Forty million boxes is, well, it’s a lot of boxes. Theoretically speaking, Coors could sell an extra 40 million cases in incremental growth in a year if they had the same effective distribution as A-B on just two brands, says Coors CRO Ed McBrien to investors on a conference call sponsored by UBS analyst Kaumil Gajrawala. Ed touched on this last week in California, but he fleshed it out a bit more here, and I found it interesting as a fellow category management geek.
Here’s the rationale and the math, in a nutshell: Ed says that across the US, Coors Light and Keystone Light combined have 800,000 fewer points of distribution than Bud Light and Natural Light. When he says points of distribution, he means individual SKUs on the shelf, not number of accounts that sell it. For instance, if Bud Light has ten packages on the shelf in a store, and Coors Light has six, Coors Light is four points of distribution behind. According to Coors research, every point of distribution is worth about a case a week in sales with those brands.
So if Coors Light and Keytone Light caught up with Bud Light and Natty Light’s points of distribution, Coors would sell an extra 41.6 million cases. That’s the same as Coors being up about 12% for the year.
Now, increasing effective distribution is accomplished in two ways: chain sales and account-by-account sales. To tackle chain sales, Coors has added people and category management capability. One big project is the Tuf set. We also glossed over this last week, but it’s worth more scrutiny.
CHAIN SALES TUF SET. As Ed describes it, twenty years ago it was the distributor door set, where every distributor (usually three or four in a market) was assigned a section of the cooler. Then came the price graduated flow set, where the natural flow of a store was ascertained, and the expensive beers were placed first in the flow, with cheap beers at the other end.
But Ed says there is a better way: By putting brands together in a set that demographically interact well. What does that mean? In Ed’s words:
“What we found was that our brands tend to skew much closer demographically to crafts and imports than Anheuser-Busch brands do. Demographically, in terms of disposable income levels, education, a propensity to want to buy crafts and imports, our Coors Light consumers looked much more like a crafts or imports consumer than would, say, a Bud Light consumer. What we’ve proposed to retailers is this notion of grouping brands. And so we’ve grouped our brands near the craft and import section, and the idea is that when somebody comes in to buy a 12 pack of Coors Light, that consumer is also more likely to trade up and put a six pack of Sierra Nevada or Blue Moon or Corona in their basket at the same time. Similarly, the Bud brand shopper looks a bit more like the below-premium shopper. So by putting the Budweiser products near the below premium products, what you see is consumers will come along and say, ‘It’s Friday night, I think I’ll buy a 12 pack of Old Milwaukee.’ And they see a 12 pack of Budweiser, they’ll say, ‘You know what, I deserve a little bit better. I deserve to trade up from a below-premium brand to a brand like Budweiser.’ The concept has proven out over the last couple of years. We now have nineteen retailers who sell 71 million cases of beer who have implemented the Trade up Flow.”
Interesting concept. Ed says over 80% of chain which have tried the TuF set have implemented it, so it must hold water.
A-B, of course, is not in the habit of rolling over. A-B has countered with the general notion that the TuF set could actually trade consumers down in some areas because in terms of A-B’s high national share, most folks going into a store are bee-lining it to Bud Light, and then they see the Old Mill 30 pack next to it and decide they must have it since it’s cheaper than tap water. Everybody has an opinion.
The other way to gain distribution is the old fashioned way: burning shoe-leather in independent accounts, and that’s the domain of the distributor. Since 40% of Coors Light and Key Light’s growth this year is coming from new distribution, you can bet that a piece of that distribution growth is from distributor efforts. It will be interesting to see how distribution for all brands is affected after the joint venture is consummated.
A-B TO TEST NEW ORGANIC ITALIAN VODKA IN THE NORTHEAST. BBD has learned that Anheuser-Busch is importing an all-organic vodka from Italy called Purus under its Long Tail Libations spirits arm, again available initially only in a few Northeast markets. It will be distributed through A-B wholesalers.
So does the world need yet another premium vodka? Clearly not. But A-B seems to have done its homework on this one to bring some interesting points of distinction to the table:
1. Organic is in, and this is 100% organic.
2. It’s obnoxiously eco-friendly. The package is 100% recyclable glass with a tree-free label using soy-based inks, water-based adhesives and a sustainable cork. Oh, and they will plant a tree for each of the first 100k registrants to their website, which isn’t quite operational yet (purusvokda.com).
3. The package. I’ve seen the 750ml bottle, and it’s pretty unique. Very Italian-artisan looking. Our take: Jekyll & Hyde it’s not (and that’s a good thing).
PAPER: S&N MAY SELL KRONENBOURG. UK newspaper the Mail on Sunday suggested that Scottish & Newcastle is in discussions to sell its French beer Kronenbourg to either SABMiller or to a private equity firm (in order to raise money for BBH?). S&N would not comment on the rumor. If it’s SABMiller, that will be yet another nice bolt-on brand for the savvy South Africans. These guys are on fire.
TRUTH SQUADERS WAKE UP. I know there’s been a holiday and everybody is fat and sleepy, but my email in-box has been slim pickings, so don’t forget your favorite beer writer when you get a morsel of beer industry information. We always protect our Truth Squaders: hs@beernet.com.”The trouble with jogging is that the ice falls out of your glass.”
-Martin Mull
——— Sell Day Calendar ———-
Today’s Sell Day: 18
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