Beer Business Unplugged

History has proven that in the beer industry, when a brand begins to die, it will eventually end up in the grave yard with little chance of revitalization.  The list of dead brands in this category is long, and could take up this entire post. However, the list of brands that almost died, but did in fact revive themselves, is very short.  One such beer is Pabst Blue Ribbon, with perhaps the number one story of a near-death beer returning to life.

Along with PBR, the Pabst portfolio consists of by-gone labels including: Schlitz, Rainer, Old Style, St. Ides, Stroh’s, Schmidt’s, Pearl, Blitz, Olympia and Lone Star to mention a few.  Many of the Pabst brands are referred to as legacy brands.  Outside of PBR, only a few of these brands are showing growth.  Lone Star and Rainer, in recent years have found their footing again and are showing signs of progress by focusing on their regional roots: Lone Star in south Texas and Rainer in the northwest.

Small Town Brewing and Pabst joined together several years ago enabling Pabst to leverage its marketing and distribution system to aid the growth of the hot new product, Not Your Father’s Root Beer.  Pabst staffed up, adding a number of field sales people across the country, which added potency behind the NYFRB and other Small Town brands.

In today’s market, when the launch of a new product has a dramatic upturn, the downward curve is typically just as dramatic, often resulting in a typical bell curve shape. Accelerated growth leads to accelerated death.  In NYFRB’s case, it appears there was a great deal of sampling (consumer trial), but little to no repeat sales.  2017 numbers indicate a -60% decline for NYFRB.  In response to this brand’s decline, Pabst laid off 70+ people this month.

NYFRB is still a very viable brand, at least going into 2018, but it is almost certain, giving current trending, that the consumer will see NYFRB’s shelf space reduced along with losses in on-premise distribution.  The elimination of that magnitude of staff will certainly have a negative effect.

The question is:  how do the Pabst wholesalers view this situation?  It is safe to say that the NYFRB wholesalers sensed that this product had a shorter life span and thus leveraged that belief by maximizing profits and minimizing market spending.  They did not miss the chance to make as much on this product as possible, and since this brand is still somewhat viable, Pabst expected wholesalers to continue to do the same.

NYFRB might have legs to survive and be a profitable brand going forward for wholesalers, but one wonders what would have happened had Pabst not staffed up to that level and focused on their legacy brands?  It is possible that many of the recently laid off employees had only joined Pabst as NYFRB took off, and that many may have given up jobs at other beer companies?

Pabst, in spite of going from an independent and top five brewery, to several different owners over the years, has beaten the odds and survived.  Pabst’s portfolio is composed of mostly unknown names to the millennial generation, which could be an advantage to Pabst in the years to come.  NYFRB may not survive.

Success is survival…

The Julius Schepps Co. of Dallas, a very successful and large wine and spirit house, made the decision to sell in early 1997.  Although Schepps was predominately a wine and spirits house, they did have a very impressive beer portfolio, including the Modelo brands: Shiner, Guinness, Moosehead and other fine imports and specialties.

The wine and spirit company, now known as Republic National, bought the majority of Schepps W&S brands. Schepps offered the entire beer portfolio to the Miller network.  Miller at the time, and still today, is headed by Andrews of Dallas and the Cranes of Ft. Worth.  The other network, Coors, is was at the time headed by Willow of Dallas and Coors of Ft. Worth. The AB house, Ben E. Keith, was exclusive AB at the time so they were out of contention for the brands.

As a buyer, this portfolio was a slam-dunk. Corona and Shiner were on fire. But the main reason this was such a good buy was because Schepps operated as the personification of a wine and spirits house.  Schepps’ service, outside of the package stores, was at best, spotty, especially in the c-store channel.  Both Miller and Coors could literally pay for the brands in a very short time by simply servicing the market, something which Schepps had not previously done.  The demand for these beers was there, the retailers and consumers did not have access to the brands.

For reasons never explained, the Coors distributors dropped out of the negotiating process, allowing the Miller network to buy the Schepps portfolio.  As a result of this action, the Coors wholesalers sold out to the Miller wholesalers within just a few short years.  Today, Andrews is the MC distributor in much of north Texas.

In 1997, Corona was the real prize in the deal.  All the other Modelo brands, Corona Light, Pacficio, Negra Modelo, and Modelo Especial, were no more than bolt-ons.  The marketing strategy was to deeply discount the Corona 2/12 bottles in an effort to drive distribution and sales.  This two-year marketing program was highly successful.  Andrews, excited about Corona, put all the distributor’s efforts behind that brand, and their secondary focus was Shiner Bock, another brand which was also on fire at the time.  Low hanging fruit.

Soon, Gambrinus began to make Modelo Especial a focus brand. Initially, however, Andrews, was pushing back, but they, too, eventually began to also focus on Modelo.  Within two years of the acquisition, Andrews experienced some success with Especial in the Hispanic grocery accounts and independent c-stores. These stores were predominantly supported by Mexican Nationals, consumers who drank Especial in cans in Mexico and wanted the same in the US.  Modelo bottles could be found only in Mexican restaurants.

In spite of the wholesaler’s reluctance to focus on Especial, and with very little marketing support from Gambrinus, it was not long before Modelo took off.  As 2017 came to an end, Andrews set multiple new-volume records with Modelo.  After 20 years, Especial now sells four million cases a year!  Especial, which is much bigger than Corona, is still growing

Especial was just another brand, once thought to be no more than a bolt-on brand. But it became a gold mine for the distributor.  Had the Coors network been successful in buying this portfolio instead of the Miller network, it is certain that the shoe would have been on the other foot.

If you never try, you’ll never know what you’re capable of.

Editors note;  We are having server problems but should have them fixed soon.  Sorry for all the issues.

The highlight of any annual brewery convention has traditionally been the unveiling of the next year’s new ad campaign.  This was especially true when a brewer had experienced slowing sales in its main brand, typically the result of the brewer having changed either management or ad agencies, or sometimes both.  Effective ads not only meant that the brand would respond, but effective ads aided in building confidence in the brewer’s wholesalers.  That alone was important, if not more important, for the brewery than how the consumer viewed the product.

As we start 2018, this decade has seen a revolution in how breweries, especially crafts, have changed their marketing and media programs.  Social media, not traditional media, has become the main and sometimes only means by which crafts, especially startups, market their beers to the consumer.

If a brewery uses social media as its only form of marketing, it becomes incumbent on the consumer to find the brewery.  Sure, brewery labels, other forms of p-o-s, and other social media outlets (Twitter, Facebook, Instagram, etc.) will have the website address for the product.  But ultimately, the consumer has to find these addresses and look up the brewery.

Traditionally, above the line media functions just the opposite by seeking out the consumer.  If the message from the brewery is on target, the consumer will seek out the brand or information about the brand.  Take, for example, the current, and quite successfully AB Dilly Dilly ads.  It is somewhat doubtful that this tagline would be such a hit if it had been used only through social media forms of marketing.  No doubt, AB has hit on something with Dilly Dill, yet it is a little too early to see if it has a positive effect on sales for Bud Light.  Either way, AB is on to something.

Then there is the question of cord cutting by Millennials.  With ESPN losing millions of subscribers, as has commercial TV, the question of how traditional advertising will function in the coming years is worth of discussion.  There are now a plethora of choices: Netflix, Hulu, Apple TV, YouTube TV, and others. That, combined with Disney’s purchase of Fox’s assets, means that changes are coming.

Much of the blame for the volume losses experienced by AB and MC has been attributed to ineffective ads that do not resonate with consumers.  Miller changes ad agencies almost every year, and AB has recently changed, too. Yet both breweries continue to pump millions into traditional media marketing along with extensive social media platforms.

For those local, and successful crafts, who are experiencing difficulty in expanding their footprint outside of the 300-mile local radius, those breweries’ marketing techniques might be better suited by a traditional campaign instead of solely relying on social media which forces the consumer to find the brand. And why should the consumer go to the trouble of finding another brand if that consumer already supports the areas local brands?

Breweries that have designs on aggressive growth and survival need to support both social and traditional media programs.  Without using both means, breweries limit themselves, somewhat like a brewery that only offers their products in bottles and kegs.  In doing just that, the brewery sells to less than half the market.

Nowadays, social media is the easiest place to go and find something…