Butch, Sundance and the Battle to Keep Beer Market Share - Comment

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It might be insomnia, it might be the light evenings, but Larry Nelson has taken to his television this month and found a classic film with echoes of the attempts of the big brewers to stop ceding share to the little guys.

left to right: Butch Cassidy, The Sunshine Kid, Anheuser-Busch InBev, MillerCoors, Molson Coors

left to right: Butch Cassidy, The Sunshine Kid, Anheuser-Busch InBev, MillerCoors, Molson Coors

The other night, I caught a rerun of Butch Cassidy and The Sundance Kid, the ’69 western starring Paul Newman and Robert Redford. It continues to entertain, despite an overly-long chase scene, and their disbelieving lament while being pursued – "who are these guys?" – remains a modern day catchphrase.

It’s also - spoiler alert - one of those rare films where our protagonists are defeated by their opponents who, in the end, possess all the advantages. In the case of Butch and Sundance, it’s the chance arrival of a passing Bolivian military patrol that leaves them hopelessly outgunned. Plucky, overmatched heroes coming up against far superior forces: it’s the story line of virtually every successful film franchise, capable of selling tickets and popcorn by the truckload.

Life is like Butch and Sundance – superiority in resources, in firepower, wins out time and time again.

All of which brings us to the world’s multi-national brewers and their responses to the craft brewing revolution. Like the Bolivian army, they ostensibly hold all the advantages – professionally-trained and -educated brewers, production facilities featuring the latest technology, economies of scale, well-known brands and marketing budgets that exceed the annual GDP of some countries.

Yet, craft brewers continue to eat into their market share (especially in the US). They continue to proliferate in virtually every country worldwide. And, they continue to have the edge in inspiring affection from beer aficionados.

How is it that the big boys remain on the seeming defensive despite their numerous advantages? And, what comprises their best strategic responses going forward?

These are the big questions. The competitive responses, if committed to paper, could single-handedly revive the fortunes of the pulp and paper industry.

I’m dismissing for the moment what might be termed the ‘acquisition strategy’ of buying a craft brewer, most recently SABMiller’s purchase of Meantime Brewing in England. Beyond R&D potential or filling gaps in a brand portfolio for tied distributors, there are limits for the overall value of the response. In short, you could snap up 100 more craft breweries and still not make much of a dent in the competitive balance.

Let us start where good brewers should; with the liquid. Craft brewers hold an advantage in brewing a variety of styles, while global players are largely – in some instances almost exclusively - focused on pilsner, or variations such as American-style light lagers. (Diageo and Guinness being the odd one out, but the premise holds: a dependence on a single beer style.)

Thanks to investing millions over the years in marketing support, multi-national brewers possess some of the world’s most recognisable brands. The issue is whether these brands can be extended to include other beer styles without damaging the core brand. The alternative is to create an entirely new brand, and use it as a way of advancing with other beer styles.

The former approach – brand extensions – has been experimented with over the years. There has been a Guinness lager, for example, and Heineken in the US has extended Newcastle Brown Ale to include Summer Ale, Winter IPA, even Werewolf, as a special edition autumn ale.

Heineken, the owner of Newcastle Brown Ale, hasn’t been alone in this behaviour. Over the years in the UK, Anheuser-Busch InBev has rolled out numerous extensions for Stella Artois, notably at a higher strength and as a wheat beer. None of these enjoyed sustained success, although the most recent, a cider, Stella Artois Cidre, has some momentum.

A-B InBev is now extending one of its international brands, Beck’s, with special editions, including a pale ale, in certain markets including its German homeland.

This is a broad brush stroke, but the thinking here is that brand extensions have rarely demonstrated staying power and most probably have damaged the central core brand by their ‘here today, gone tomorrow’ lifespans. (Again, there are exceptions, such as ‘light’ versions of import brands in the US, although the fortunes of Amstel Light suggest that there are exceptions to the exceptions.)

The alternative is to launch an entirely new brand, and use it as the central tent pole around which to peg variants. Boston Beer, with Sam Adams Boston Lager as its centre, is arguably the best at this, launching numerous seasonal and special edition beers all under the reassuring Sam Adams name.

Add to this list MillerCoors, which evidences with its Blue Moon Brewing Co much the same structure as Boston does with Sam Adams. Starting with a Belgian style wheat beer some 20 years’ ago, ostensibly first brewed at the microbrewery that is part of Denver’s baseball stadium, today under Blue Moon umbrella branding there’s a wide variety of seasonal and one-off speciality releases.

(As an aside, have a close look at the Blue Moon website. I’ve spent some time on it, and nowhere could I find mention either of parent MillerCoors or of Molson, Coors or SABMiller in isolation. It looks like a craft beer brand; its multinational roots are obscured. It’s this kind of behaviour that drives supporters of craft brewing authenticity absolutely nuts.)

Still, Blue Moon is the prime example of a global brewer utilising its resources and mimicking craft brewers – with success. Molson Coors’ half year numbers, released last week, revealed that Blue Moon Brewing’s volumes grew in mid-single digits, driven by the original Belgian White’s 79th consecutive quarter of growth. In contrast, its American light lagers, Coors Light and Miller Lite, both recorded volume declines despite extensive marketing support.

The lesson here: Multinational brewers can be like craft brewers. They have the size, they have the scale, they have the resources, and they should be working for market share in a variety beer styles beyond lager. Almost like the Bolivians.

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