Dear Client:
Now that fall resets are top of mind, we got retail whisperer Bump Williams to dish what retailers are stocking, the future of the category, and the next light beer. You, friends, are a fly on the wall.
H: You got your pulse on the industry. What are you hearing? What’s the overall theme?
B: “Retailers I think are starting to put their arms around the fact that they’re gonna sell less volume. But they’re gonna make more money. Whether that’s a good thing or bad thing; they’re kind of struggling with that. They talk about the growth in high end … and they realize that the shoppers that come into the stores, that’s where they’re migrating to, they’re going right to that high-end segment of beer.
“So they’re at a crossroads: ‘Do I keep beer space exactly the way it is, in terms of linear footage, and with that linear footage, do I keep everything packed up the way it is? [For example] premiums have that share space and high-end has this share space — or do I change that?’ That’s like fork in the road number one. Number two is, ‘What do I do with beer space if the category continues to go down 1%, 1.5% maybe even 2% this year on a volume basis? Do I take that shelf space and give it to craft spirits or spirits in general, or maybe wine? Or another category that has higher growth like energy drinks?’ That’s where the retailers are right now as they plan for their fall sets. They’re taking a lot of things into consideration: pricing, profitability, velocity, shelf space.”
H: Hasn’t craft proven to these retailers that maybe they should expand their cold box space to accommodate the extra SKUs? Instead of giving it to wine, which turns so slowly.
B: “Craft is a category that has I think compounded annual growth rate of about 17% over the past 10 years. You just can’t find that anywhere else. But if you break that down there’s a lot of craft brands out there that aren’t turning that fast. … So I think retailers have a hard time balancing between, ‘What do I do with premiums? The guys that are keeping my lights on every single day?’ And ‘What do I do with the national craft brands that are enjoying good growth but not keeping pace with the category? And what do I do with the local guys? … What do I do with the newcomers? Do I give them a facing? Do I put them on the floor? Do I keep them cold?’ It’s a quandary they’re in.”
H: What about light beer — is that ever gonna come back?
B: “When I look at premium lights and below premium lights like Busch Light or MGD Light, High Life Light … They’re about two-thirds or 60% of the business. So 60 cents out of every dollar is spent on those brands. That’s a lot of business. It’s the backbone of beer. If these brands aren’t healthy, if this segment isn’t healthy, the beer category can’t be healthy. I don’t care how much craft beer grows. Number two is, when I look at craft brewers, I look at the Founders All Day IPA, the everyday IPAs, the more sessionable craft beers coming out. [They’ve] got a great taste, [they’ve] got the IPA style to it, and people are going to be pounding that to no end. I love that I think that craft brewers who focused on these more sessionable craft beers have got a great idea: ‘Hey, we’re gonna go for 60% of the beer drinkers so lets get them in our portfolio.’
“The third thing is this we talk to retailers all the time about balance. Whether it was [about] A-B or MillerCoors or whomever it might have been, balance is critical. [They say] ‘I don’t want to sacrifice 60% of the business for 10%. I can’t do that, cause I’ll never be healthy that way.’ I think retailers who understand that balance, they get good advice in their category captains. The craft brewers come in and say, ‘Hey look we want to support this more sessionable segment. We’re gonna help you do that and there’s more profit, more margin and it’s a fast turn, fast growth, and it’s where the consumers are going. I think it’s a huge threat for the Miller Lites, Bud Lights, the Coors Lights of the world. But again those brands are always gonna be here. There is a product life-cycle.'”
H: I think Mexican lagers will become the new light beer. They may not pick up all the volume but they could pick up the dollars.
B: “It’s a broad umbrella question but I don’t think Tecate Light and I don’t think Heineken Premium Light are ever gonna be the major players. … But I think Modelo Especial like 15-pack cans or suitcases, whatever you want to call them … I think single serves for c-stores, those are massively big brands that have a phenomenal upside opportunity. I think you’re right, Harry, those are gonna be a growth engine.
“But when I look at consumers today, they don’t want a heavy lager, and they don’t want a light lager that you can find everywhere. They just don’t want that, because there’s no brand identification with that. Which is why again I go back to craft … like New Belgium Shift Pale Lager. That’s a great beer, and it’s easy to drink. I talked about the everyday IPA and Founders All Day IPA. I’m telling you, I think that’s where a lot of the growth is gonna come from. But the import category continues to do well because a lot of craft drinkers drink a lot of imported beer. It’s not just, ‘if I drink craft that’s all I’m drinking.’ That’s a fallacy.”
H: Speaking of brands of the future … Why doesn’t Dick [Yuengling] just go and open in 20 states tomorrow?
B: “It’s a capacity issue for Dick. I think he’s built for about 4 million barrels right now out of his three breweries. Two in Pottsville, one in Tampa. But I think it’s simply that if he opened up a big volume state and I think about Kentucky, I think about Mississippi, I think about Michigan, think about Indiana, think about Illinois or Chicago in general. I think that would just kind of suck him dry on capacity. And Dick was a distributor himself as you know and the last thing he wants to do is put a current retailer out of stock or run a current distributor short of any product. Dick’s kind of managing the portfolio the way he’s got right now and I’m all about that.
“I’ll tell you though right now, I personally think if Dick could find another brewery like he was looking at in Memphis. … If he could find another brewery, let’s just say it’s three to six million-barrels capacity … man, he’d open those 20 states a lot quicker than what his currents plans probably are. I think Yuengling, even in its existing 15 states, is an overlooked, underdeveloped brand. It doesn’t get the support that the mainstream brands get like Bud, Miller, or Coors. It doesn’t get the distribution, the spigots, the merchandising. If it did, it could probably be the 5th largest brewer in the nation … (Bud, A-B, Constellation Brands, Heineken, D.G. Yuengling) there’s no doubt in my mind about that.”
[Ed. note: To that point, despite speculation about embattled Yuengling trends in new markets like Massachusetts, the brand’s wholesalers are generally pretty bullish. One distributor outside the brewer’s home market has had the brand for about a decade and says it’s grown every year. He calls it “the brand of the future.”]
More on category management and craft tomorrow.
MILLERCOORS TO HIKE FALL MILLER LITE MEDIA SPENDING EXPONENTIALLY
Yesterday Andy England and Ed McBrien sent a rah-rah note to MillerCoors and Miller-only distributor owner-principals and other partners.
They talked about their “proof of commitment” on Miller Lite, from extending the successful Original Lite Can beyond its initial two-month run, to this month’s launch of the white-label heritage bottle: “This timing fits perfectly with the seasonality of Miller Lite bottle sales, which surge in the September through January window,” per note. (Then, recall, comes “the full conversion in October of Miller Lite packaging and the rest of the brand’s visual identity to its distinctive original-white look.”)
Then the big news: significantly upped media spend and beefed up sports programming for Miller Lite. “Now, we’re taking another step to build and maintain momentum on Miller Lite, with a significant increase in the national media buy for September, capitalizing on a key sports window and setting up Miller Lite to make an even bigger splash with the new visual identity in October. In fact, we’re doubling our originally planned media buy for the month.
“Details are being finalized now, but you can expect to see a stronger Miller Lite presence throughout September on sports programming such as NFL on FOX, local-market MLB broadcasts and college football, as well as on cable entertainment networks such as FX, Comedy Central, Discovery, TBS, AMC and Spike.” Spanish language programming is a focus, too: “you can look for more Miller Lite advertising on networks such as Univision, Telemundo, ESPN Deportes and FOX Deportes.”
Miller Lite’s increasing relevance as an “authentic” brand via original can makeover seems to be driving the investments. “American beer drinkers are taking notice of Miller Lite again for the first time in a decade,” per note. In fact, it said, between May to July, “#ItsMillerTime has received more social media mentions than hash tags promoted by Coke and Bud Light. To be specific, during this period #ItsMillerTime was mentioned 40 times more than #UpForWhatever!”
It ended with the hope that “Labor Day weekend is going to be just the beginning of the next chapter in this exciting new Miller Lite story.”
Until tomorrow, Harry
“What worries you masters you.”
– Haddon W. Robinson
THE 2015 BEER SUMMIT – The Beer Industry Summit will be at The Breakers resort in Palm Beach, FL. January 11 – 12, 2015. Register and more info here: http://beernet.com/beer_summit.php
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