Once the undisputed kings of beer, AB InBev and MillerCoors are struggling to curtail a multi-year slump in sales of their top brands and re-energize brews that have failed to keep pace with changing consumer tastes and trends.
“If you could go back in a time machine you would say, ‘Shoot, I wish back then that we had started to follow those trends that were growing,’ …but we recognize it now and we’re fixing it,” Greg Butler, vice president of Miller Brands at MillerCoors, told Food Dive. “We held on to the equation for too long.”
The major beer producers are facing threats on several fronts as Americans move away from domestic lagers in favor of Mexican imports, craft beers and wine and spirits. A growing number of consumers are also turning to low-calorie and no- or low-alcohol brews as part of a broader health and wellness trend sweeping the food and beverage industry.
Despite a host of new products tied to these preferences and trends, the big players in U.S. beer continue to struggle to curtail slumping sales and stem the loss in market share. Total beer shipments declined 1.3% in 2017, led by sharp drops among flagship products including Budweiser (-6.8%), Coors Light (-4.1%), Miller Lite (-2.8%) and the most popular U.S. brand, Bud Light (-5.7%).
But while the market-leading beers are still providing lucrative sources of revenue and product volume for their owners, manufacturers are not oblivious to the fact that for the industry — and their bottom lines — to rebound, they need to reinvent these beverages, giving consumers more reasons to drink them instead of competitors.
“If we can’t get our big legacy brand stabilized, the math just doesn’t work,” Butler told attendees at the Beverage Forum in Chicago, noting a 1% drop in Coors Light requires a 12% increase in the company’s Blue Moon brand to offset the decline. “The thing we always hear across CPGs is, ‘How do you rebuild a legacy brand from a different generation for today’s generation, especially when consumer needs are changing, and what consumers are looking for are changing?’ “
Learning to adapt
The major beer manufactures have expanded their presence in many of the trends impacting the industry through acquisitions and internal innovation.
Executives at the AB InBev, the world’s largest brewer, have gobbled up craft breweries in recent years — including Wicked Weed, Devils Backbone and Karbach Brewing. They’ve worked to position Stella Artois as a premium brand; introduced Bud Light Orange flavored with real orange peels, and partnered with Jim Beam to create a limited-edition beverage aged in bourbon barrel staves called Budweiser Reserve Copper Lager.
“You see these consumer trends and our portfolio not being adjusted to this. You see that the market is moving in a direction and we need to catch up.”
And AB InBev has continued to benefit from growth in its Michelob Ultra brand, a pricier, low-calorie beer that has boosted sales annually since 2011. With a 21% increase a year ago, it’s the fastest-growing beer in the country during the last few years — showing if the product meets the needs of the consumer, sales will follow. AB InBev recently expanded the brand by adding 7-ounce bottles to attract more weeknight consumption and introduced Michelob Ultra Pure Gold, which is made with organic grains and has slightly fewer calories and carbs than the original.
For its part, MillerCoors introduced a new light beer called Two Hats in lime and pineapple flavors. It has a tagline of “Good, Cheap Beer” and quirky ads to appeal to millennial drinkers who are less status conscious and more budget conscious. Molson Coors, which owns MillerCoors, also has added craft players to its lineup and expanded its reach into other beverages after purchasing Aspall Cider, a nearly 300-year-old maker of premium ciders and specialty vinegars.
So far, MillerCoors and AB InBev have struggled to generate meaningful consumer traction from these and other investments. AB InBev’s volume share of the U.S. beer market, by far its largest, has fallen from 49.8% in 2009 to 41.5% a year ago. MillerCoors has seen its position erode during the same period to 25%, a drop of 5.1%, according to trade group data.
“You see these consumer trends and our portfolio not being adjusted to this. You see that the market is moving in a direction and we need to catch up,” Michel Doukeris, who began overseeing AB InBev’s Anheuser-Busch division in January, told Food Dive. “Trends are very brutal because they change directions, and if your portfolio is not very well aligned with those trends, you end up being behind.”
Doukeris expressed concern about the company’s recent struggles and loss of market share, but was confident the steps it is taking are positioning it for future growth.
”I think we always need to do more,” he said. “At the end of day, the [sales] results, they’re a very clear expression as to whether you are doing enough.”
Brian Sudano, a managing partner with the Beverage Marketing Corporation, said at the Beverage Forum that AB InBev’s focus on health and wellness — and commitment to have 20% of its sales volume coming from its low- or no-alcohol portfolio by 2025 — were among the signs that the beer giant is on the right track.
“There are a lot of things going on that point to a competitor that is starting to gain their footing,” Sudano said at the conference.
Constellation Brands leads the pack
Analysts speaking at the Beverage Forum applauded the job Constellation Brands has done marketing its Mexican brands — including Corona and Modelo Especial — to stand out from its competitors and give people a reason to pay up for the products. Constellation, which controls 90% of the premium beer market, posted robust volume growth of 8.9% in 2017, its fourth straight year leading the industry.
“If you look at the marketing job that Constellation has done, it has really been phenomenal in terms of differentiating their brands and getting people to buy those particular beers that tend to be lagers,” Robert Ottenstein, senior managing director at Evercore ISI, said at the conference Wednesday. “This is really great marketing, and I don’t think we should sell short marketing with these companies.”