Beer Marketer's Insights

Beer Marketer's Insights

Broadly speaking, beer biz still trading up, and total pricing remains healthy. But there are warning signs that healthy pricing environment under more pressure than at any time since end of price war in 98. In report called: "Fraying in the Retail Pricing Atmosphere?," Goldman Sachs analyst Marc Cohen neatly laid these out: "soft" demand, "moderation" of trading-up trend, lower general price inflation, potential excise tax hikes, and "indications" that some brewers/importers "have reservations" about current round of price hikes. Meanwhile, in a "profound shift," according to lead article in Wall St Jnl, Fed Reserve Board signaled it sees some "possibility of deflation." Inflation less than 1% so far in 2003 by a measure Fed favors. And Goldman Sachs expects only 1.3% hike in consumer price index next yr. That would certainly make it tuffer for AB to get a 2-2.5% price hike. In 1st qtr, AB rev per bbl up 2.8% and it still expects over 2% in 2003, but Coors rev per bbl flat as its mix shifted to Keystone Light (see below).

Beer pricing in supers continues up at nearly 3% clip, including trading-up, according to IRI. Avg prices paid up 45 cents, 2.8% year-to-date thru Apr 20. Subpremium brand volume down 2% and lost 0.9 share while total beer biz up 0.9% in supers. Tho there are no signs of widespread trading down or discounting in supers, avg prices paid for Miller and Coors products up only 1% in most recent periods and essentially unchanged for Heineken, which is up at double-digit pace. Note avg prices paid for Coors Light up 2%+. But gap widening between Bud Light and Miller Lite as well as between Busch and High Life. Miller gets better share performance in supers in mkts where gap widened, Goldman Sachs analysis showed. Then too, we hear Miller didn

Retailers “have to get nasty, play hardball,” in battle to change culture, get ahead of neos, govt affairs exec Rick Berman told American Bev Licensees, recently merged assn of on- and off-premise groups. Rick, who also represents big chain on-premise bizzes, just named among top lobbyists in DC by The Hill mag (NBWA’s Dave Rehr made list too). On tap for ABL: PR campaign to go after MADD and its funding sources, including GM. ABL affiliate Wisc Tavern League ready to roll anti-Chevy POS materials criticizing its “collusion” with MADD efforts to put retailers out of biz, arrest bar patrons. Coasters and posters ask patrons to think about GM stance next time they buy a car. Another potential target: Allstate. ABL also has: 1) “white paper” by an ex-state director for MADD that criticizes its “biased science” and anti-drinking stance; 2) pro-hospitality TV spots that put social drinking in positive light.

In case you missed it, parents of one girl killed in RI club fire last mo sued AB and RI distrib McLaughlin & Moran, along with club, band and radio station that promoted show.  Suit claims DJ threw Bud t-shirts to crowd and promoted “fresh” Bud beer.  AB sez it shouldn’t be part of suit since it didn’t “advertise, sponsor or promote” the band.  Hard to see link between beer and this fire, but distribs will take closer look at some promotions now.  Tuff 12 mos for M&M; recall it took strike over July 4 last yr. 

Usually the big distrib buys smaller one.  But a half-mil-case AB distrib in Pennsy, Northeast Bev (owned by Lance Sutter) just jumped 2-mil-case hurdle as it purchased approx 1.7-mil-case Falcone Bev Co in Scranton.  Falcone family reportedly in talks for yrs; this deal in works for some time, finalized this week.  Registered deed showed $4.4 price mil for “property,” wrote local paper.  Don’t know what Lance paid in all.  Northeast will have 1200 accounts, approx 50 employees, Times Leader said.

Big Green may finally be linin' up to flex its M&A muscle more aggressively. Heineken ceo Anthony Ruys told Reuters that his co ready and able to spend over $1 bil a year to jump into global consolidation game. Game plan: use cash flow from mature mkts (like USA and Europe), about 70% of profits, to grow developing mkts. Top priorities, according to Ruys: China, South America and Africa. Tony denied that Heineken corporate structure could crimp expansion plans. Meanwhile, 1 major mkt will generate losses for Heineken in '03: that's UK, where Heineken distribution contract with Interbrew ends this yr. Heineken plans brand swap to higher-priced version of Heineken that'll cause estimated $21.4 mil profit hit, 50% volume drop to 1.2 mil bbls. (Leading competitor in same segment, Coors' Carling, should grab slice.) But Ruys told just-drinks that it's "worth it" because "it will be more profitable volume."
With Wine Inst claiming nearly 6% gain for wine volume last yr, and preliminary DISCUS data showin’ 1.8% gain for spirits, 1.2% gain for US beer biz means beer lost share of alc bev mkt to wine/spirits for 3d time in last 4 yrs. Take out malternatives, and trend for beer worse.
Final figures just came in. Malt bev suppliers spent approx $1.17 bil on media in 2002, according to CMR, up $184 mil, 19%. AB alone spent $90 mil more on media, a 28% jump. Miller spending up $34 mil, 14%. But Coors spending down slightly, sez CMR. Top importers, Heineken USA and Barton/Gambrinus held media spending even, but Labatt USA, GBIC and Boston each zoomed spending. Spending for top 15 malternative brands: $193 mil, about $40/bbl, $3 per case. Of course, distribs funded much of that. And there's likely to be less of it in 03. Lots more detail in next BMI.

In Trenton, Oh brewery, Miller makes up to 57 brands in any given week, according to Financial Times, “the majority of them owned by other companies and made under contract.”  Including all types of packaging, there are “572 types of product at a brewery that employs 623 people.”  That’s almost 1 SKU per employee. 

Brewers have become almost as fixated on Hispanic mkt as on young adult males 21-27. So if you want clue to where brewers will focus resources, it’ll probably be in top Hispanic mkts like LA, NY, and Miami. 7 mil Hispanics live in LA metro, 4 mil in NYC metro and 1.7 mil in Miami area, according to stats in Supermarket News. Those 3 mkts have 1/3 of US Hispanic population. Chi and Houston round out top 5. Each have about 1.6 mil Hispanics in metro area. Over 40% of Hispanics live in 5 metro areas. 

Longtime prexy/coo and board member, father of current chairman Pete, brother of Bill, Joe Coors died over the weekend at 85.  Joe was at least equally well known for his passionate political beliefs and as a leading funder of conservative causes.  At Coors, Joe shared office with his brother Bill for decades as they grew the business.  Bill praised his brother as an astute businessman, “very principled and dedicated” but his politics were “far right to Attila the Hun.” “We got along a lot better if we didn’t talk politics,” Bill added. Services for Joe will be in San Diego this Saturday.