by Gregg Glaser

the
futureofbeer
by Gregg Glaser
ith an approximate 52 percent market share and
estimated 2003 production figures of 102.5 million
barrels, Anheuser-Busch is far ahead of its nearest
competitors. Miller brewed about 39.6 million barrels in 2002
(the last year for which figures are available) and Coors
brewed about 22.6 million barrels.
“A-B beats up on the competition,” said Tom Pirko, longtime
beverage industry consultant and president of Bevmark in
Santa Barbara, CA. “They have an excellent distribution system and great marketing. They found the sweet spot and they
went with it.”
W
[ ]
Imports steadily
climbed throughout
the last decade and
that ascension continued in 2003, with
a growth rate of
about six percent.
Miller, a potent symbol of the
internationalization of the brewing
business with its purchase by South
African Breweries (SAB) in 2002, has
lost some market share (now at
about 19 percent) to A-B.
Instead of being managed in an old
family brewing tradition such as A-B
and Coors, Miller was an underdog in
the multinational Phillip Morris conglomerate, according to Peter Reid,
publisher and editor of Modern Brewery Age. Now, the question on the minds of beer industry watchers is when will SAB
turn Miller around?
Coors (with an 11 percent market share) acquired the
Carling brands in the UK in 2002. The flagship brand, Coors
Light (the only Coors brand in the top 10), was down almost
two percent in the last year. The Coors family is still in control and brewing is still the top priority in Golden; Coors has
been stuck in the number three spot for a long time.
A Changed Marketplace
The economy was sluggish early in 2003, and even though it picked up at the end of the year
it didn’t improve in job creation. “People don’t now and won’t in the future have the same discretionary income as in 1990s,” said Pirko.
There is also now much more competition to beer from other beverages. “The beer
business dynamics have changed,” said Pirko. “Beer no longer stands alone as a choice
when someone wants a cold one.” Today, consumers can choose from a plethora of malternatives, energy drinks, flavored water, plain water, teas and other drinks. Allegiances have
changed. The beer drinker is no longer a flat-footed, given customer.
Low-carb beers are the only significant change in the beer industry within the last year,
and low-carbs are a natural extension of light beers, already hugely popular.
Per capita consumption of beer has steadily declined in the U.S. over the past ten years from
about 22 gallons in 1992 to just over 19 gallons in 2002. Health concerns are part of the reason
for this decline. Despite many reports over the past few years that moderate consumption of
alcohol is part of a healthy lifestyle, many consumers remain convinced that alcohol is not good
for them and certainly fattening. Add with diet fads such as the Atkins low-carb craze, potential
drinkers either shy away from beer or go the new low-carb beer route. But, as Pete Reid said: “All
beers can’t be low-carb.”
“The high end beer category
will continue to expand as consumers invest in fewer units
and instead go for rich, full
flavor. That’s where the craft
brewers are well positioned.”
Dan Bradford, president of the Brewers Association of America
Neo-prohibitionists are also hurting the beer business by
issuing negative alcohol reports on a regular basis. Industry
trade group the National Beer Wholesalers Association (NBWA)
considers groups like MADD, Center for Science in the Public
Interest and the Robert Wood Johnson Foundation to be completely anti-alcohol. “Neo-prohibitionists are looking for all the
bad data and will exploit it,” said David Rehr, president of NBWA.
State excise taxes on beer are up across the country and many
states are looking to raise taxes on beer to pay for budget shortfalls. This has and will continue to negatively affect beer sales,
just as the 1991 federal excise tax on beer did, according to Jeff
Becker, president of the Beer Institute, a trade association of over
100 brewers, importers and brewing equipment suppliers. “The
declines in beer sales in the first half of 1990s were due to the
1991 excise tax,” said Becker. A prime goal of the Beer Institute is
to roll back the 100 percent increase of the federal beer tax
imposed in 1991 to its pre-1991 levels of $9.00 per barrel.
TOP 10
DOMESTIC
BREWERS
IN 2002
Imports
Imports steadily climbed throughout the last decade and that
ascension continued in 2003, with a growth rate of about six percent. When you look at the IRI list of the top ten beers sold in the
last year, two imports – Corona and Heineken – are on that list.
The big importers – Heineken USA, Labatt USA, Barton Beers,
Gambrinus and Guinness (Diageo) – sell about four million barrels of beer each year in the U.S.
On the other hand, however, imports aren’t growing at the
rate they were in the 1990s, the import boom years. From 19961997 imports grew at a rate of 14 percent; from 1998-1999 the
rate was 15 percent. Even with last year’s lower rate of growth,
imports have come on strong to take an 11 percent market share
in the U.S., contrasted against 4.5 percent in 1990. Some analysts
believe imports could eventually account for 20 percent of all
U.S. beer sales.
Micros/Craft
BARRELS
GAIN/LOSS
% SHARE
OF U.S.
PRODUCTION
AB
101,800,000
Miller
39,660,000
Coors
22,688,000
Pabst
7,500,000
Boston Beer
1,275,000
Yuengling
1,220,000
Latrobe
1,040,000
Genesee
900,000
Sierra Nevada
566,098
City Brewing
540,000
2.3
(1.25)
(0.11)
(18.48)
8.51
19.02
(5.45)
(10.09)
4.56
4.08
55
22
13
5
1
Less than 1
Less than 1
Less than 1
Less than 1
Less than 1
Copyright Modern Brewery Age
Micro and craft beers continued to increase
in sales last year, but market share for the
category still hovers around three percent
of all U.S. beer sales. The increase over 2002
is only a couple of tenths of a percent. The
projections from the go-go days of the mid1990s that micro/craft beers would eventually gain ten percent of the U.S. beer market
seem like pie in the sky today.
Dan Bradford, president of the Brewers
Association of America (BAA), sees things
differently. “The high end beer category will
continue to expand as consumers invest in
fewer units and instead go for rich, full flavor. That’s where the craft brewers are well
positioned,” said Bradford.
Micro/craft brewers benefit from consumers’ alcohol sensitivity, explained
Bradford, because many beer drinkers have
decided to drink less, but drink better.
TOP 10 U.S.
BRANDS
SHARE SOME
WITH FRIENDS.
MARKET
SHARE
(CASE SALES)
1) Bud Light
2) Budweiser
3) Miller Lite
4) Coors Light
5) Natural Light
6) Corona Extra
7) Busch
8) Miller Genuine Draft
9) Michelob Ultra
10) Heineken
15.7
11.3
7.5
7.2
4.8
3.2
3.0
2.6
1.9
1.8
CASE SALES %
CHANGE
2.8
(3.7)
0.3
(1.7)
(0.5)
3.8
(4.9)
(10.7)
815.6
7.3
52 weeks ending 11/30/03 Copyright IRI
MULLINS’ MANGO LEMONADE
1 1/4 oz. mount gay® mango rum
3 oz. lemonade
1 oz. cranberry juice
fill glass with cubed ice.
pour ingredients in order listed.
add a soda straw and garnish
with a lemon wedge and cherry.
COOL BREEZE
1 1/4 oz. mount gay® vanilla rum
1/2 oz. cointreau®
2 1/2 oz. sweet & sour
top with cola
combine ingredients 1–3 in mixing tin with ice.
shake or flash-blend and pour into glass.
top with splash of cola.
garnish with a lemon wedge.
The biggest of the craft
TOTAL U.S.
brewers (Boston Beer, espeBEER SALES
cially) are becoming to the
BARRELS
2002
rest of the category the same
Domestic 180,400,000
as A-B is to all other brewers.
Many of the formerly micro
Imported
23,070,000
brewers are no longer micro,
Exports
4,350,000
but are classified as regional
Copyright Modern Brewery Age
specialty brewers. The smallest of the top ten micro/craft brewers brewed over 76,000 barrels in 2002.
The largest, Boston Beer, produced 1,280,589 barrels. The Institute of
Brewing Studies in Colorado defines a micro brewer as one producing
15,000 or fewer barrels per year. You have to go down to brewery number
56 on the micro/craft list to find one meeting that definition.
This split between the truly small, locally distributed micro brewer
and the much larger regional or nationally distributed regional specialty
brewer is the big story in the micro/craft segment. Bradford said that
most of the big brewers in the BAA were up double digits last year, whereas the smaller players grew only 3-5 percent. When it comes to working
with distributors - and the all-important chain stores - the biggest craft
brewers have a huge edge over their smaller micro competitors.
or enjoy our smooth mount gay® rum flavors
with your favorite juice or soft drink.
Malternatives: Here to Stay?
©2004 Mount Gay Distilleries, LTD, Mount Gay ® Flavored Rum. 32%
alc./vol. COINTREAU® Liqueur. 40% alc./vol. Rémy Amérique, Inc.
®
New York, N.Y. Eclipse Design. Be Confident. Drink Responsibly.
Malternatives, a.k.a. Ready To Drink (RTD), Flavored Malt Beverages
(FMBs) and Alcopops, are not the powerhouse they were (or were thought
to be) in 2002. They still sold well in 2003, but sales have dropped from
previous levels. Case sales were down 154.6 percent (according to IRI)
from November 2002 to November 2003, and dollar sales were down 12
percent. One of the first malternatives, Hooper's Hooch, introduced in
1995, has been discontinued. Diageo’s Smirnoff Ice continues to lead this
category with a 26.3 percent market share. Diageo also has the number
three player, Smirnoff Ice Triple Black. And no surprise here, A-B has three
entries in the top ten: Bacardi Silver O3 (#5), Bacardi Silver (#7) and
Tequiza (#9).
Federal regulatory issues could seriously injure the malternative category. The Tax and Trade Bureau (TTB) of the Treasury Department issued
a Notice of Proposed Rulemaking regarding malternatives in March 2003.
In that notice, TTB proposed limiting the amount of neutral distilled alcohol malternatives to 0.5 percent. Currently, most malternatives have 7599 percent of their alcohol content derived from distilled alcohol in the
form of flavor concentrates.
Since malternatives are now classified as malt products, they
are advertised, marketed, distributed and sold like beer. If the
TTB proposed rule goes into effect, many industry watchers
believe these requirements would destroy the taste of the drinks,
making them too "malty" and turn off consumers. If the producers didn’t change their formulas, then their malternatives would
be treated like liquor: no more TV ads, a loss of the beer distribution and sales conduits and a higher taxation level would follow.
A TTB “comment period” after the March proposal resulted in TTB receiving 15,000 comments (9,000 emails) on the
proposal. “That’s an enormous number of comments,” said
Charles Bacon of the TTB. The comment period was extended
six months and even after this extension ended an additional
1,000 comments flowed into TTB offices. Needless to say, it
will be many months before TTB officials wade through all
these comments and issue a final ruling.
“This is a difficult, highly charged issue with many factors
to consider,” explained Bacon. “The comments were all over
the board.”
The industry has lined up on two distinct sides in the malternative wars. The Beer Institute, NBWA and BAA are in favor
of the 0.5 percent rule. As Rehr of NBWA said: “Beer is brewed,
not squirted into a bottle.”
Diageo and the spirits companies, who produce the bulk
of the malternatives, favor a ruling that states that only the
majority (51 percent) of alcohol must be from fermentation
and 49 percent may come from added flavorings.
Whenever TTB completes its review of the thousands of
comments, a transition period is anticipated to allow industry members to reformulate existing products that don’t
meet the new requirements. It could be 2005 before this issue
is resolved.
A Future Scenario for Beer?
According to the Beer Institute, today there are approximately 2,800 malt beverage brands produced in the U.S., about
three times the number a decade ago. There are over 1,800
U.S. brewers (including brewpubs), five times more than in
1992. But still, said Pirko, the beer business is languishing.
“There’s not much creativity, except by the one company
that can afford to fail. The big question is how far can A-B go
in market share - 55 percent, 60 percent?” Just as a comparison, in Denmark, Carlsberg has an 80 percent market share.
As it has been for years, beer is the number two beverage
choice for Americans, with soft drinks holding the top spot.
Gregg Glaser has covered the beer beat since 1994 for All About Beer Magazine,
Modern Brewery Age, Yankee Brew News and other publications. He's also a regular guest on radio and TV programs, speaking about beer, of course.
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*Source: Harrigan Bodick Quantitative Research (8/03) — sample survey may not be
representative of whole U.S. ©2004 Mount Gay Distilleries, LTD, Mount Gay ® Flavored Rum. 32%
alc./vol. Rémy Amérique, Inc. New York, N.Y. Eclipse Design.®
Be Confident. Drink Responsibly.