Still cautious from the economic downturn, consumers created an uneven environment for beer once again in 2011. The year’s performance reflected a category of contradictions with trends torn between the ongoing price consciousness of some shoppers and the insatiable taste for variety — even if it carries a higher price — from other demographics. As crafts, flavored malt beverages (FMB) and ciders benefited from consumer curiosity, the large domestic brewers repeated 2010’s trend of dollar sales growth as volume declined.
“In 2011, total beer volume sales continued to decline, down by another 2 percent while value sales of beer were up by 1 percent,” explains Ty Law, research analyst at Euromonitor International, Chicago. “As consumers were trading down, manufacturers hiked up unit prices on their economy beers to make a profit. As economy beers were no longer a cheap buzz, many Americans stopped purchasing them and instead saved up for the premium-end products.”
Bump Williams, chief executive officer and president of Bump Williams Consulting, Stratford, Conn., notes that volume losses were not unique to 2011.
“For 2011, the takeaway is that the volume was down probably close to 3 million barrels across on-premise and off-premise,” Williams says. “That’s on top of another 2.5 or 2.8 million barrels the year before, on top of another 2 million barrels the year before that. This is a really slippery slope we’re on.”
The overall
beer category had $25.1 billion in sales in food, drug, gas, convenience and mass merchandise outlets, excluding Walmart, club and liquor stores, for the 52 weeks ending Dec. 25, 2011, according to Chicago-based market research firm SymphonyIRI Group. The average price per case within the entire category increased 0.5 percent during the same time period, which led to a 2.5 percent increase in dollar sales despite a 0.3 percent decrease in case sales, SymphonyIRI data shows.
In 2011, the beer category saw its two leading segments, domestic premium and domestic sub-premium beer brands, lose market share by small percentages, -0.8 and -0.4 percent, respectively, according to SymphonyIRI data for sales in measured channels through Dec. 25. Stepping into this void were craft, import, domestic super-premium and FMB segments, which each showed small growth in market share. Craft beer and hard cider led the beer category in volume increases with a 14.5 percent rise in craft case sales and 24.3 percent increase in hard cider volume sales through the last week of 2011.
Although price restructuring caused some consumers to choose brands in other beer segments, such as imports, some consumers turned to other categories entirely, Williams says. Sub-premium beer consumers, who often purchase larger package sizes, have not only been affected by increasing prices on their budget-priced beer brands, but also rising gas prices, unemployment and underemployment, he notes.
“We saw that price gap get way too tight with premium beers, and what the big brewers wanted to do was trade people up and it didn’t work,” Williams says. “The spirit companies were brilliant: they saw what was happening and they lowered the price of a lot of their 750-ml. vodka, tequila and rum brands, and there were a lot of 750-ml. promotions for $6.99 or $7.99.”
Williams says many consumers noted the price tag difference and switched from beer to spirits. According Nielsen, the spirits category increased 3.7 percent and the wine category grew 2.1 percent in 2011, says Danny Brager, vice president of the beverage/alcohol team for the New York City-based research firm.
The pressure from the other side of the alcohol aisle was highlighted by Tom Long, chief executive officer of Chicago-based MillerCoors, in a speech at the National Beer Wholesalers Association (NBWA) annual meeting and trade show in October. Long said that beer manufacturers and wholesalers were no longer just competing against competitive beer brands, but needed to respond to pressure from spirits, which have been consistently taking share from beer.
After years of declining sales, the spirits segment turned around, in part by tactics borrowed from beer, Long noted. Spirits companies took a page from the brewer’s playbook and placed emphasis on brand-building, advocacy and collective action, he said. On behalf of beer-makers, the MillerCoors chief executive officer said brewers are dedicated to getting beer growing again.
Domestic challenges
The country’s largest brewers, MillerCoors and Anheuser-Busch InBev, St. Louis, continued to sell less volume, but at a more profitable level in 2011, explains Dan Wandel, senior vice president at SymphonyIRI. Anheuser-Busch InBev lost 0.9 percent market share, but maintains 50.1 percent of the U.S. beer category in SymphonyIRI’s measured channels. However, the brewer decreased 1.8 percent in volume, but reported a 0.8 percent increase in dollar sales through Dec. 25. Likewise, MillerCoors, which lost nearly half a percent in market share to occupy 26 percent of the beer market, saw its volume drop 1.6 percent, while dollar sales increased 0.7 percent.
Part of the domestic category’s struggles was a lack of innovation in 2011, Wandel says. “For the third consecutive year in supermarket data that [SymphonyIRI] tracks, the overall sales generated by new brands declined versus the previous year,” he says.
One such innovation, MillerCoors’ MGD 64 Lemonade, was short-lived. The limited-edition line extension of its low-calorie MGD 64 line, a 64-calorie light beer with the taste of lemonade, was launched May 1 and discontinued by the brewer in late July.
Garima Goel Lal, senior analyst at Mintel, Chicago, says that packaging is one area where major brewers have differentiated their brands. This year, Anheuser-Busch InBev’s Bud Light, which topped U.S. beer sales with $5.3 billion in SymphonyIRI’s measured channels through Dec. 25, released a pressure-sensitive label on its bottles. The label allows for consumers to customize it with a message or drawing using a coin or key, the company says.
In May, MillerCoors rolled out new cold-activated technology for Coors Light bottles and cans. The packaging changes colors to alert consumers when the beer is cold, and then super cold. When cold, the mountains and a Cold indicator bar on a Coors Light package turn blue, but with further chilling, the package’s Super Cold indicator bar turns blue. Coors Light increased 2.5 percent in volume and 3.7 percent in dollar sales in food, drug, gas, convenience and mass merchandise outlets, excluding Walmart, club and liquor stores through Dec. 25, 2011, according to SymphonyIRI data.
In the fall of 2011, MillerCoors redesigned the packaging for its Miller Genuine Draft (MGD) brand, which saw both dollar and volume declines of 13 percent in SymphonyIRI’s measured channels through Dec. 25. MGD’s new design features a black label for bottles and cans that is meant to highlight the brand’s fresh draft taste and connection with global nightlife, the company says. MGD’s global black label packaging began to roll out in November 2011 and completed the transition in January, MillerCoors noted.
Arguably last year’s biggest success story was Pottsville, Pa.-based D.G. Yuengling & Son Inc., which expanded into its 14th state in late 2011. In its original markets, Yuengling benefits from a position as the only full-calorie premium and light premium beer with double-digit growth, Williams explains. Expanding distribution into Ohio doubled the brewery’s growth trends, he says.
“Ohio doubled what they were growing in the 13 original states, so if they were up 7 percent in the 13 states, bringing Ohio in brought their volume up plus 15 percent — that is staggering,” Williams says.
Yuengling Traditional Lager increased 24.5 percent in volume and 26.3 percent in dollar sales for a total of $185 million in measured channels through Dec. 25, according to SymphonyIRI. The brand also finished 19th on SymphonyIRI’s overall beer category brand list. Yuengling Black & Tan also grew to $15 million in sales with a 21 percent increase in dollar sales and 18.8 percent growth in volume.
Carving out a niche with price-sensitive consumers, private label beer brands increased in popularity in 2011. Industry analysts are split on the merits of these offerings as Mintel’s Goel Lal and Euromonitor’s Law maintain that private label beer brands appeal based on low price, which is contradictory to the overall category’s brand-centric operation. Goel Lal cites Mintel research that says 56 percent of beer consumers look for a name brand, while 53 percent choose a beer based on low price.
However, SymphonyIRI’s Wandel notes that 2011 was a record year for private label beer. Although it remains less than one share point of the research firm’s overall category data, SymphonyIRI data shows that private label beer sold just fewer than 2.3 million cases in measured channels, which is an increase in sales of about 1 million cases from 2010, he says.
“Make no mistake, I think the biggest driver in the success in the private label brands that we’re seeing now is that there’s a big fundamental change there,” Wandel explains. “In the past, it was import private labels that were really doing the bulk of the volume. That has changed over the last two-plus years, and now where the efforts are really being made with private label in the category are around the domestic, mostly in the sub-premium, premium and craft items.”
Nielsen’s Brager agrees citing data that private label growth in grocery, convenience and drug stores was up 46 percent in dollar sales, although its share impact overall remains a slight 0.1 percent dollar share. The drug channel, which was dominated by Walgreens’ private label beer Big Flats, leads the channels in private label performance and saw a 0.9 point dollar share gain in 2011. Private label lost volume in convenience stores, but presented modest growth in grocery stores, where it still outpaced the overall beer category with 6.2 percent dollar share growth, Brager explains.
Upper echelon
The industry continues to see light beer’s share erode with Mintel’s Goel Lal noting that ultra light varieties have contributed to the segment’s decline. SymphonyIRI’s domestic super-premium beer segment is topped by Anheuser-Busch InBev brand Michelob Ultra Light, which experienced an
8.4 percent increase in volume sales and 10.3 percent rise in dollar sales in measured channels through Dec. 25. The performance also helped Michelob Ultra Light round out the Top 10 overall beer brands, according to SymphonyIRI data.
The super-premium beer segment also includes fellow Anheuser-Busch InBev brands Bud Light Lime, which experienced 8.8 percent declines in both volume and dollar sales in its second year on the market, Bud Light Chelada and Budweiser Chelada, which each posted positive growth.
Also among the super-premium segment’s top performers are Blue Moon and Leinenkugel’s brands from MillerCoors subsidiary Tenth and Blake Brewing Co.’s portfolio. Founded in August 2010, Tenth and Blake is home to MillerCoors’ craft and import brands, which include Peroni Nastro Azzurro, Pilsner Urquell and Grolsch.
Blue Moon Belgian White Ale ranks No. 3 in SymphonyIRI’s super-premium beer segment with $150 million in sales, which is a 21.5 percent increase in dollar sales and 20.6 percent rise in volume sales in SymphonyIRI’s measured channels through Dec. 25. The brand’s seasonal releases reported higher increases with a 27.4 percent volume increase and 39.3 percent dollar sales growth, according to SymphonyIRI data.
Seasonal beers also were a popular draw for Tenth and Blake’s Leinenkugel’s brand. Leinenkugel’s seasonal varieties reported a 59 percent increase in volume and 62 percent rise in dollar sales for a total of $31.4 million in sales in measured channels through Dec. 25, SymphonyIRI reports.
Similar to Blue Moon, Anheuser-Busch InBev’s Shock Top brand also reported growth with $54.2 million in sales in SymphonyIRI’s measured channels. The research firm’s Wandel notes that Blue Moon and Shock Top might not have arisen if it were not for the craft beer boom. Williams concurs saying that the brands appeal to both craft and super-premium beer consumers.
In addition to its standard Belgian White Ale, Shock Top expanded its portfolio with Shock Top Raspberry and last month’s release of Shock Top Wheat I.P.A. The variety is a hybrid style beer combining the smoothness of wheat beer with the crisp, hoppy bitterness of an India pale ale, according to the company. In addition to retailing on its own, Shock Top Wheat I.P.A. will be available in a sampler pack with Shock Top’s other two varieties starting this month.
At 5.8 percent alcohol by volume, Shock Top Wheat I.P.A. feeds into the trend of higher alcohol beer varieties, which also is being addressed by Anheuser-Busch InBev’s latest release, Bud Light Platinum. Designed as a higher-end version of America’s No. 1-selling beer brand, Bud Light Platinum is a lager that is described by the company as a bit sweeter and smoother than Bud Light with 6 percent alcohol by volume. The company rolled out the product at the end of January and marketed it during the Super Bowl with two 30-second ads featuring young professionals at an after-hours office party.
SymphonyIRI’s Wandel spotlights Bud Light Platinum as a signal that the innovation missing from the big brewers might be returning in 2012. “I think the major brewers recognize that the innovation has been somewhat questionable the last couple years, and I think we’re going to see a big effort and push behind that in 2012,” he says.
Foreign rebound
Unlike the overall beer category, the imported beer segment was able to continue a growth trend, Euromonitor’s Law says. “In 2011, imported beers grew for [the] second year in a row by 1 percent to reach total volume sales of 3 billion liters,” he explains. “This feat is impressive as the overall beer category has declined by 2 percent for a third straight year. Imported beer managed to recover quicker from the recession than their domestic counterparts.”
Law attributes imports’ bounce back to competitive pricing and the rise of smaller import brands.
SymphonyIRI data shows the overall import category reported $3.6 billion in sales, which is a 5 percent increase in dollar sales and represents 3.7 percent volume growth. Crown Imports, Chicago, led the category’s growth with an 8.3 percent increase in dollar sales and 7.2 percent growth in volume sales, according to SymphonyIRI data. Williams says Crown Imports’ surge can partially be accounted for because of its new packaging, promotion of brands within its portfolio and move into convenience stores.
Crown Imports released Corona Familiar, which is a family-size 32-ounce bottle of leading import brand Corona, in the United States last year. Growth also came from Crown Imports’ push behind its portfolio of brands, including Modelo Especial, which ranks third among imports for the 52 weeks ending Dec. 25, according to SymphonyIRI data. Modelo Especial captured $331.7 million in sales, which is a 19.2 percent increase in dollar sales and 18.8 percent growth in volume, SymphonyIRI data shows. Its Pacifico and Negra Modelo brands also reported single-digit increases during the time period.
Dos Equis, a brand of Heineken USA, White Plains, N.Y., continued its positive per-formance with a 22 percent increase in volume and 25 percent growth in dollar sales in SymphonyIRI’s measured channels through Dec. 25. The brand fared the best of the company’s portfolio of imports, which also include Heineken, Heineken Premium Light and Amstel Light.
Williams sees the category’s slight rebound in 2011 as a signal of better things to come. “To me, the import category isn’t dead, it’s simply dormant,” he says. “There are some [brands] that are going on underneath the Heineken and Corona brands that are really boiling with a lot of growth. Don’t discount imports because there are a couple of brands that are asleep right now. Imports are going to be back — hard.”
Leading the import category’s growth with a 36.4 percent increase in dollar sales and 38.9 percent growth in case sales was Anheuser-Busch InBev’s Stella Artois brand. Williams notes that the brewer is capitalizing on Stella Artois’ on-premise appeal, where it is served in a signature chalice-style glass, and executing the brand at retail with more support and new distribution channels.
Williams foresees continued upswing in import performance thanks to positive inspiration. “You’re going to start seeing imported beers looking an awful lot like craft beers, and I think that’s a great thing; I love that,” he says. “That creates trial, it creates repeat, it creates store loyalty, it increases market basket dollars — that’s all great stuff.”
Craft domination
In line with the last few years, craft beer was the segment to watch in 2011.
“The continued double-digit sales growth success of the craft segment once again led all of the segment’s growth,” SymphonyIRI’s Wandel says. “The largest channel for [craft] is supermarkets; they just don’t have a big presence in convenience —it’s starting to emerge. When I look at their biggest channel of supermarkets, craft finished up 12.6 percent in volume sales and 15 percent in dollar sales. They were by far the clear winner in terms of sales increase versus a year ago.”
Nielsen’s Brager says craft beer’s popularity has spurred an 8 point increase in the average number of craft items on grocery store shelves.
Across all of SymphonyIRI’s measured channels, craft beers posted a 16.6 percent rise in dollar sales and a 14.5 percent increase in volume to tally $1.2 billion through Dec. 25.
Mintel research indicates that 62 percent of craft beer consumers drink craft beer because each brand tastes different, Goel Lal explains. Seasonal and limited-edition craft beers also continue to intrigue consumers, she notes, citing Mintel research that nearly 70 percent of craft beer drinkers like to try seasonal beers. Nielsen’s Brager notes that seasonal brands contributed 32 percent to craft’s growth in 2011.
Nearly all of the Top 20 brand families posted positive numbers in dollar sales and case sales for the bulk of 2011, according to SymphonyIRI data. The category’s best-sellers include the Samuel Adams brand from The Boston Beer Co.; Chico, Calif.-based Sierra Nevada Brewing’s beers; New Belgium Brewing Co.’s brand family; and the Shiner brand from Spoetzel Brewery in Shiner, Texas.
Sierra Nevada Brewing Co. recently announced it has chosen a site in North Carolina where it will construct its East Coast brewery. The new facility, which is expected to open in 2014, will allow shipment of fresh-brewed beer to consumers in the East and will start with a capacity of about 300,000 barrels with room to grow, the company said. The location was chosen not only for its ease of shipping and water quality, but also because it fit in with the brewery’s reputation for a laid-back culture with a love of the outdoors, Sierra Nevada Brewing noted in a statement about the expansion.
Posting some of the category’s largest gains were the brands from Portland, Ore.-based Craft Brewers Alliance. The company’s Widmer brand ranked No. 5 on SymphonyIRI’s list of top craft brand families with $41.6 million in sales. Redhook was not far behind with $33.4 million in sales. The company’s most recent addition, Kona Brewing and its line of Hawaiian beers, posted one of the craft segment’s largest gains. The Kona brand family captured $21.6 million in sales, which is a 54.8 percent increase in dollar sales and 57.7 percent rise in volume sales, according to SymphonyIRI data for measured channels through Dec. 25.
The craft segment’s biggest gainer was the Lagunitas brand family from Lagunitas Brewing Co., Petaluma, Calif. The brewery’s lineup reported 58.8 percent growth in volume sales and a 58.6 percent increase in dollar sales for $19.2 million in SymphonyIRI’s measured channels.
Going forward, SymphonyIRI’s Wandel notes the promise of cans in the craft category. “Each year the sales of cans have increased in our data for craft, but it’s still a very, very small base,” he says. “I do think with rumblings that some of the larger guys in craft are starting to think about it, and likely to get into it, I think we’re going to see a pretty big year in can sales for craft.”
The variety of options created by craft breweries is helping to broaden U.S. consumers’ ideas about beer, Euromonitor’s Law says. Dark beer has specifically begun to take share from lagers, he says. In 2011, dark beer volume sales increased by 10 percent while value sales grew by 9 percent to reach $5.4 billion, the Euromonitor analyst notes. Dark beers also have a bright forecast with Euromonitor predicting 3 percent annual growth through 2016, Law says.
Flavor frequency
Consumers’ taste for variety led to a bump for the FMB segment, which increased 3.7 percent in volume and 3.8 percent in dollar sales in food, drug, gas, convenience and mass merchandise outlets, excluding Walmart, club and liquor stores, for the 52 weeks ending Dec. 25, 2011, according to SymphonyIRI. Williams notes that Smirnoff Ice and Bacardi Silver continue to perform well.
The FMB segment’s No. 1-selling brand family, Marc Anthony Brands’ Mike’s Hard Lemonade brand reported 30 percent volume and dollar sales increases. The statistic includes the brand’s new single-serve 8 percent alcohol by volume Mike’s Harder Lemonade line and reformulated Mike’s Lite Hard Lemonade portfolio.
Also attracting flavor-seekers is the hard cider segment, which has benefited from craft’s rise, Euromonitor’s Law says. “[Hard cider’s] growth has largely been attributed to the popularity of the U.S. craft beer market and consumers’ desire to try new flavors and tastes,” he says. “Familiarity with the wide variety and tastes of craft beers has allowed consumers to give other alcohol beverages a try.”
Euromonitor also notes that some craft brewers are offering hard cider varieties, including Angry Orchard Cider Co., which is affiliated with The Boston Beer Co. The category continues to be dominated by Vermont Hard Cider Co.’s Woodchuck brand family, which reported a 38.5 percent increase in dollar sales to $25.1 million, and makes up 47.7 percent of the hard cider category’s market share, according to SymphonyIRI data.
Recording triple-digit increases, the Crispin Cider Co.’s brand family grew 274.7 percent in dollar sales and 253.7 percent in case sales in SymphonyIRI’s measured channels through Dec. 25. The brand’s performance was cited as inspiration for MillerCoors’ Tenth and Blake Brewing Co.’s acquisition of the company that was announced last month. Crispin will be run as an independent division of Tenth and Blake and will continue to produce its Crispin brand apple and Fox Barrel brand pear ciders at its cidery in Colfax, Calif., the company said.
Despite the impressive performance, experts caution that hard cider’s growth is coming from a small base. However, Williams likens the category’s trajectory to that of craft beer 20 years ago noting the emergence of seasonal ciders, variety packs and special-edition ciders, such as Vermont Hard Cider’s Woodchuck Private Reserve and Farmhouse Select offerings. He also highlights the segment’s potential to appeal to women and younger consumers of legal drinking age.
Cider’s 2011 performance might just be beginning for the segment, says SymphonyIRI’s Wandel. “As big as it was last year, I think going into 2012 cider is poised to have an even bigger breakout year,” he says.
2012 vision
Although the U.S. beer industry experienced bright spots during 2011, experts are not overly optimistic in their predictions for this year. Euromonitor’s Law predicts continued decline in volume sales, albeit at a lower rate than previous years.
Williams foresees price hikes this year in the range of 2 to 2.5 percent. Despite the need to pass the added costs on to consumers, he says price has not yet been a deterrent for consumers purchasing high-end, luxury beers, such as craft selections. He also notes the opportunity for brewers to appeal to baby boomers and females.
Due to continued economic uncertainty, Williams predicts the overall beer category will be down 1.8 to 2 percent. The rate of decline will depend on unemployment rates, passing of new taxes and gasoline prices, he says.
On the other hand, SymphonyIRI’s Wandel predicts a much stronger year for innovation, with the larger brewers releasing new brands and new packaging. Mintel’s outlook is for 4.6 percent growth, which will primarily come from craft beer, Goel Lal notes. BI