January 2012

By Jack Kenny

People who watch the beer business closely have known for several years that the wine and spirits industries are a big threat to big beer. It has been the focus of articles in many publications. No doubt it has been the subject of many a brainstorming session at breweries and distributorships.

Apparently, though, some people in the beer business haven’t been paying attention. Why else would the head of a global beer giant stand in front of a room full of distributors and beg them to snap out of their stupor and start going after the real competition? Here’s what Tom Long, the CEO of MillerCoors, said recently at the annual meeting of the National Beer Wholesalers Association (NBWA):

“The days of beer guys knocking each other around and not worrying too much about spirits and wine is over, and it’s frankly been over for a long time. And if we’re going to thrive long term, then we’re going to have to look at those competitors and as an industry take on the challenge of brand beer. Make no mistake: Our success over the next five years depends on that.”

He’s right. Big beer is slipping. Volume has declined over the past few years. Forecasters are saying that beer volume could be down 2 percent in 2011, once all the numbers are tallied. Beer Marketers Insights President Benj Steinman, who also spoke at the NBWA event, told distributors that another year of 2 percent decline will take the industry “back to where we were 10 years ago.”

Meanwhile, the volumes of spirits sales were up about 3 percent by the middle of 2011, doing quite well in another year of economic uncertainty. So in effect what Long was telling the beer people was this: We have to fight for our beverage, not just our brands. If we don’t close ranks and take up the beer banner, we’re all going to hurt.

Big beer relies heavily on advertising, and though we are quite well entertained by television ads promoting various major beer brands, they focus on image of one kind or another and not on the product in the bottle. Maybe the brewers might want to ask themselves if their customers are choosing wine and spirits over beer because they no longer want what’s in that beer bottle.

Now contrast this big beer dilemma with the performance record of craft beer. You know, all those micros that make up about 5 percent of the beer business. Craft beer sales were up 14 percent in the first half of 2011. And they don’t advertise. They promote themselves mainly through word of mouth, and some activity on social media as well as special events.

Here’s another interesting thing about the beer world: On the internet is a list of beer blogs, those that are not affiliated with a brewery or a particular brand of beer. This particular list includes 815 North American blogs and 358 from elsewhere in the world. I haven’t been to all of these, but I can assure you that few of them have anything to do with big commercial beers or breweries. (One might think that a blog with the name www.guysdrinkingbeer.com might pay just a bit of attention to the Buds, Millers and Coors out there. One would be wrong.)

What would happen if big beer kept losing share to wine and spirits? Would that be disastrous for the whole industry? I’m no economist, but I’m guessing that it would have an effect, at retail, on profits. Then again, I watch the cases of Coors Light fly out of the stores. I see the busy taps at the taverns. These brews aren’t going away any time soon. And if more people will opt for wine and/or spirits, doesn’t it mean that they will spend those dollars at retail anyway? Everyone knows that products have life spans or cycles of one kind or another. Beer will always be with us. It will just have a few ups and downs. These are strange times for businesses as well as for consumers. A friend of mine once said that today we have to be comfortable being uncomfortable. The big brewers will figure it out, or they won’t.

Meanwhile, craft beer will grow, more tasty brews will show up on package store shelves (and maybe supermarkets, if they’re smart) and in bars and restaurants. And we all will enjoy a glass of wine or a taste of spirits whenever we wish to do so. One more thought: The big beer guys might want to think twice about how they promote themselves over these other beverages. The last thing I want is someone telling me that beer is better than, or cooler than, or healthier than, or smarter than something else. But I’m not going to hold my breath.

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