A Pennsylvania newspaper reports that the big brewers are discounting premium beer by $2 or more a 30-pack case (retailing $15.99 or even $14.99 30 packs), and heavy keg discounts as well. The newspaper is calling it a “beer war”.
One retailer told the paper: “This is a price war, but it’s great for the consumer, so come buy beer while it lasts.“
Cold weather has arrested the NE over the last few weeks, and after a short period of relative warmth, cold weather is returning later this week. Perhaps tough comps and bad weather caused a bit of panic in our Big Three brewers. Big three volumes have been soft in PA lately.
COORS MAKES CHANGE IN THE EAST. Coors exec vp Ed McBrien sent a memo to employees announcing a change in personnel in their Eastern region: Jay Stuart, vp of that region, is leaving to pursue other interests, although he will stay on for several months to ease the transition. Woody Tondorf will replace Jay effective immediately. He has held senior-level roles with Pepsi-Cola International and Frito-Lay. He’ll report directly to Ed.
MORE EXCITEMENT FROM THE CRAFT BEER PANEL. We got lots of great feedback today from our installment on the craft beer panel at the Beer Summit. So we thought we’d give you a little more of the interesting parts of that panel. Here are a few more excerpts from that panel at the Grand Ballroom of the Phoenician Hotel in Scottsdale, Arizona. You are a fly on the wall.
HARRY SCHUHMACHER FOR BBD: Gentlemen, I’ve have noticed that craft beers are more and more in the supermarket circular ads … and I can’t figure out in my mind whether that’s a good thing or a bad thing. I mean, it’s good that you’re getting more exposure and higher velocity, or is it a bad thing that maybe it’s discounted more, damaging the image of the beer?
GARY FISH FOR DESCHUTES: Everybody here knows that promotion drives a lot of sales and how that is structured, when and how much and so forth is really important to us. We try to make sure that while we understand the value of promotion in driving velocity that we also understand that it’s dollars that drives our business, and our wholesalers’ business and the retailers’ business and everyone else as well. So while designing promotions, what is on our minds is making sure that the overall pricing integrity remains.
HS: Do you see more promotional activity from your end Jim? I’m sure you track it pretty closely.
JIM KOCH FOR BOSTON BEER CO.: ..We do see a little bit more of it and I think what’s happening is craft beer is becoming an alternative to imports. When grocery chain stores go to promote something, typically they want to promote a regular domestic beer and then they want something at the higher end and historically basically that has been an import. Today with the growth of craft beer and the excitement around it, they’re willing to put a craft beer alongside an import. To us that’s okay. It wouldn’t be okay if they promoted us as an alternative to regular priced domestic beer. But if they promote us alongside a Heineken or a Guinness or a Stella or Corona, then that’s good.
HS: You both heard Tom [Long] say earlier that Americans prefer lighter, lager beers and clearly that’s true today, but probably less true with each passing day. Is there a concern that there is a ceiling on the total number of people who would be willing to convert over to a more flavorful or darker beer?
JK: I’m sure there is.
HS: Where are we in that spectrum?
JK: One of the advantages of the position Gary and I have is that we’re tiny, and we’ve worked very hard to get from invisible all the way up to tiny. If we’re really lucky, maybe we get to small. But when you have a little over half a percent market share, we can do something that our friends in St. Louis can’t do: we can double our market share…
HS: Well, they can double their market share, but it would be 100%. [Laughter]
JK: Actually, it would be 100.8%. [Laughter] For us, it would only get us to one percent. Yes, I’m sure there’s a ceiling, but we’re not there yet.
GF: You know, one thing that’s interesting, Harry, is you get these questions or talk to people about subjects like this and I tend to take my cues from other consumer goods categories. Everyone likes to talk about wine, well let’s talk about wine. Where is the ceiling in specialty wine? When are they going to reach that ceiling? I think that there’s a long, long way to go. And the entire category, all of the 1,300 to 1,400 small breweries, are less than 4% of the market. There’s a long way to go..
HS: Well that’s good that you’re bullish. Where do you see Gary Fish five years from now? Are you going to expand geography?
GF: You mean when I get off the golf course? [Laughter]
HS: Yeah, if ever that happens, are you going to sell out to A-B?
GF: Nobody’s made an offer, so.
HS: That’s surprising, they’ve made offers to everybody else. You should be insulted. [Laughter].
GF: Maybe, maybe not.
HS: There’s time yet.
GF: We’re looking to continue to grow. Harry, we don’t have the Starbucks kind of 2000 by 2000 kind of plan. We want to be a little bit better tomorrow than we are today. I think we want to continue to grow in a way that is intelligent for us. Historically our growth rate has been about 10% a year, which to a lot of companies that sounds like a lot, but as Jim said, 10% on a very small base is a little more reasonable. So we’re going to spend the rest of this year looking at new markets and trying to decide how to grow intelligently…
HS: Jim what about you? You’re the belle of the ball, obviously. Many brewers would love to be in some kind of alliance with you. What are your thoughts about the future?
JK: We’re optimistic about growth. Having been doing this for what? 22, 23 years, you know you have fat years and lean years and you do your best and you just pray that the growth comes. For us, we can’t expand geographically, we’ve got 21 different styles of Sam Adams and so we’re not really able to spread out SKUs. For us we really just have to educate consumers. When I think about our competition, we all have competition and I think we tend to fixate a little too much on that, because what enables us to grow is meeting the consumer’s needs. In some sense I always think our real competitors are ignorance and apathy: people who don’t know about beer or people who don’t care about beer. If we can make people knowledgeable about beer and if we can make people realize that beer is important, it’s a really cool thing and it can add to the pleasure of their life, and we can grow.
HS: As we all know, the largest player, Anheuser-Busch, is really making a push into craft beers, in a lot of ways with their own brewed craft beers. Do you feel threatened by that or do you feel that that just raises overall awareness among consumers?
GF: I think Jim’s last comment was very appropriate. Anheuser-Busch is going to do what they’re going to do. To me worrying about what they’re going to do, with their significant market share, is really a waste of time for us. They are trying to spread out in the cooler. They are trying to access areas in the cooler that they didn’t have access to before this. If I was in their shoes I’d probably be doing the same thing..
JK: I think the beer industry maybe does get over-fixated on the internal competition when, as Frits highlighted, wine and spirits are growing and we’re not. That’s where the win-win is for all of us. If we can present to consumers a credible alternative to wine and spirits. People are turning to wine and spirits largely because they offer some of the kind of premiumization attributes that people are looking for, variety, flavor, perceived quality and image, authenticity, heritage, and craft brewers are uniquely positioned to be the tip of the spear for the beer industry in going after those wine and spirits drinkers. And so I think part of our job as craft brewers, as participants in the beer industry, is to be the leading edge in competing with wine and spirits and hopefully grow the pie for everybody.
HS: One thing that has changed very recently I think is that typically in the past you would choose between a Miller or Coors wholesaler or a wine and spirits wholesaler or a craft-only type wholesaler or self-distribution. But now it seems that a lot of Anheuser-Busch wholesalers are getting their toes in the water and are getting a lot more aggressive in trying to add your brands. Does that change the landscape and does that change your plans?
GF: It changes the landscape marginally. We’ve been approached by some Anheuser-Busch wholesalers in our local market and really the only thing we can say is that that shipped sailed a little while ago. It’s unfortunate as it does provide some opportunity for us as we look at new market opportunities but at the same time we can’t avoid the thought that we got kicked to the curb several years ago in certain circumstances and we don’t want that to happen again [referring to A-B’s 100% share of mind program]. So, we want to have a very clear understanding with anyone we’re going to partner with in business what the partnership is going to involve and what the rules of engagement are going to be as we move forward. It’s nice in a lot of markets to go from one option to potentially two, but for us it has changed only marginally I would say.
WHAT A GREAT PANEL those craft beer legends provided. I hadn’t intended to print so much of what they said but I thought it was important to see the highlights of their words at the Summit. Their ideas, juxtaposed against what is happening in Pennsylvania, is quite illuminating.”An appeaser is one who feeds a crocodile, hoping it will eat him last.”
-Winston Churchill
——— Sell Day Calendar ———-
Today’s Sell Day: 9
Sell days this month: 22
Sell days this month last year: 23
This month ends on a: Fri
This month last year ended on a: Fri
YTD sell days Over/Under: +1
