On Wednesday, Chicago-based MillerCoors cited continued sales declines for major brands such as Miller Lite and Coors Light, and even steeper declines for value-price brands.
"We're in unprecedented water in the beer business," Kiely told the newspaper, noting that U.S. beer sales have posted [image-nocss] moderate increases annually, with the exception of 1992. "But for 30 years, this business has been on a march and for all of us, the brewers, distributors and our retailers, it's really unusual to have a downturn impact beer the way it has."
Last fall, big beer sales began to decline precipitously, said the report, and the market has yet to recover. For the year, beer sales are expected to fall 2% to 3% by volume. A big reason for that, Kiely said, has been a disproportionate level of unemployment in the key beer-drinking segment, men age 21 to 35.
"Since the beginning of the downturn, beer held up pretty well, and some of that I think has to do with the dynamic of unemployment checks," he said, noting a trade down at the time from Miller Lite to lower-priced brands. "But volume held up pretty well until last September and then we saw it shelf down."
At that point, Kiely said, the industry "ran out of gas." The resurgence for brands such as Miller High Life "couldn't sustain itself," he said. And since volumes remained relatively constant for a year after the initial downturn, Kiely said he suspects many unemployment checks began to run out around that time. "People started getting really nervous about not having money, and if you look at unemployment of 20- to 30-year-old males, you're looking at a numbervery close to 14% to 15%, and that really hit us," he said.
Kiely is not predicting a recovery until unemployment reaches more normal levels; however, he said, the company has seen signs of improvements in some of its key brands. Miller Lite, for example, launched a "vortex" bottle (which has a swirl at the top, intended to enhance its flavor) in the spring. Kiely said this bottle helped generate a 6% improvement in the brand's sales by volume.
"People like to experiment in the beer business, they like to try new things," Kiely said. "The experience of the vortex bottle is real. You feel more of the head notes of the beer. People like that."
Grocery scanner data from SymphonyIRI, a Chicago-based market research firm, supports a recent lift in three of the four biggest beer brands, the report said. Miller Lite, Bud Light and Budweiser sales are all down for the 52 weeks ended October 3, between 2 and 8%. Only Coors Light sales are up, 1%; however, for the 13 weeks ended October 3, Miller Light, Coors Light and Bud Light sales are all positive, between 0.65% for Miller Lite and 3.4% for Coors Light.
IRI figures do not include Wal-Mart and club store sales.
For the last four weeks, the data are even more promising, with Miller Lite sales up 1.75%, Coors Light sales up 5%, and Bud Light sales up 4%. Only Budweiser sales continued to fall, 4%.
Still, earnings for big beer look better than revenue, said the report. MillerCoors said Wednesday that net income for the third quarter, excluding special items, actually increased, 37%, to $334 million, thanks to cost cutting and price increases.
In a research note following the earnings release, said the Tribune, UBS analyst Kaumil S. Gajrawala wrote that MillerCoors' profit growth should accelerate in the fourth quarter. Gajrawala also expressed optimism for Molson Coors and the U.S. beer business in 2011, based on stronger pricing power and improving volume trends.
MillerCoors is a joint venture combining the U.S. operations of Denver-based Molson Coors and London-based SABMiller.
Anheuser-Busch InBev also released earnings Wednesday, similarly reporting earnings improvements despite ongoing volume declines in the United States, according to the report.
As for the craft beer explosion that some expect to signal the death knell for big beer? Kiely does not sound worried. "It's great for beer," Kiely told the paper. "It gives us talk value as a category, up against wine, for example, and it really engages our key beer drinkers. They really want to know where the beer comes from and talk about it."
Kiely added that the company's main objectives are to build sales in so-called premium lights and in the craft and import business. "We have a great platform to start from," he said, pointing to Leinenkugel and Blue Moon.
Another bonus for Blue Moon is that, unlike with other beers, women account for half of the users. Men, however, account for 60 to 70% of the volume, the report said.
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