Beer Business Unplugged

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!

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.