Around the early 1990s, the golf industry, in anticipation of the soon retiring waves of baby boomers, assuming the boomers would have ample money and free time, would take up golf by the thousands.  Investors started building hundreds of new golf courses.  Many of them were designed by architects or professional golfers who got paid for their name or reputation and built courses that only players with PGA or LPGA cards could enjoy.  Golf equipment manufactures did the same, new technology and line extensions based on the golfers ability, had those companies introducing new products annually.  As a result, prices soared, as did their profits.

Then came the dot-com recession which slowed the rapid growth of the golf industry.  To support this growth, colleges began to expand their golf degree programs to students.  In fact, at the 2009 PGA show in Florida, about 20 colleges displayed their degreed programs, touting that when completed; the student would have multiple hours toward a PGA card.  Even today there are some independent schools that offer associates degrees in golf.

Finally, the great recession of 2007, along with the now much higher costs of golf equipment and green fees, has caused the golf industry to collapse.  Many more golf courses and real estate developments have closed, and there are only a handful of new courses opening.  This past summer, Dick’s let go almost 600 PGA pros as they closed their golf departments.  The golf industry is contracting.

Portland State University’s program, The Business of Craft Brewing, is heading into its third year.  The one year program has a wait list for students with the current group of students coming from all over the US. Interestingly, 50% of the new students are female.  More and more colleges are offering beer programs or schools to their students, some only one day, but many, as with PSU, are offering a more comprehensive program.  A number of students are looking at distilling or producing cider instead of just beer. PSU is building the program to address the needs of the craft industry.

A number of publications continue to highlight the recent craft brewery closings, while at the same time discussing the possibility of craft consolidation.  All this while the craft segment continues to show double digit growth, both in volume, and even more so in dollars.  We all are aware of the huge number of new breweries and even more are being built or planned as I write.  As a reference, just last week while in Astoria, Oregon, a city of less than 10,000 residents, there were three breweries, a distillery, and a winery.  Every on-premise account visited only had crafts on draft.

The article from this blog entitled the Coming Tsunami written in the summer of 2012 highlights the large number of new SKUs being introduced and those coming in the future.  While SIRI indicates a decrease in SKUs, we know more are on the way even though most of the new breweries are in the micro category.

There are parallels between the golf industry and the craft industry.  High costs for certain products, line extensions, new products, and high interest. But there is one huge difference.  While the golf industry over-built and is contracting, the craft industry is expanding and growing at double digit rates.  The craft industry is a perfect example of the supply and demand model at its best.  The tsunami is here.

Beer Fodder; http://youtu.be/eubWYPhcEEo

The beer industry, like all industries, is defined by key events which take place over decades that result in the evolution of industry changes.  Philip Morris buying the Miller Brewing Co. and changing how beer was marketed was one of these events.  As mentioned in pervious blogs, Philip Morris used their cigarette marketing knowledge, supported by millions in media, to grow their brands.   The internet gave the consumer the ability to find and learn about different beers and styles.  As much as anything, the internet gave the craft industry the vehicle on which to build their brands.

In recent years, the advent of social media has been the key marketing strategy used by all breweries, especially the startup crafts.  Social media and craft beers, more than almost anything, define the millennial generation.  During this past summer’s NCSLA annual conference in San Antonio, one of the highly attended panel discussions was Millennials-Redefining the Beverage Alcohol Landscape.  On this panel we discussed not only the size of this generation, but how they handle the purchasing of consumer products.

Recently, the WSJ ran an article defining how Millennials are turning away from McDonalds.  In the article, the author cites that since 2011, sales to those ages 19-21 year old are down almost 13%.  Those aged 22-33 are flat.  The article mentions that the reason for the downturn in sales to Millennials is that this group is looking for healthy choices.  Chipotle is one of the restaurants to which the Millennials are turning.

In terms of size, the Millennials and the Boomers are about the same as far as numbers.  Both generations had, and are having huge effects on all consumer products, especially beer.  Philip Morris marketed Miller Lite as a product of Great Taste and Less Filling, using ex athletes as their spokes people.  The Boomers were also becoming health conscious, too.  Miller Lite’s message hit home, soon followed up by Coors Light and Bud Light, all less calories and less carbs.  Smoking went down as working out and exercising grew.  Soon eating better and healthier was added into their life.

Than the question could easily be; as Millennials age, as did the Boomers, will they change their drinking habits?  Will the growth of the craft segment slow or perhaps even stop within the next decade?  Light beer has less calories and carbs, craft beer is loaded with calories and carbs.  The higher the alcohol, the more calories the beer has.

Craft beer websites all highlight their beer, but with the exception of New Belgium, none post their caloric count!  They all have the ABV listed of each product along with the IBU count but try to find the carb count.

If McDonalds is correct in their assumption that the Millennials are eating healthier then the beer industry might want to pay more attention to the future of crafts.  One definition of social media is that it is “the personification of narcissism.” which to some degree, defines this generation.  The next decade will tell us if social media is really all about me, me, me!

Beer Fodder:

http://stlpublicradio.github.io/beer-gif/index.html

Budweiser, The King of Beers, Schlitz, The Beer that made Milwaukee Famous, Miller, The Champagne of Bottle Beer, Coors, America’s Fine Light Beer, and Pabst Blue Ribbon Beer.  These were the five national premium brands that for many years dominated the US beer market.

The beginning of the end of these brands dominating the market started with the introduction and success of Miller Lite.  The success of Miller Lite was followed by both Coors Light and Bud Light.  We all know the story of how these three light beers became what they are today.

On the other hand, both Schlitz and Pabst, who also tried the light route, did not survive.  The demise of these two brands is also well documented.  After all these years, what is interesting is where these five brands are today and how they got there.

Budweiser, once the largest selling beer in the nation is the victim of Bud Light and the changing tastes of the American consumer, has moved to the third largest seller. Although it is still highly supported by ABI, Bud, however, remains in decline.  The brand is down -2.9% in volume in the July IRI report.  InBev, however, has taken Budweiser globally and it is doing well.  The brand seems to have found life outside the US and remains a viable brand.

Schlitz, once a strong number two brand, is no factor and has not been for years.  In spite of many attempts to revive the beer, little, if any success has been achieved.  With a retro bottle, Pabst, who now owns the Schlitz has targeted markets in south Florida, Chicago, and Milwaukee.  This targeted approach at first glance made sense, going after retirees who grew up with the brand along with two former key major markets.  Even with this marketing approach, however, the results were disappointing.  Schlitz today is mostly a memory.

Miller High Life, with the support of MC, continues today.  The brand is down 4.0% to date in the same IRI reports.  Looking at this brand, it has survived numerous attempts to reposition itself over the years.  At the Miller annual conventions, wholesalers did not know which direction the brewery was taking Miller.  Today the brand lives in the retro world with its heritage and distinctive clear bottle.

Coors has really seen ups and downs over the years.  Not unlike AB and Miller, Coors tried many times to turn Coors Banquet around.  The brand went through many package and liquid changes, but nothing stopped the sales downhill slide until recently, when Coors went back to brewing the beer close to the original liquid.  The next smart move happened with the design change which was more in line with a retro, clean look of the can from its heritage.  The brand responded with years of increases.  In fact, July numbers show it +8.1%.

Finally, Pabst, which for a reason unknown to the industry, began a complete turnaround some years ago as a retro, anti-establishment brand.  It was also priced in the popular or regional levels.  First starting in the Northwest than moving eastward, it has become somewhat of an enigma in the industry.  A number of craft only bars offer Pabst, many on draft.  With the rumored sale of Pabst Brewing Co., what happens to the brand will depend on who buys it and their marketing plans.

Pabst and Coors have shown that with the right message any beer can remain relevant.  Bud and Miller High Light, in spite of continued negative numbers, still remain nice brands to have, but need the right message.  Only Schlitz, has yet to be resurrected, but do not bet against that happening.  After all these years, in some way, it is like Deja vu all over again!

Beer Fodder;