IUF logo.

Beerworkers Archive


Post date: 11/11/2010 - 22:20

American Beer Market

Beer champs on the ropes, Deutsche says

In the most memorable scene of the original Rocky movie, Apollo Creed battles Sylvester Stallone's character, Rocky Balboa, in a knock-down, drag-out fight for the ages.

Deutsche Bank analyst Marc Greenberg says that scene reminds him a lot of the U.S. beer market these days. Much like Apollo, he feels the industry's leadership is failing to recognize successful competition and is using passive tactics to meet new challenges.

Th

Beer champs on the ropes, Deutsche says

In the most memorable scene of the original Rocky movie, Apollo Creed battles Sylvester Stallone's character, Rocky Balboa, in a knock-down, drag-out fight for the ages.

Deutsche Bank analyst Marc Greenberg says that scene reminds him a lot of the U.S. beer market these days. Much like Apollo, he feels the industry's leadership is failing to recognize successful competition and is using passive tactics to meet new challenges.

Th

e U.S. beer duopoly -- Anheuser Busch In-Bev NV( BUD/NYSE) (Bud, Stella, Leffe, Brahma) and Molson Coors Brewing Co. (TAP/NYSE) (Rickard's Red, Creemore Spring, Coors Light) -- blame consumer weakness and the trade-down effect as the primary cause for declines in sales. The premium light beer category, estimated at 50% of the U.S. market, has seen monthly volume declines in 13 of the past 16 four-week periods.

But other types of premium alcohol, including craft leader Boston Beer (Samuel Adams) and popular spirits such as Jack Daniels, Smirnoff and Captain Morgan have posted significantly better growth. Average monthly spirits growth among the three flagship brands in whiskey, rum and vodka has been positive in 11 of the past 16 months.

Leading companies have emphasized the importance of increased marketing and promotions aimed at maintaining customer loyalty, as trips to bars and restaurants have fallen. This is a completely different tactic than the leading beer companies, Mr. Greenberg told clients.

Despite the trade-down suggestion, Boston Beer and other craft-makers continue to outpace the overall beer category and gain market share. They also typically sell for 30% to 40% more than premium light beers.

Mr. Greenberg estimates the high end of the beer market, which includes imports and crafts, accounts for 20% of U.S. beer volume. So while some of the weakness in the premium light segment may be a result of the economy, the analyst notes plenty of middle-income consumers still seem pretty willing to buy Corona and other higher-end beers.

"Aside from pricing, we believe ineffective innovation and promotion continue to plague the major brewers, with unremarkable media campaigns, and 'innovation' constrained to packaging and line extensions," Mr. Greenberg said.

So while those corny football tie-ins may be funny the first time you seen them, beer companies might want try something else.