light beer introductions had in the 1970s.   Driven by the boomer generation, the introduction of lights to the market would be considered a disruptor to the status quo. In just a few years, light beers became the largest selling segment in the industry as beer drinkers left regular beers in droves. The rise of Corona, and what Modelo accomplished, could also be considered a disruptor.  And of course, the growth of crafts has definitely disrupted the industry.  What might be the biggest disruptor in years is the seltzer segment.  Seltzers could be the latest example of a disruptor in the beer industry.  Or is it too early to make such a declaration?

Both companies and individuals can be considered disruptors.  When Philip Morris bought Miller Brewing, and brought the concept of marketing to the industry, Philip Morris was a disruptor. Russell Cleary of G. Heileman had what might be considered a disruptor model by acquiring a number of breweries and assigning brands to different distributors in the same market. This business model of pitting distributor against distributor was disruptive, but the distributors ended this by changing their state franchise laws and eliminating the brewery practice. Was Paul Kalmanovitz a disruptor as he acquired many regional and national breweries and brands? Probably not. Perhaps one would think that Jim Koch of Boston Beers is a disruptor? If not, Koch’s influence on the industry has helped create the craft or better-beer segment.

In recent years, the beer industry has been faced with what could be the greatest disruptor in its history, cannabis. As the cannabis industry expands, it will have an effect on beer sales and the distribution to the consumer will be a disruptor. What is an unknown is just how much of a disruption cannabis will be. Only time will tell.

Either way, when one looks at the beer industry one could either say the industry has been in a disrupted state for decades based on the changes in brands/segments. Or one could say that the beer business is not a disruptive industry due to the structure, laws, and state franchise protections. Simply put, the structure of the industry, in itself, is the disruptor. If that is the case, we will not know for decades to come.  

This is the age of disruption.

 Posted by at 6:00 am
Jul 302019
 

After years and years of chasing, buying, and stripping companies, InBev announced, prior to the release of their latest earnings report, that the company has sold their Australian business to the Japanese brewer, Asahi, for $11.3 billion. ABI said they sold that business to reduce their massive debt, which was brought on by the recent SABMiller acquisition. Selling this piece of InBev’s Asian business is considered their plan “B.” InBev had originally attempted a public offering of their Asian business, but reneged as it seemed ABI could not get the valuation they desired.  According to the pundits, this sale and reduction in debt puts ABI in a position to acquire more acquisitions in a faster growing market. If that is the case, how do the U.S. AB distributors feel?

The recently released second quarter results for ABI reflect higher revenue and earnings driven by their global market, led by Brazil and other countries.  Once again, though ABI’s global results look good, their U.S. results are not good.  ABI’s market share in the U.S. dropped .55%, in addition to a.1% loss in the first quarter. ABI blamed these results on raising prices, needed as a result of increased costs. ABI also announced that Michelob Ultra is 10% of their U.S. business, and still growing.

Are the pundits correct in saying that ABI’s business model is simply to buy and gut companies, but not sell them?  This seems to hold true concerning ABI’s goal to reduce their $104 billion-dollar debt. Yet, why are they are selling their highly profitable and mature Australian business, something ABI never does, only to reduce debt, then return to  the same debt-laden situation?

While it is hard not to admire what ABI has accomplished globally, the question is, can their business model continue to work while losing substantial market share in the U.S.? And, at the same time, SABMiller’s debt seems to have changed ABI’s operating strategy.

There is no reason that logically indicates any short-term changes for ABI. In fact, there may be a sense of urgency in their offices to get something done, and done quickly. Whatever happens, the industry and the world will soon know.

I never think about the future – it comes soon enough.

.

.

 Posted by at 6:00 am
Jul 232019
 

In the last 35 years, no brand has come close to the growth of Corona. The brand went from being in a position of not even having a hand full of distributors who could sell a layer of the beer, must less a pallet, to the current situation of now selling over 150 million cases of Corona.  The beer industry has never seen anything like Corona, though recently Modelo, Michelob Ultra, and perhaps White Claw have given Corona a little run for their money. 

In the early years of Corona’s growth, the brand was distributed by Barton Beers and Gambrinus, each of which had the western and eastern halves of the United States, respectively.  Years ago, Barton Beers acquired the rights to all Models brands for the U.S. at which time the importer became Constellation Brands. Constellation Brands’ timing could not have been better as ABI soon bought the Modelo Brewery and spun off Modelo’s U.S. business to Constellation Brands.

Modelo’s growth continued under the leadership of Constellation Brands, but success subsequently produced changes. Constellation Brands bought Ballast Point and distributed those beers throughout the country. Constellation Brands then introduced a number of line extensions, some of which were successful, including Corona Familiar, and more recently Corona Premier.  But at what cost did these changes come? Corona Premier, Modelo’s answer to the success of Ultra, has cannibalized Corona Light, and in recently published data, even Premier is slowing in growth.

Of course, there is also Constellation’s investment in Canopy, the Canadian cannabis company which, to date, has not been a profitable investment. With a $245 million loss in the U.S., Canopy may never be profitable. 

With Corona Refresca, Modelo now has a new entry into the spiked water and seltzer segment. The new FMB segment that is on fire are those products low in ABV, calories, and carbs.  Yet Modelo’s Corona Refresca is high in calories at 199, which means high sugar and carb content. Is this type of product what today’s consumer is looking for? It does not seem so.

For decades, Barton Beers and Constellation Brands were the industry leaders.  These companies were leaders, not simply in the fact that they produced top selling beers, but also leaders in their program development, marketing, and media productions. Corona was the envy of the industry. It seemed that they could do no wrong and everything they touched turned to gold.

Not anymore! The question becomes:  how many more investments will Constellation Brands make while the recent products and companies struggle? The first indication is what happened to the recent CEO of Canopy, one of their founders, who was asked to leave the company.

In the not too distant future, Constellation’s brand managers will be removed, agencies will be fired, new agencies will be hired, senior management will leave, and new management will realign the structure to “be more responsive and quicker to react to the changing market.” Constellation will follow AB, MC, Heineken, and others. It is not just a matter of if; it is more a question of how much longer?

Sometimes, very competent people make errors!

 Posted by at 6:00 am
Jul 162019
 

This post begins the eighth year of Beer Business Unplugged.  As I have done for the past seven years, I will comment on the previous year’s posts and industry issues.
The February 19th post, Success and Failure are Both Part of Life, was the most read post for the year, and it also set an all-time record for the most read post ever! Success and Failure told the story of the reincarnation of Austin’s Celis and the struggles of the brand.  The post brought a multitude of responses from all tiers in the industry, many advocating that Celis was, in fact, a viable brewery. In recent weeks, the industry learned that Celis has gone out of business and two weeks ago, filed for bankruptcy under chapter XI.
The Celis story was one of the many lamenting breweries that had closed or sold over the last year. It seemed that every week there was another blog about another brewery closing. This trend appears to be continuing over the next year.
Another shift which seems to be gathering some steam is the growth of sessionable or light crafts. More and more brewers are adding a low ABV and lighter flavor to their portfolio. Call it the Ultra effect, but it will continue.
Breweries by Population

There are two other key developments which have continued to capture the industries sights during the past year.  The first is the cannabis situation which seems to be losing traction at this time, and the second is the continued and amazing growth of seltzers and spiked waters, led by White Claw.
Once again, I want to thank the readers who have sent comments and thoughts, they are always appreciated and helpful. I look forward to the continuation of this blog throughout the coming year.
This year’s classic Schlitz commercial.

And now, on to year number eight….

 Posted by at 6:00 am
Jul 092019
 

In a conversation several years ago with a distributor who had recently sold his large, successful operation, the distributor commented on the challenges he encountered trying to train and maintain company employees. As an illustration, he referred to the tradition of sports teams and the amount of training and preparation, often a full five days, for a mere three-hour game.  The distributor noted the length of practice in regards to a relatively short game and acknowledged a similar training system used by the United States military, noting the importance of superior training techniques in the event soldiers were called to duty.

When one looks at the beer industry, it is quickly evident the amount of time invested into craft beer training. A recent article in the Dallas Morning News, “Jobs Data Helps Track the U.S. Brewery Boom,” highlights the job growth of the brewing industry.  The article stated, “The number of jobs at breweries jumped from 26,380 in 2008 to 77,902 in 2018, according to the Bureau of Labor Statistics.” This parallels the growth in the number of operating breweries.

The article further states that there is also a regional variation to be found. Some regions, or cities, have more breweries than others. To sort this out, an “employment location quotient” provided by the BLS for states, metropolitan areas, and countries was in each industry. The BLS measures an industry’s share of total jobs in an area divided by its share nationwide. In Bend-Redmond, Oregon, population 191,000 in 2018, one is 18 times more likely to run into a brewery worker than in the U.S. as a whole.

This article goes on to state that the BLS will suppress data so as not to reveal employment and wage information that can be traced to a single employer.  For example, in Chico, California, home to Sierra Nevada, and in Pottsville, Pennsylvania, the home of Yuenglng, the data is suppressed. The data translates into salary ranges, thereby illustrating that an AB brewery or a MillerCoors operation would have the highest pay. The metropolitan areas with annual brewery wages of $80,000 are indeed home to major AB breweries. In the craft world, San Diego, which has 128 breweries, has low wages, as would be expected.  Employment, however, has more than doubled since 2014. The annual wages on the low end of the scale are $23,049 in Niles-Benton Harbor, Michigan and the highest in Syracuse, New York, at $89,675. The brewing industry only accounts for 0.05% of total jobs in the U.S. 

Many craft brewers struggle to find quality employees as referenced by the low salaries. These brewers can find bodies, but without the proper, on-going training, how well are they going to perform? Many of the young beer people have some type of Cicerone training, which does aid with the understanding of beer, but may not necessarily translate into sales.

The old adage, “you get what you pay for,” could not be more evident than in today’s beer industry.  It is easy to equate a breweries’ payroll to their success by using the above mentioned statistics. If a brewery wants to be successful, they should pay for talent instead of simply acquiring more employees.  Not only will the brewery benefit, but so will the wholesalers, retailers, and consumers

Money and salary are not particularly good motivators in the long term.

 Posted by at 6:00 am