Corona and Heineken’s Balancing Act

Juggling cachet and ubiquity.

Corona Extra and Heineken are far and away the biggest imports.

They’re so big, in fact, that the increasingly act like mainstream beers. They have big ad budgets, they have light extensions and they’re coming out with bigger pack sizes.

Both brands still command a premium. But observers say balancing “specialness” and their mass appeal presents a challenge…even if it’s an enviable one. And it’s a challenge that’s going to continue now that a new generation of upstart imports, such as Dos Equis and Stella Artois, are on the rise.

The latest issue of Brew magazine explored Corona and Heineken’s challenges. If you would like to receive a free subscription to Brew Magazine, drop a line with your name and mailing address here.

From the issue:

How big can Corona Extra and Heineken get before they lose their specialness?

A decade ago, the brands had mystique. They were widely known, to be sure. But they weren’t available in every store. They weren’t seen much on TV. They played in a distinctly different space from the mainstream domestic beers.

That’s less true now. They’re well-established in the Top 10 beer brands – Corona at No. 6 and Heineken at No. 9. They’ve upped their ad budgets significantly. They’re both aggressively marketing light extensions. They’re coming out with bigger pack sizes.

And they’ve increased their presence in convenience stores. Corona and Heineken had 4.5 percent share in C-stores in 2007, up from 3.8 percent in 2005, according to Nielsen.

“They are just about mainstream brands,” says Peter V.K. Reid, editor of beer industry trade magazine Modern Brewery Age. “These brands are within the brand set of a pretty huge percentage of consumers.”

Going Mainstream?

Imports are a big part of the U.S. beer business -- and they’re going to get bigger.

As recently as 2004, full-calorie mainstream domestic beers commanded more share in supermarkets than imports.

That’s not the case now.

Imports in 2007 represented more than 14 percent of supermarket beer sales, according to beer sales statistics from Nielsen. Mainstream full-cal domestics, meanwhile, accounted for just over 11 percent.

That stat highlights how imports are an increasingly important part of the U.S. beer business. And that trend is only going to continue.

The latest issue of Brew took an in-depth look at how imports have transformed -- and will continue to transform -- the U.S. beer business.

From the issue:

Miller Tops Distributor Survey

Supplants A-B as top ranked brewer on Tamarron’s “performance score.”

Creating a new relationship with distributors -- and being a supplier that’s easy to work with -- has been a key focus for Miller Brewing Company.

And while that’s a never-ending effort, it seems like Miller’s work is showing some results.

Miller supplanted Anheuser-Busch as the top-ranked supplier on the overall performance score measure among eight major brewers, according to preliminary results from the 2008 Tamarron Consulting Supplier Performance Survey, in which distributors grade their suppliers.

It’s the first time since survey’s 1999 inception that A-B didn’t rank first.

“This is a huge win for us,” said Tom Cardella, executive vice president of sales and distribution. “Improving distributor relations and confidence has been a major goal for Miller, and this shows we’re making headway. We’re certainly not satisfied, but we should all take pride in the changes behind these numbers.”

Bud Light Lime Has More Carbs than Chill

Carb count 20 percent higher.

Anheuser-Busch appears to be betting it can take share from Miller Chill with a higher-carb, higher-calorie knockoff.

Bud Light Lime, set to hit the market in May, has 116 calories and 8 grams of carbohydrates, according to label materials filed with the Treasury Department's Alcohol and Tobacco Tax and Trade Bureau.

Miller Chill, meanwhile, has 110 calories and 6.5 grams of carbohydrates.

The two brands are both 4.2 percent alcohol by volume.

A label image can be seen here.

The calorie and carb stats can be seen on the back label here.

The label application can be seen here.

Can A-B Cash in on MillerCoors “Disruption”?

August Busch makes prediction.

Anheuser-Busch on Thursday reaffirmed its earnings targets, its increased commitment to its core brands -- and its belief it can make hay with the creation of MillerCoors.

A-B CEO August Busch IV told analysts and investors it believes it can take advantage of the creation of the joint venture between Miller Brewing Company and Coors Brewing Company (still subject to regulatory review).

From Beer Business Daily:

August says the J-V will be very favorable to A-B's shareholders. He admitted that he underestimated the challenges integrating the InBev brands, and he suspects Carlos underestimated the challenges in integrating Crown. "There's going to be a tremendous amount of disruption," he said.

People Paying Up for Pricey Crafts

Gain share in supermarkets despite big increases.

Will consumers be willing to pay more for craft beer? has been the big question confronting craft brewers grappling with rising hops prices.

Recent beer sales trends in supermarkets suggest the answer is a tentative yes.

For the four weeks ended February, the national average weighted case price for craft beers increased by 4.9 percent, according to beer sales statistics from Nielsen. That’s more than the major brewers or the import category.

Heineken: No U.S. Price Increase

Reports strong results for Femsa.

Heineken NV doesn’t plan to raise prices in the U.S. in 2008 following last year’s increase of 3.5 percent.

That’s according to remarks by Heineken chief financial officer Rene Hooft Graafland on Wednesday while discussing the company’s 2007 performance.

“Seeing that the domestic brands are not following that, we have not planned a price increase in the USA for 2008," Graafland said.

Miller Chill Top New Brand in Supers

Racked up $40.8 million in sales, according to IRI.

Miller Chill was “by far” the top new beer brand in supermarkets last year, Beer Marketer’s Insights Express reported yesterday.

BMI, citing beer sales statistics from IRI, said Miller Chill posted $40.8 million in sales in 2007.

Anheuser-Busch’s Bacardi Silver Mojito was a distant second, with $8.1 million in sales.

A-B placed six brands on the top 10 -- including two brands launched regionally, Land Shark Lager and Bud Light Chelada. But their combined performance didn’t match that of Miller Chill.

From the BMI Express report:

AB also had #3 Landshark Lager and #4 Bud Light Chelada, plus #s 7, 9 and 10. But all of new brands #2-10 didn't equal total of Chill. Only craft brand in top 15: Alaskan IPA.

Given Miller Chill’s success, who can blame A-B for launching Bud Light Lime in hopes of taking some of that volume?

The Beer Marketer's Insights home page is here.

Previous Brew Blog coverage of Bud Light Lime can be seen here.

Good Reviews for Miller Lite Brewers Collection

Positive ratings from beer industry trade magazine.

Miller Lite Brewers Collection got positive reviews from a Modern Brewer Age consumer tasting panel.

The panel tried all three of the brews -- a blonde ale, an amber and a wheat -- that are now in test markets. And, while the panel had some criticisms of the packaging, it gave the brews positive reviews.

“Our panel sampled all three, and found them to be very drinkable, very light beers,” says the writeup in the February 18 issue of Modern Brewery Age Weekly (not yet online).

The blonde ale was considered the standout of the trio. “Beautiful in appearance, exquisitely balanced and highly attenuated, it is arguably one of the best light beers ever made,” the review says.

The blonde ale and the wheat both received a “five beer” rating from the magazine. That designation means a beer is “Superb in every respect. True to style, enjoyed by all.”

The amber received a “three beer” rating. That means: “Good beer. No flaws but garnered faint praise.”

The Modern Brewery Age home page can be seen here.

Is A-B “Running Out of Opportunities” Globally?

Rumors it may make a run for Russian brewer.

Might Anheuser-Busch make a run for the biggest Russian brewer?

Baltik Beverages Holding, the No. 1 Russian brewer, currently is jointly owned by Scottish & Newcastle and Carlsberg SA. But Carlsberg, which teamed up with Heineken NV in a bid for S & N, is poised to take over the whole entity.

But the Daily (London) Telegraph is reporting rumors that A-B might try to crash the party.

From the report:

Anheuser Busch, the US brewing monolith behind the Budweiser brand, has long coveted the Russian business and the coming weeks could present it with its last chance to get its hands on one of the world's fastest growing brewers.

Carlsberg looks set to take full control of BBH, the Russian joint venture, after Scottish & Newcastle accepted a £7.8bn joint takeover bid from the Danish brewer and Heineken last month. However, industry insiders believe there is a chance Anheuser could still crash the party.

The reason is that while A-B has a dominant market share in the United States, it has a limited presence in developing markets that will drive the growth of the global beer industry in years to come.

From the Telegraph story:

One insider at a European brewer said: "For Anheuser it is decision time because it has a problem. They have an historic opportunity with S&N or InBev because they are running out of opportunities. "

Speaking of Russia, SABMiller plc CEO Graham Mackay said the brewer is eyeing expanding its presence in Russia, through acquisition or organic growth.

The Telegraph story can be seen here.

The Financial Times' coverage of Mackay's comments on Russia can be seen here.

Miller, Coors Gain in C-Stores

Bud drags down A-B.

Miller Brewing Company and Coors Brewing Company gained share in convenience stores during the four weeks ended January 26, according to beer sales statistics from Nielsen.

Anheuser-Busch, which dominates the channel with 61.4 percent of case volume, saw its share erode as Budweiser declined.

Miller gained 0.2 points of volume and dollar share during the period. Its gain was driven by Miller Chill, which has held its 0.2 share in C-stores.

Miller also got a boost from the Milwaukee’s Best franchise, which gained 0.1 points of case share.

More Twisted From Boston Beer

Two new Twisted Tea flavors on tap.

Faced with rising competition in the alcohol tea area, Boston Beer Company is poised to introduce two new flavors of its Twisted Tea.

Boston Beer, the brewer of Samuel Adams, has received label application approval from the Treasury Department’s Alcohol and Tobacco Tax and Trade Bureau for two new flavors: Green Citrus Twisted Tea and Twisted Tea Midnight.

Midnight is described on the label as a “refreshing hard black iced tea.”

Boston Beer is introducing the flavors amid growing competition and proliferation of alcohol iced teas. Within the past year, Diageo, Anheuser-Busch and Mark Anthony Brewing (maker of Mike’s Hard Lemonade) all have introduced products.

The label image for Twisted Tea Midnight can be seen here.

The label application for Green Citrus can be seen here.

Will Bud Light Lime Distract A-B?

Could Bud Light Lime douse A-B’s “hot hand?”

Analysts and observers have suggested that Anheuser-Busch lost focus on its core brands as it added a bevy of crafts and imports to its portfolio.

Now come suggestions that the same thing could happen as A-B prepares the aggressive launch of Bud Light Lime, a line extension that’s clearly aimed at Miller Chill.

From a Wall Street Journal story about the launch:

John Greening, a former advertising-agency executive who represented Anheuser, said he is concerned the brewer is diluting its top-selling brand. "I worry they're losing their focus," said Mr. Greening, now a professor of marketing communications at Northwestern University. "Their hot hand has always been Bud Light. This takes the attention away from the hot hand."

Meanwhile, a story in Adweek detects skepticism in the distributor ranks about Bud Light Lime:

"Just like with Land Shark, we can put it in 8 to 10 percent of our accounts and if it doesn't grow, it doesn't grow," said a Southwest wholesaler, referring to another A-B entry. "Personally I question it. We've got a great strategy put in place for Bud Light, and we're looking for a great year. We got hammered with Bud Select, and I don't know if (Bud Light Lime) is incremental business, new business, or what."

The Wall Street Journal story (subscription required) can be seen here.

The Adweek story can be seen here.

Brew Blog's previous coverage of Bud Light Lime can be seen here.

A-B Rolling Out Chill Clone

May 5 launch.

Anheuser-Busch has confirmed that it’s planning a national rollout of Bud Light Lime.

Bud Light Lime, whose launch was first reported by Brew Blog, will be introduced nationally on May 5. It will be backed with a $35 million marketing campaign, according to reports in beer industry trade magazines.

The brand, which will come in a clear glass bottle with an APL label, will be rolled out with no test-marketing.

A-B has launched literally dozens of new products over the past two years in an effort to mine niches and seek new sources of volume (it’s already discontinued some new products). Now that Miller Chill has proven itself in the market, A-B appears to be going after it.

Molson Coors Beats Wall St. Estimates

U.S. STRs up 6.2 percent.

Powered partly by strong U.S. performance, Molson Coors Brewing Company posted fourth-quarter results that beat analysts’ expectations.

Molson Coors earned 73 cents per diluted share during the quarter, not including one-time items. The analysts consensus predicted earnings of 65 cents per share, according to Bloomberg.

Coors Brewing Company, the brewer’s U.S. arm, posted strong results.

As reported by Beer Marketer’s Insights:

Coors sales-to-retailers up 6.2% in 50 states in 4th qtr, up 5.5% if you include tuff Puerto Rico mkt. Coors led by "mid-single digit growth" for Coors Light, "strong double-digit growth by Blue Moon" and "low double-digit growth" for Keystone Light. Even Coors Banquet "grew at a low double digit rate in the quarter." What's more, Coors Banquet "achieved its first full year of growth in 22 years." Not bad.

Molson Coors CEO Leo Kiely commented on U.S. performance in the earnings release:

"The U.S. business gained market share and increased operating income more than 28 percent during 2007, while overcoming significant cost challenges.”

The Molson Coors release can be seen here.

The Beer Marketer's Insights home page is here.

A Bloomberg story on the earnings can be seen here.

A-B Rolling out Chill Knockoff?

Following “denigrate, replicate” playbook.

Is Anheuser-Busch poised to introduce a Miller Chill clone?

There have been rumblings from the field that the No. 1 brewer is getting ready to do exactly that. According to industry sources, A-B has been quietly laying the groundwork for a lime-flavored version of Bud Light.

The brand, to be sold in six packs, is priced above Bud Light, the sources said. Refreshment will be a key selling point.

In other words, the taste profile, price point and positioning all bear a striking resemblance to Miller Chill.

A-B-InBev Combo Rumors Heat Up

Could things get hostile?

The perennial rumors of a combination between Anheuser-Busch and InBev heated up this week.

A Belgian business magazine reported that the two were in talks that could lead to a merger.

From a Reuters report:

InBev, the world's second-largest beer producer by volume, and. Anheuser-Busch are in talks that could lead to a merger of the two, Belgian business magazine Trends said on Thursday.

The New York Times’ Deal Book blog, citing Breakingviews, suggested that now -- as opposed to last year when similar rumors surfaced -- InBev would hold the upper hand in a deal. That’s due to its higher market valuation and the superior performance of its stock.

Miller Chill Heats Up Competition Down Under

Competitors roll out lemon- and lime-flavored beers in Australia.

Miller Chill has exceeded sales expectations since its launch last December in Australia.

And the competition has noticed.

Lion Nathan is introducing Barefoot Radler, a lemon-and-lime infused beer. Foster’s Group already has rolled out Carlton Fusion, a beer brewed with lime and salt … not unlike Miller Chill.

From the Sydney Morning Herald:

All the big companies believe drinkers want more choice. Lion is targeting Barefoot Radler at existing beer drinkers who want to add yet another beer to their repertoire and those who prefer wine or spirits. Radler-style beers are particularly popular in Germany, where 300 million litres of the stuff are drunk each year.

Miller Chill is doing well, the story reports:

The marketing director of Pacific Beverages, Andrew Walker, said Miller Chill sales were "well ahead of forecast" even though marketing had been low key, limited to on- and off-premise taste tests to communicate what is an unusual combination. "Consumers are always looking to try something different. They don't want to be stuck in a rut."

Pacific Beverages is a joint venture between Coca-Cola Amatil and SABMiller.

The Sydney Morning Herald story can be seen here.

Costs Crunch Cali Crafts

Brewers bumping up prices to deal with costs of hops, other inputs.

The Contra Costa (Calif.) Times is the latest newspaper to report on how craft brewers are boosting prices to deal with the rising costs of inputs ranging from hops to bottles.

Some crafts have increased six-pack prices by as much as $1, the paper reports.

From the story:

Anderson Valley Brewing in Boonville last week raised the suggested retail price from $9.49 to $9.99 for a six pack of Hop Ottin' and all their other prizewinners. Stone Brewing of San Marcos raised the price of Arrogant Bastard and their other brands to a similar price. Firestone Walker did the same thing last month. Even Boston Beer, the maker of nationally distributed Sam Adams, is rolling out price increases.

"Right now, we have the perfect storm," said Boston Brewing's Michelle Sullivan. "So many things are happening at once: increases in the hop market, the barley market, the cost of energy for making glass. Even freight costs are up."

Diageo Buys Stake in Ketel One

Drops out of Absolut hunt.

Diageo is opting to buy into a small but fast-growing premium vodka rather than a big, established one.

The world’s biggest distiller announced today that it’s paying $900 million for a 50 percent stake in a company that will distribute the Dutch vodka Ketel One.

In doing so, Diageo says it’s dropping out of the bidding war for Absolut.

From Bloomberg’s coverage:

Ketel One has ``huge'' growth potential because the brand is smaller than Absolut, Chief Executive Officer Paul Walsh said in a Bloomberg Television interview.

Walsh discussed his plans for the brand:

Diageo aims to expand distribution of Ketel One to Europe and Latin America, Walsh said. He forecast sales growth for the vodka of more than 20 percent a year, in line with the ``super premium'' spirits market.

The Bloomberg story can be seen here.

Is A-B Facing Distributor Jailbreak?

More wholesalers dropping exclusivity, WSJ reports.

For years, Anheuser-Busch racked up share gains with a distributor network that was willing to drop imports and crafts to focus exclusively on Budweiser and Bud Light.

But now a growing number of distributors are dropping exclusivity to bring in hot imports and crafts -- and A-B could pay a price.

So reports Wednesday’s Wall Street Journal in a story headlined “Beer Distributors Want More than Just One Best Bud.”

From the story:

“In the past year, distributors in Texas, Tennessee and elsewhere have decided to eschew Anheuser's incentives and begin selling rival beers such as Yuengling Lager, as well as wine and spirits. Recently, R.H. Barringer Co. became the first Anheuser distributor in North Carolina to start selling other brands, acquiring a rival that sells wine and imported beer. Today, about 60% of Anheuser's sales flow through distributors carrying only its brands, down from about 70% at its peak.

“The shift might help competing alcohol brands gain market share, as distributors divert some of their attention from Anheuser, which accounts for about 48% of U.S. beer sales. For consumers, it means greater choice at their local bars and liquor stores. Wall Street analysts say the movement signals a weakening of the St. Louis brewer's clout in the marketplace, as small-batch "craft" beers and imports, as well as wine and spirits, wrest market share from mass-market brews like Budweiser.”

Deja Dude?

Some claim A-B’s new “Dude” ad campaign has been done before.

Anheuser-Busch, which has long been seeking an encore for its wildly popular “Whassup” ads, has generated some buzz with its new “Dude” campaign for Bud Light.

But some are asking whether we’ve seen it all before.

From this week’s Advertising Age:

"But the ads have also drawn notice for what some call a suspicious resemblance to earlier work. Consider that after the online magazine Slate ran a positive review of the 'brilliant' campaign, its comments pages were quickly overrun by allegations of theft and plagiarism of, among other things, a recurring gag on a popular Tulsa, Okla., morning radio show, a Spanish-language Coors Light ad, an anti-drunk-driving campaign that aired in New Zealand, a scene from the 1998 film 'Baseketball' and a 1980s stand-up act by the former 'Saturday Night Live' star Rob Schneider.

A Surge of Mojitos

New Bacardi rum, Parrot Bay FMB on tap.

Two of the biggest spirits marketers are poised to capitalize on the growing popularity of the mojito cocktail.

Bacardi USA has registered the label for Bacardi Classic Mojito – apparently a mojito-flavored rum with 30 percent alcohol by volume – with the Missouri Division of Alcohol and Tobacco Control.

Diageo North America, meanwhile, appears ready to roll out two new mojito-related beverages.

It has received label approval from the Treasury Department's Alcohol and Tobacco Tax and Trade Bureau for Captain Morgan Parrot Bay Mojito. The brand would be the newest extension for the popular Captain Morgan Parrot Bay FMB lineup.

It also has received label approval for two mojito-themed ready-to-drink products under the T.G.I. Friday’s On the Rocks label: Berry Mojito and Passion Mojito.

More Costco Beers?

Retailer receives approval for “German Style Lager.”

Brew Blog reported last week that Costco Wholesale Corp. has received label approvals for three private-label craft-style beers.

More could be on the way.

The retailer on January 30 received label approval from the Treasury Departments Alcohol and Tobacco Tax and Trade Bureau for German Style Lager. It carries Costco’s Kirkland Signature private-label logo.

According to the application, the beer would be brewed by California’s Gordon Biersch Brewing Company.

Rumors of InBev-A-B Deal Surface – Again

A-B declines comment.

The Wall Street Journal on Friday reported that the long-rumored combination of InBev and Anheuser-Busch is once again on the table.

From the story:

“InBev and Anheuser already have held discussions, say people in the industry familiar with both brewers' thinking. Although reports of the talks surfaced as long as a year ago, they have become more serious, and a deal is possible this year, people in the industry say.”

The report came on the heels of A-B reporting fourth quarter earnings that missed Wall Street estimates. Equity income from A-B’s stake in Grupo Modelo, which long has buoyed A-B’s profits, declined during the quarter.