She said.......
It's about the beer
                             He said........

Gina Miller            and                Bill Keeper
GINA-

Hey Bill, here we are in December and a look back at the year shows it has not been a good
one for the brewing giants.  You look heart broken; hold those tears, please.  Yes, the fact of
the matter is that young drinkers are joining we mature adults in abandoning domestic swill.

Over the past five years, Budweiser has seen a 28 percent decrease in domestic sales
volume, while Bud Light—still the most popular beer in America—has seen its sales go down
10 percent.. The light beer market as a whole, for that matter, is struggling: showing a decline
of 8 percent this year alone.  On the other hand craft beer sales have been steadily rising, up
another 14 percent in 2014..

I think the drive towards craft beer may be driven by the simplest of factors: taste. In a recent
survey of consumers who are choosing to drink fewer mass-market light-beer brands, 27
percent said the primary reason is "getting tired of the taste," while another 21 percent "were
consuming more types of other beer,".  Among drinkers age 21 to 27, the "getting tired of the
taste" answer jumped to 40 percent.   That's good news to folks like us who love good beer.

Interestingly I also saw a statistic that indicated increasing preference for beer does not
necessarily mean more sales, especially when craft beer is involved. As young drinkers switch
from a Miller Lite to a craft, they'll drink one or two crafts when they used to drink three or four
Miller Lites.My guess is thats not only because craft beer tends to be more expensive. It also
often has a significantly higher alcohol content.

As you know the big brewers didn't become big because they were stupid. Both MillerCoors
and Anheuser-Busch have attempted a shift towards higher-margin "premium" beers and
drinks that carry their flagship beers' names. Anheuser-Busch, for instance, recently
introduced Budweiser Black Crown and Bud Light Platinum, which sell at a price premium of 10-
15 percent and early this year MillerCoors brought out Miller Fortune at a 6.9 percent ABV, a
direct competitor to Black Crown.

From a craft beer perspective I'm happy to say that these new premium brands have had a
decidedly mixed record of success. Though sales figures for Miller Fortune have not been
released, the ad agency handling the account was recently fired.  Even more,  Anheuser-Bush
InBev noted that a company-wide 0.4 percent market share decline was due primarily to
decling Budweiser Black Crown sales.  Ouch.

Undetered, the  big brands are now importing popular foreign beers in an effort to combat
falling sales. AB InBev brings to the American market Corona (Mexico), Stella Artois (Belgium)
and Beck's (Germany); SABMiller, the second largest, imports Pilsner Urquell (Czech Republic)
and Peroni (Italy). Then of course there is the  "crafty" beers maneuver.  But I guess that's a
another topic for another day.  

Anyway the morale of the story is that this has been another great year for craft brewing but
we keepers of the faith have to be on guard for the increasingly tricky and diverse macro beer
counterattack.


That's it from me, chug-a-lug, Bill.....see you next time.
BILL-

Hey Gina, you sound like an human statistics machine; but they are music to my ears. I think that  
independent craft breweries are more popular than every before because their products are
better, it's that simple.   Craft brewers use better ingredients and the product,as you say, tastes
better.

Now, A-B’s purchase of several small craft breweries (Goose Island for example) sometimes
worries me too. No, I don't think it's likely to directly lead to a decrease in the brand’s quality for
now, but history and logic says that if the company’s margins are dipping and management is
trying to squeeze a dime out of a nickel, they won’t be afraid to cut costs, be that from ingredients
or staff. Remember what happened to some of those classic lagers of the 1950s and 60s?

However just buying other breweries in and of itself isn't a game changer because the key
element is still the customer.   My understanding of the history of business acquisitions in almost
any industry is that success comes from respecting the consumer and staying true to the
product. Rarely does someone buy a brand to dilute and destroy it though it is a possibility.

I can't condemn those small breweries who have sold out to the big boys.  Brewing is a business
and it's about money.   If they can make a profit by selling, then good for them.  And profit is the
key all around. Gina, in our world of increasingly educated and discerning craft beer drinkers, a
better product means more profit for the new owners  As long as consumers vote for quality with
their money big beer will have no choice but to improve quality or continue to lose ground. One
case in point - did you hear how the Goose Island acquisition has started to revitalize the
Elk
Mountain hop farm?

Gina, I’m not optimistic about corporations; I’m optimistic about the power of consumers. To
presume that corporations can simply buy their way into our hearts & minds (and mouths) is to
presume the consumer has little to no power.  

One last thing I noticed.  When AB has taken over brewery they often get a needed infusion of
top of the line equipment.   As you know AB recently bought the Blue Point brewery in
Patchogue, NY , my home town.  Blue Point was, to put it mildly, not state of the art.   In fact, they
were so over capacity so they were contract brewing at a less than pristine place in Rochester,
NY which eventually made their beer about as consistent as the weather.  Now, thanks to the
financial power of AB things have dramatically changed.  

Don't get me wrong I have deep concerns about how the big guys are reacting but it's a battle I
don't think they can win. In fact, as I mentioned in last month's column, I think the biggest danger
to craft beers is not  that consistent tasting brew from A-B & MillerCoors. No, I worry that every
time a new to craft beer consumer spends $8 for a poorly made pint (and last month you
acknowledged there are more and more of those out there) he/she just might go back to
something they know will have no flaws and always taste the same.  And that's not good.

Here's looking at you, kid!   See you next month.
Round 41