MillerCoors says that Blue Moon is the biggest craft beer in the US

MillerCoors says that Blue Moon is the biggest craft beer in the US

MillerCoors says that it has no plans for a major cost savings programme once its current one finishes, but will the American beer market force it to think again?

Beer consumption is sinking as the US struggles to reduce unemployment by hauling its economy onto solid ground. This is the message that we have constantly heard from MillerCoors and Anheuser-Busch InBev since the onset of recession in (what is still, just) the world's largest economy. 

If they're right, then any upturn in the economy should bring hordes of newly-employed young men flooding back to mainstream lager.

There are two main problems, though. One is that, at the time of writing, the US economy is stagnating and looks more likely to go down before it goes up.

The second is that beer consumption is evolving, and was doing so before the financial crisis. Brewers' Association leaders are keen to stress that the craft beers they represent remain a dot on the landscape - with around a 5% volume share of total US beer sales - but there is little doubt that craft brewers have nabbed market share from the industry heavyweights. 

To some extent, MillerCoors and Anheuser-Busch InBev have held up profits by pushing through price increases on their beers. They are also seeking a piece of the craft beer pie. MillerCoors this week declared Blue Moon to be the "biggest craft beer brand in the US".  

Despite these quick-fix solutions, however, the great concern remains that the US beer market is never going to recapture past volumes. It may not fall forever, but the lessons of other mature markets - from Sydney to London - tell us that a strong rebound in the US is unlikely.  

This week, MillerCoors reported half-year volumes down by another 2.6%. Since its formation as a joint-venture between SABMiller and Molson Coors in 2008, MillerCoors has boosted profits via a $750m synergies programme. But, with $711m of those savings achieved and less than 18 months of the programme left, speculation is turning to what happens next.

MillerCoors CFO Gavin Hattersley told analysts this week that there are "no plans to announce a new cost [savings] number" following the end of the current programme. Pricing, adhoc savings and faith in new beers form the basis of the brewer's plan to combat sluggish sales.

However, the longer it takes the US beer market to stabilise, the more attractive radical proposals may become. 

Earlier this year, SABMiller's CEO, Graham Mackay, told just-drinks on a results call that "rationalising of the production grid is always under the spotlight" across the brewer's global operations. He was speaking predominantly on Eastern Europe, but added that "there are possibilities for that in North America, too".

A watershed moment in Europe came when Carlsberg confirmed to me, in 2005, that it planned to close half of its breweries in the region within a decade. That's when I properly grasped the extent of the new landscape.

The questions on my mind, then, are: at what point does MillerCoors (or A-B InBev perhaps?) sit down and consider another serious reworking of its production base in the US? At what point does the firefighting give way to planning for a new reality?

In the US, it is arguably a more pressing matter for MillerCoors than for A-B InBev, due to the former's lower profitability. Analysts at Sanford Bernstein estimate that the Budweiser brewer is $27 per hectolitre more profitable than MillerCoors. Most of this difference, it says, is down to pricing, but costs account for $10 of it.

It's just a thought, but I certainly wouldn't rule out further closures and supply consolidation from either A-B InBev or MillerCoors in the US.