The rules of the beer business are changing. Part two of a weeklong series.
For nearly three decades, the American beer industry operated by some very basic rules. Big brewers marketed big brands with big television advertising campaigns, and distributors pushed hard with big floor displays.
But now the rules are changing. Imported and craft brands are becoming bigger players on the scene. And the nature of competition in the U.S. beer market has changed.
The latest issue of print Brew looks at seven old rules and their replacements. And it looks ahead to dynamics that are shaping future rules.
Today, a look at rules No. 2 and No. 3.
Old Rule: Imports and crafts are exotic
New Rule: Imports and crafts are mainstream
Back in 1995, imports represented 6 percent of the beer sold in the United States. In 2005, they represented 12 percent, according to figures from Modern Brewery Age. Imports, in the aggregate, have more share than Coors Brewing Company in the United States, according to MBA. A variety of consumer trends – trading up, the popularity of Mexican cuisine, rising tourism and an increasingly diverse population – have transformed former niche products into the choice of Middle America.
Indeed, top imports Corona Extra and Heineken are taking on the characteristics of mainstream domestic brews. They spend millions on television. They’re sold in convenience stores. They’re available in large package sizes. And, bowing to U.S. consumer tastes, they’re available in light versions.
Their very size and marketing budgets make them mainstream. Corona is the sixth biggest beer in the country by shipments and Heineken the 10th, according to figures from Beer Marketer’s Insights. Together they represented 52 percent of import shipments in 2005 and 49 percent of the category’s growth.
Meanwhile, the craft segment has been enjoying a renaissance. During the first half of the year it posted double-digit growth, a pace not seen since the mid-1990s.
Old Rule: Beer is local
New Rule: Local is now global
The U.S. beer industry began as a local business. In 1873, 4,131 breweries did business in the United States, according to Philip Van Munching’s book, “Beer Blast.” The number plunged over the years for a wide range of reasons (including Prohibition); by the 1950s, regional brewers, along with a few near-national players, dominated.
Consolidation continued apace, and the big got bigger. By the 1970s – partly because of Miller Brewing Company’s rise – beer truly became a national business in which a few heavyweights dominated the landscape. The four biggest brewers represented 23 percent of total industry volume in 1955; by 1975, they represented 60 percent, according to figures from the book “The U.S. Brewing Industry” and Modern Brewery Age.
The U.S. beer industry met globalization in 2002 when SAB plc acquired Miller, creating SABMiller plc. That movement was reinforced in 2005 when Coors Brewing Company merged with Canada’s Molson Brewing Company.
The trend will only continue, because global brewers want to tap the world’s most lucrative beer market. That’s why Heineken NV created Heineken Premium Light, a brew designed for American palates. And that’s why InBev is pushing for national distribution of Stella Artois.
More than ever, the strategies of international brewers are shaping the U.S. beer market. Next time you’re in a Chinese restaurant and see Harbin (partly owned by Anheuser-Busch) or are at a club and see a Peroni Nastro Azzurro (owned by SABMiller), remember those brands were brought to you by globalization.
