ST. LOUIS -- For years, makers of small-batch craft beers have been chipping away at the market share of America's three beer giants. Now, the big brewers are craftily playing the same game, and winning back much of the momentum, according to The Wall Street Journal.
The major brewers generally avoid using the parent company's name on the labels for their craft beers. Anheuser-Busch Cos., for example, lists Green Valley Brewing Co. as the maker of its Wild Hop Lager, an organic beer. Sunset Wheat from Jacob Leinenkugel Brewing Co., is owned by SABMiller [image-nocss] PLC. Blue Moon Brewing Co. is a 100%-owned subsidiary of Molson Coors Brewing Co., but the parent company isn't mentioned on its beer labels.
Through the first eight months of this year, retail sales of craft beers made by those companies or their affiliates grew at nearly three times the rate of independent craft brews, said the report, citing market-research firm Nielsen Co.
Sales of craft beers affiliated with the big three brewers in grocery, drug, convenience and major-market liquor stores surged 45% to $177 million through August 25 against year-earlier levels, excluding sales at Wal-Mart Stores Inc., Nielsen found. (Wal-Mart doesn't supply sales data to Nielsen or any other data-tracking firm.) Sales of independent craft brands rose 16% to $531 million, said the report.
The big brewers' brands, which include such top sellers as Molson Coors's Blue Moon and Miller's Henry Weinhard's Private Reserve, accounted for 25% of the category, an increase of four percentage points from a year earlier, the report added.
The growth shows how the big companies are able to leverage their advantages in staff size, marketing and distribution to quickly gain a foothold in emerging categories of the beer industry. It's a combination of great branding and strong distribution muscle, Nick Lake, a Nielsen vice president, told the Journal.
Some beer aficionados and industry executives deride the brews made by big companies as faux crafts. Any brand put into the marketplace with an intentional lack of affiliation with the brewery brewing it, I consider that a faux craft, Tom McCormick, executive director of the California Small Brewers Association, told the newspaper. It's intentional deception.
The major brewers say they're not trying to deceive anyone. We see Blue Moon as being a special brand, Andy England, chief marketing officer of Coors Brewing Co., the U.S. unit of Molson Coors, told the paper. It's no more relevant than Kashi [cereal] being owned by Kellogg or Lexus being owned by Toyota, he said.
Craft beers represent 5% of U.S. beer revenue, but they are the fastest-growing segment, said the report, and they are attractive to big brewers because they command higher prices. A Sunset Wheat six-pack can be bought at stores for $6.79, while a Miller Lite six-pack goes for $5.49.
The growth rates of the big brewers are helped by the fact that they are starting from a smaller sales base. Still, the jump shows how much influence they have over beer consumption. In the U.S., beer generally must be sold through distributors, and the big brewers have far larger distribution networks than independent brewers do. If a mass-market brewer wants to add a new brew to its lineup, it can more easily attract an audience for it.
These three networkscan get these beers on shelves overnight, Bump Williams, general manager of the beer, wine and spirits practice of market-research firm Information Resources Inc. (IRI) told the paper.
The major brewers mostly promote their craft brands through word of mouth, a departure from the drumbeat of TV commercials touting their mass-market brands. To spur interest, the companies have had representatives meet with bar owners to teach them how to talk up the brands' attributes. The companies also host tasting dinners at bars or restaurants, where they pair their beers with certain foods that bring out the flavor.
Miller Brewing, the U.S. unit of London's SABMiller, has arguably been the most aggressive of the three big brewers in trying to expand its craft beers over the past year, the Journal said. It has introduced its Leinenkugel's portfolio of brands into 17 new states, giving it a presence in 42.
Total Leinenkugel's volume, or quantity of beer sold, is up 29% for the year to date. Consumers are so willing and wanting to try new things, especially in beer styles, Jake Leinenkugel, president of the Leinenkugel's division, told the paper. He also credits the mobility of American society and the power of the web for raising awareness of the brand. It took years for the brand to really connect with distributors, he said.
Other big-brewer craft brands have taken years to catch fire, the report said. Coors launched Blue Moon, a Belgian-style wheat beer in 1995. By 2000, sales were so meager that the company was considering scrapping it, said England. But the brand began to attract fans in the Midwest, thanks mostly to some hard-working Coors distributors, he says. They taught bartenders to serve Blue Moon in a glass with a slice of orange, which caught drinkers' attention, he said.
This year, the Blue Moon roster, led by the Belgian White variety, increased sales by more than 80% at U.S. grocery, drug and convenience stores, according to Nielsen data, England said. It is among the best-selling of all crafts, said the report.
Anheuser-Busch lacks a star craft brew that it produces, but it has a wide portfolio, and several of the brews are posting sales growth, such as ZiegenBock Amber, sold only in Texas. Anheuser-Busch also owns big stakes in several craft brewers, including a roughly 40% stake in Oregon's Widmer Bros. Brewing Co.
Some independent craft brewers said their growth rates are slowing because of the distribution power of the large brewers. Bob Sullivan, head of marketing at Boulevard Brewing Co. of Kansas City, Mo., said the company had expected to increase sales at a percentage in the high teens this year, but now expects a rate of about 14%. We introduced some new brands and packaging, he told the paper, and with what Miller, Bud and Coors are doing, it turned out to be maybe not the best timing.
The big brewers' actions have also made Boulevard more cautious about expanding into new markets, which requires heavy investments in salespeople and advertising, Sullivan said. Now it is much more difficult and costly when you go into a market.
Some craft brewers say the giants' move into the category is a good thing because they're bringing new legions of craft drinkers into the fold. Even if the independent brewers' market share falls, they may enjoy higher sales and profits as the category grows. Go Blue Moon, said Greg Owsley, chief brand officer at Colorado's New Belgium Brewing Co., the maker of Fat Tire Amber Ale, a leading craft beer.
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