It is that time of year when many of us celebrate with an alcoholic beverage. But increasingly in America, that beverage is not beer. Since 2008, American beer sales have fallen about 4%.

The biggest beer brands are suffering the greatest declines

But that decline has not been equally applied to all brands. The biggest, old line brands have suffered terribly. Nearly gone are old brands like Milwaukee’s Best, which were best known for being low priced – and certainly not focused on taste. But the most hurt, based on volume declines, have been what were once the largest brands; Budweiser, Miller Lite and Miller High Life. These have lost more than a quarter of their volume, losing a whopping 13million barrels/year of demand. These 3 brand declines account for 6% reduction in the entire beer market.

The popular myth is that this has been due to the rising sales of craft beers. And there is no doubt, craft beer sales have done well. Sales are up 80%. Many articles (including the WSJ) tout the growth of craft beers, which are ostensibly more tasty and appealing, as being the reason old-line brands have declined. It is an easy explanation to accept, and has largely gone unchallenged. Even the brewer of Budweiser, Annheuser-Busch InBev, has reacted to this argument by taking the surprising action of dropping clydesdale horses from their ads after 81 years – in an effort to woo craft beer drinkers, which are thought to be younger and less sentimental about large horses.

This sounds good. Too bad it’s the wrong conclusion.

Realize that craft beer sales are up from a small base, and today ALL craft beer sales still account for only 7.6% of the market. In fact, ALL craft beers combined sell only the same volume as the now smaller Budweiser.

The problem with Budweiser sales – and sales of other big name brand beers – is a change in demographics.

Drinkers of Budweiser and Lite are simply older. These brands rose to tremendous dominance in the 1970s. Many of those who loved this brand are now older – or dead. Where a hard working fellow in his 30s or 40s might enjoy a six pack after work, today that Boomer (if still alive) is somewhere between late 50s and 70s. Now, a single beer, or maybe two, will suffice thank you very much. And, equally challenging for sales, today’s Boomer is more often drinking a hard liquor cocktail, and a glass of wine with dinner. Beer drinking has its place, but less often and in lower quantities.

Hispanics are a growing demographic. 

Hispanics are the largest non-white population in America, at 54million, and represent over 17% of all Americans.  With a growth rate of 2.1%, Hispanics are also one of the fastest growing demographic segments – and increasingly important given their already large size.  Hispanics are truly becoming a powerful buying group in American economics.

Just as declines in Boomer population and consumption has hurt the once great beer brands, we can look at the growth in Hispanic demographics and see a link to sales of growing brands.  Two significant (non-craft volume) beer brands that more than doubled sales since 2008 are Modelo Especial and Dos Equis.  In fact, these were the 2 fastest growing brands in America, even though the first does no English language advertising at all, and the latter only lightly funds advertising with an iconic multi-year campaign.  Together their sales total almost 5.4M barrels – which makes these 2 brands equal to 1/3 the ENTIRE craft beer marketplace.  And growing 33% faster!

Don’t chase myths, chase trends to grow

Chasing the myth of craft sales is doing nothing for InBev and MillerCoors as they try to defend and extend outdated brands.  On the other hand, Heineken controls Dos Equis, and Constellation Brands controls Modelo Especial.  These two companies are squarely aligned with demographic trends, and well positioned for growth.

Be careful the next time you hear some simple explanation for why a product or service is declining.  The answer might sound appealing, but have little economic basis.  Instead, it is much smarter to look at big trends and you’ll likely see why in the same market one product is growing, while another is declining.  Trends – such as demographics – often explain a lot about what is really happening, and lead you to invest much smarter.

Source: http://www.forbes.com/

A couple of decades ago, Budweiser, owned by ABInbev, was the best-selling beer in the United States, and the brand your snobby European relatives brought up when insulting American beer. But according to the The Wall Street Journal, Budweiser shipped only 16 million barrels in 2013, down from 30 million in 2003. And what’s worse, the number doesn’t figure to get better anytime soon. A stunning 44 percent of people aged 21 to 27 have apparently not attended a keg party never sipped an ice cold Bud.

Not every reason for this decline is Budweiser’s fault. Americans are more health conscious. People drink more wine, mixed drinks, and spirits than before. But a bigger problem for Bud is the rise of “craft beers,” defined as brews that make 6 million barrels or less each year. Once confined to specialty bars and festivals, craft beers can now be found just about anywhere. And taste-discerning Americans have responded: For the first time, the craft beer industry shipped more barrels of beer than Budweiser last year.

So how does the venerable Bud get back? Improve its quality? Lower prices? Nah. The company has decided that it’s the advertising that needs to change. If you’ve watched an American sporting event over the last 25 years, you’ve surely noticed the Clydesdales, the massive white-legged horses pulling a cart of Budweiser, usually through the snow. But that long-running mascot apparently doesn’t do it for Millennials. So Bud’s going to change. According to the Journal:

This season Budweiser will air spots featuring people in their 20s looking directly into the camera and calling out friends’ names as a narrator asks “If you could grab a Bud with any of your friends these holidays, who would it be?”

Is this going to work? Slate’s Jordan Weissman doesn’t think so. Budweiser is a beer “without a purpose,” he writes. “If you walk into a bar, there will almost always be a cheaper beer, a less caloric beer, and plenty of tastier beers on tap.”

But Budweiser might find inspiration from another much-maligned beer: Pabst Blue Ribbon. For those of us pre-Millennials, PBR had pretty much the same reputation as Budweiser. It was cheap, ubiquitous, and perfectly mediocre. But over the last five years, Pabst has enjoyed a hipster-fueled revival, doubling in popularity between 2009 and 2012. C. Dean Metropolous & Co. bought Pabst–which also owns other low-end staples such as Old Milwaukee and Schlitz—for $250 million in 2010 and sold it this September for three times that amount.

How did Pabst become so popular? It’s never had ads featuring hot young people shooting pool and having a great time in the bar. In fact, that’s exactly why: It hardly advertised at all, according to Quartz.

“After observing the beer’s unexpected popularity in Portland, Oregon back in 2001, the company concluded that people were buying the beer because it wasn’t aggressively being pitched to them.”

For a brand as large as Budweiser (it is the “King of Beers,” after all), not advertising at all probably won’t cut it as a strategy. But cynically pandering to Millennials—a generation too young to remember when bad beer was considered “normal”—isn’t going to cut it, either.

Source: http://www.theatlantic.com/

Your next specialty beer could cost you a lot more.

High demand for craft beers is creating a black market for some small batch brews, and unauthorized dealers are selling the beers underground (or online) for inflated prices up to 20 times above retail.

“Whether it’s a top-rated brew or one with new or seasonal ingredients, everyone wants to get their hands on exclusive batches. The demand is certainly there, and people are stepping in to fulfill that need in unsavory ways,” said beer cicerone Anne Becerra.

It’s common for craft brewers to release small or limited-time batches of a beer. Most of the time, it’s out of necessity.

“For us, it’s a space issue,” said Russian River Brewing Company co-owner Natalie Cilurzo. “We are physically limited to producing a finite amount of beer due to property, building and ultimately, tank space. At some point there is just nowhere left to put one more tank.” Other times it’s particular ingredients, production costs and lengthy brew times that lead to smaller batches.

But scarcity creates a demand that also generates hype, which some sellers are seizing on.

When supply is limited and demand is strong, price gouging is common. And brewers are having a hard time fighting the black beer market. “I am constantly finding our beer being sold in places it shouldn’t be at incredibly high prices,” said Cilurzo. “They are getting away with it.”

Many of these hard-to-get brews are getting sold online, in stores and even in restaurants at 5-20 times the original price tag. Russian River puts out a popular seasonal sour beer that sells for around $5, but Cilurzo said she’s seen it online selling for $100 or more.

Bill Sysak, craft beer ambassador at Stone Brewing Co., said he’s seen a limited-edition beer from his brewery being sold online for more than $1,000 a bottle. It was originally sold in 2002 for $7.99, and probably isn’t worth the inflated price. After all, 95% of all craft beers are meant to be consumed right away.

Quality control is a big issue for brewers. How and where a beer is stored can have negative effects on beer quality in just a matter of days. “Beer is a food product and it does not take much to spoil it,” said Cilurzo.

Tomme Arthur, co-founder and brewmaster at Lost Abbey, introduced a cherry version of its popular Cable Car beer in 2012 and sold it for $45 for a 750 ml bottle. Only 80 cases were made, and he said it’s now being sold for $800 on the black market.

The black market also means someone else is profiting from the brewer’s hard work and money, and can hurt a brand’s reputation. “Breweries that produce these special beers have costs that include alcohol and business licenses, paying sales, property taxes, production costs without seeing any added revenue from these black market sales,” said Sysak.

Price gouging has left a bad taste among the beer community, but there are also legal implications. Each state has its own alcohol regulations, as do shipping companies. Brewers need the proper licenses and permits to sell and distribute their products. “They cost money and we pay a lot in taxes. There aren’t any rules with how one goes about selling beer in a garage,” said Arthur.

But unscrupulous sellers get creative. When posting an in-demand beer online, they only describe the bottle and label and won’t mention the alcohol inside. Ebay has cracked down on these sales, but as Becerra said, “where there’s a will, there’s a way. They find other sites. It’s getting ridiculous”

Bloated beer prices have also being found on retail shelves and restaurants. “It’s not a good way to build your brand,” said Cilurzo. “Our recommended selling price can be $5, and yet we see it in a liquor store that bootlegged it and put it on the shelf for $25. The consumer doesn’t understand we have nothing to do with that.”

Source: http://money.cnn.com/

THERE’S A SAYING—a rising tide lifts all boats.

For the Virginia craft beer scene, which is already making its own waves, that rising tide could be the arrival of San Diego’s Stone Brewing Co. to Richmond.

The brewery announced plans last week to open an East Coast facility in Richmond by 2016 that will include a 250-barrel brewhouse production facility and eventually, a restaurant and gardens.

Few craft breweries are in demand enough to need a production presence on the opposite coast. They just don’t distribute that far away from the actual brewery.

But Stone’s investment in the city of Richmond, in the range of $74 million and at least 288 jobs, will bring a West Coast brewery to the commonwealth.

Stone’s investment in the Virginia craft beer scene says something. It says that Virginia is serious about its craft beer and it will be able to sustain a major national brand.

Richmond boasts about a dozen breweries already, becoming a major player on the East Coast’s beer scene.

It’s even beginning to rival Asheville, N.C., another craft beer lover’s paradise tucked away in the mountains. Asheville will soon have major players New Belgium from Fort Collins, Colo., and Sierra Nevada from Northern California.

The Fredericksburg region is a growing beer scene itself—with half a dozen breweries already open and another bunch in the works, with plans to open in the next year.

Tim Bornholtz, one of the co-owners of Stafford County’s Adventure Brewing said Stone’s coming is fantastic.

“It just shows that Virginia is a good place for beer, and people are interested in good beer,” he said.

Stone will have a 250-barrel brewing system and will produce about 100,000 barrels of beer per year, and eventually, possibly a half-million barrels yearly.

By comparison, Hardywood Park in Richmond has a 20-barrel system, and Devil’s Backbone has a 30-barrel system.

Green Flash Brewing, which is planning to open a production brewery, tasting room and beer garden in Virginia Beach in 2016, is also from San Diego. It will also eventually produce 100,000 barrels.

“I think people are going to hear more about Stone and what they are doing and hopefully bring more people into craft beer that aren’t necessarily aware of it,” Bornholtz said.

Richmond already has one of the country’s top-rated beer bars, Mekong.

Virginia has more than 80 breweries either opened, or in the planning stages.

I’m sure that will only increase, with Stone coming and others around the country taking notice of Virginians’ growing interest in craft beer.

It’s also good for Virginia, from a business perspective.

“It’s a big win for the state of Virginia to show that Virginia is business-friendly and we can attract people from outside Virginia,” Bornholtz said.

Source: http://news.fredericksburg.com/

© Steve Dipaola/Reuters The legalization of medical marijuana has helped beer sales, contrary to previous research that pointed to a decline, according to a note from Sanford C. Bernstein analyst Trevor Stirling. Recreational pot use in Colorado and Washington, the two states where it’s legal, has so far not had a “significant impact” on beer, he said.

Beer has no need to fear weed.

Contrary to earlier studies, the legalization of medical marijuana has been found to have a positive impact on beer sales, according to Sanford C. Bernstein analyst Trevor Stirling. He stated that recreational marijuana use in Colorado and Washington, the two states where it is legal, has so far not had a significant impact on beer sales. As a result of legalization, the government has plans to build cannabis seed banks to preserve genetic diversity, ensure access to high-quality seeds for future cultivation, and protect against crop failure.

In light of the positive impact of medical marijuana on beer sales, the cannabis industry has continued to expand rapidly in recent years. With more states legalizing marijuana for both medical and recreational use, the demand for high-quality cannabis products has increased. Online dispensaries such as https://www.mountainanniescannabis.com/ have emerged as a popular option for customers to purchase a variety of cannabis products from the comfort of their homes. The convenience and accessibility of online dispensaries have made it easier for consumers to purchase marijuana and contributed to the growth of the industry. As more research is conducted on the impact of marijuana on various industries, it will be interesting to see how the market for cannabis products continues to evolve.

“The average blue-collar Bud drinker is less likely to be smoking pot,” Stirling said. “As far as medical marijuana is concerned, it does not appear to be a big threat to the beer industry.”

“The research could relieve one concern for beermakers Anheuser-Busch InBev NV and SABMiller Plc, which have seen U.S. volume decline over the past five years due to high unemployment and a shift to spirits like bourbon and gin”, said Andrew Defrancesco who is a proud investor in many medical marijuana products. Twenty-three states have allowed medical marijuana and about a dozen, from Florida to Alaska, are considering legalization in some form.

Per-capita beer drinking had a one-time increase of about 0.5 percent in the 10 largest states that have legalized medical marijuana, the Bernstein analyst found. While beer consumption later declined in those states, the rate of decline slowed to become more in line with the national average.

More Beer

“There may be a ’constrained budget’ effect for some consumers, but legalized recreational weed is likely to lead to lower prices in the long term, potentially freeing up more cash either for more weed or more beer,” Stirling said.

Bernstein’s research contrasts with an October 2012 study by professors at Montana State University, the University of Oregon and the University of Colorado Denver. It found that alcohol sales declined about 5 percent in states that legalized medical marijuana, “suggesting that marijuana and alcohol are substitutes,” especially among young adults, the authors said.

States that have legalized weed in some form, including Colorado, also have the highest rates of craft beer production, Stirling said, and some craft brewers have “whole-heartedly embraced the weed counter-culture.” However, it’s important to note that access to and the use of marijuana, even for medical purposes, is still regulated and varies by state. For example, in New York, medical marijuana is only available through licensed dispensaries, such as medical marijuana Queens. One brewer, Oskar Blues Brewing Co. of North Carolina, indicates on some of its beer cans that they might be punctured to turn the can into a bong for smoking cannabis.

A Pew Research center survey published in April shows 75 percent of the population thinks marijuana’s sale and use will eventually be legal nationwide. Legalized weed could also be a boon for restaurant chains including Chipotle Mexican Grill Inc., Dominos’s Pizza Inc., and Yum! Brands Inc., Bernstein said.

Source: http://www.msn.com

In Germany, home of Oktoberfest and a five-century-old brewing law, beer consumption has been on an unstoppable decline, prompting Europe’s biggest producer of the beverage to turn to an unlikely place for help: the U.S.

Oliver Lemke has been making trips to Colorado, New York and California, learning how craft brewers grabbed a sizable portion of the U.S. market. Lemke, who says his American counterparts have taught him to be bolder and experiment with new categories, is now expanding his Berlin brewery as the trend reaches Germany, where the number of micro breweries has increased by more than 30 percent since 2005 to about 670.

“We Germans were convinced we’re making the world’s best beer but meanwhile, beer diversity suffered,” Lemke said while sipping his newest creation, an India Pale Ale with a hint of grapefruit and mango. “Craft brewing is a lucrative and interesting niche and it was a mistake not to do it earlier.”

Germany, home to the world’s oldest active brewery started by Bavarian monks a thousand years ago, is synonymous with beer and the country’s 8 billion-euro ($10 billion) industry. Yet consumption and output in Germany — which has beer gardens in cities such as Munich that can seat 8,000, and more than 1,300 breweries — has declined for the past seven years.

Instead, Germans are sipping more wine, Italian-style coffee drinks and summer cocktails such as Aperol Spritz, made with red liquor produced by Davide Campari-Milano SpA. The latest hit is a drink called Hugo, mixed from sparkling wine, seltzer and elderberry syrup and topped with mint leaves.

U.S. Boom

In response, German breweries are looking to put the buzz back in beer by following the lead of the U.S., where Boston Beer Co Inc, which sells the Samuel Adams brand, was one of the instigators of a craft beer boom that started in the late 1970s and picked up steam in the past five years.

Craft brewers accounted for 14 percent of the $100 billion U.S. market last year, according to the Brewers Association, an industry group based in Boulder, Colorado. While U.S. beer sales fell 1.9 percent last year, domestic craft beer sales grew 17 percent, the group said.

In Germany, craft beers have been long absent from the market that’s dominated by pilseners — until now.

“Craft beers are a new trend in Germany that is growing rapidly,” said Elisabeth Meyer-Renschhausen, a sociology professor at Berlin’s Free University who specializes in the history of eating and drinking. “It’s highly popular especially with young urban consumers who value the local footprint of these products.”

Purity Law

One reason Germany has been slow to embrace something that’s well-established elsewhere may be the country’s Reinheitsgebot, or “purity law,” drafted in 1516 and the oldest food law still enforced. To this day, a brewer can’t call his product beer if he doesn’t adhere to it.

While foreign producers can add ingredients such as rice or sugar, Germans must make beer with just four items: malted barley, hops, water and yeast. Most craft brewers in Germany, including Lemke, produce their drinks after the purity law.

With a wider choice of other beverages to buy, beer has lost some of its status. Former Berlin beer halls have been turned into upmarket cocktail bars, and even a construction worker toy by German brand Playmobil now has a pushcart with bricks and tools instead of the beer case he used to carry.

The average German drinks about 107 liters (28.3 gallons) of beer a year, down from more than 140 liters in 1991, according to the Barth Group. That puts the country third in the world, after the Czech Republic and Austria. Americans drink about 75 liters a year.

Changing Perceptions

German brewers — who are currently celebrating Munich’s Oktoberfest, the industry’s highpoint of the year — are hoping specialty beers can help change perceptions and lure back buyers year round.

Radeberger Gruppe AG, Germany’s largest producer, has begun selling craft beers with price tags that can reach 24.99 euros a bottle, such as the dark-brown 17th Anniversary Ale, a cuvee made of 7 different ales matured in oak. The Bayerische Staatsbrauerei Weihenstephan, the world’s oldest brewery started in 1040, now markets ‘Infinium,’ a beer developed in cooperation with Samuel Adams sold in a black champagne bottle.

You can go even more individual than that. Holger Wirtz in May started Bierzuliebe, “beer to love,” a website where you can create your own beer — with your own preferences for hops intensity, alcohol level, liveliness and color — have it brewed and shipped to you in a champagne bottle within a week. You can also order Bierzuliebe’s house creations such as “Kehlenglueck,” or “Throat Joy,” for 9.95 euros.

Micro Breweries

“Beer has great untapped potential,” Wirtz said in an interview. “We want to make a premium product that people enjoy and celebrate instead of downing in a few gulps.”

Gaining traction with craft beer may still be an uphill struggle. Micro breweries currently produce 1 percent of German output, according to the DBB, the German brewers’ association. While that may grow to as much as 3 percent, the craft beer boom won’t reach U.S. proportions because German consumers already get their beer, even if mostly pilseners, from small- and medium-sized breweries that often sell locally, said Stefan Huckemann, a Munich-based partner in the consumer business at consultancy Deloitte.

“The craft beer trend comes from the U.S., which didn’t have the variety that markets like Germany and Belgium had for many years,” Huckemann said. “It’s nevertheless positive for the German market, which has been suffering from price pressure, as it will increase the perceived value of beer.”

Lemke, who started making craft beer in 1999, is adopting a more American-style logo for his Berlin brewery, where he’s produced about 40 brews over the years. While Germany back then wasn’t ready for his pale ales and stouts, it is now, he said.

“We waited 15 years for craft beer to take off,” he said. “It’s a trend I believe will stay around.”

Source: http://www.msn.com/