Warning: #LongRead
Yesterday, the Denver Post’s “First Drafts” blog ran this story: “Pete Coors, big beer industry continues to grapple with craft beers.”
No kidding. It was one of many interviews Coors is providing as he stumps for Denver to host the next Republican National Convention. Naturally, he talks about beer, too.
There are several figures used in the post to show how things have been rough for MillerCoors and its chairman, like fourth quarter earnings for the company down 2 percent to retailers and 2.2 percent to wholesalers. Generally speaking, we know that beer sales are down for big brands like Budweiser, Miller or Coors.
But what struck me most were some of Coors’ comments about the beer industry, which came off misguided, crotchety and sometimes downright false. It surprised me, considering we’re talking about the head of the seventh largest brewer (by volume) in the world.
Which led me to this post. Consider it an exercise in crowdsourcing, venting and general confusion over Coors’ quotes in the Post story. You can read that piece here, but we’ll walk through some of this comments below and see if we can iron out details and facts. I encourage you to leave your own thoughts or findings in the comments.
Without further ado, let’s see what Pete Coors had to say…
On competing with craft…
“Basically the biggest trouble we have is on-premise sales,” he said. “We have a lot of bar owners who are enamored with craft beers. They are beginning to take off the premium light handles and putting bottles behind the bar instead and replacing the handles with craft beer handles. We lose 50 percent of our volume when that happens.” …“We have done research that shows it’s not in the economic benefit for a bar to do that.”
Let’s first acknowledge that bar owners are running a business and when craft beer sales are beating macro lagers solidly, it makes sense to give the people what they want. Growth of the craft brewing industry in 2013 was 18 percent by volume and 20 percent by retail dollars. If you can charge an extra buck for a craft beer over Coors, that’s good for a business, especially when a customer doesn’t mind paying extra for higher quality.
But let’s also consider the issue of variety. I’ve noted before the rising interest in variety packs and the idea of the “portfolio drinker,” but also consider that having a large beer menu – like one featuring craft beer styles that people are nuts for – moves product:
According to the Alcoholic Beverage DemandTracker, 33 percent of alcohol drinkers who visit restaurants regularly report that they are more likely to order beer when offered a large selection of beer brands.
A good portion, about 26 percent, also said they are more likely to order more servings of beer with a better beer selection than they would have otherwise.
That’s not specifically bars, but I imagine the argument could me made it’s transferable to that kind of location as well.
On growth and market share…
“They all want to grow, but the more they grow the less crafty they are,” he said. “They are getting fairly large and they are getting into each other’s space. They are having a hard time defining themselves as craft brewers because of their size.”
That comment was made in regard to fast-growing craft breweries, for which Coors believes there is a correlation between getting larger and a lack of innovation or diversification.
Except for Sierra Nevada, which has more variety packs then they suddenly know what to do with. Or New Belgium, which continuously releases new Lips of Faith offerings and just added Snapshot as a year-round beer and has their Hop Kitchen brews. Or Stone, which is seeking to open a second location while sending out the Enjoy By series or their Spotlight Series.
Defining oneself as a craft brewer – so long as you’re below the magic threshold of 6 million barrels – has never been as easy. The Brewers Association has made sure of that at a time when consumers are anxious to buy craft beer. The hardship for breweries isn’t defining themselves, it’s defining all the variation they take on to stand out in an ever-increasing market. Diversification is the brass ring to reach toward, not an iron anchor dragging businesses down.
On today’ industry…
Coors said he is baffled about trends that show the more expensive craft beer market growing by about 7 percent, the light premium beer market staying flat and the economy beer market with brands such as Pabst Blue Ribbon and Keystone dropping by 7 percent or even into double figures.
This situation is not baffling, not after craft beer beat the recession. From 2007 to 2012, craft beer sales more than doubled from $5.7 billion to $12 billion. This is all while Average Joe and Jane were hurting financially.
Even when economic trouble hit, you can’t beat a superior product:
About 24% of beer drinkers told Mintel that they drank more craft beer sold at stores in 2012 than they did compared to 2011, while 22% upped their craft beer drinking in bars.
On the “trend” of craft beer…
“In this economy that is difficult to understand,” Coors said. “But people are staying at home now, not buying cars or houses. They have money to spend. They want to spend it on something that they think has more value. … You talk about the millennials. The world is very different.”
Just to be clear, used car sales are up. New car sales are up. Home sales are up. There is additional money to be spent.
What got me was his acknowledgment that Coors products apparently aren’t something that people think has value. Pete Coors seems to intimate he thinks Coors has value, but consumers don’t. Especially those pesky Millennials, who are making the world very different and won’t get off his lawn.
I’ve written at length about the importance of Millennials to the beer industry so kudos to Coors for taking the bold step of writing them off.
On changing tastes…
Pete Coors … said he still drinks the same beer he has consumed for decades.
“I am a Coors Banquet drinker,” he said. “I grew up on it and just can’t get myself to change.”
… and that’s an issue. In an industry where innovation, variety and change are embraced, Pete Coors’ biggest problem is that he doesn’t want to.
The Undisclosed Wild Card…
The strangest thing of all from the interview was this comment from Coors, discussing why it’s valuable for businesses to have his beer on tap:
“Having a premium light brand, whether it’s Coors, Miller or Bud on tap actually improves the economics of their business. People stay in their seats an average of 18 minutes longer when they have a light premium beer on tap. That means they are spending more money, leaving bigger tips. We have a little algorithm and an app that we give to our distributors to evaluate and analyze these businesses and bars.”
This is a little trickier because I neither have a magic app or access to mathematicians who create algorithms to determine the amount of time people spend at a bar. However, this comment just seems silly. Aside from the fact that we should expect a businessman to say businesses flourish when they use his product.
There are far too many variables to consider here, including location of a business, demographic makeup, weather, regional job type and availability, etc. But let’s assume this is correct, that bars with Coors, Miller or Bud do have customers that spend more time buying beer. This is a slippery slope, especially because at the root of this discussion is the idea of people drinking more beer than they would elsewhere. Please be responsible when you drink.
I’d assume these businesses are primarily in geographic locations where craft beer options are sparse. If we know that craft sales across the board are up and that more locations are adding more craft taps, it may be a safe assumption that businesses that still heavily sell BMC beers are more stranded geographically when it comes to craft beer and have less access.
A state like North Dakota, for instance, only has seven listed craft breweries. That’s roughly one brewery per every 100,000 people in the state, which is also the top state in the U.S. for consumption of beer at 45.8 gallons per capita. I point this out because as a state that consumes the most beer, but with a severe lack of craft beer options, it would suggest Bud, Miller or Coors are more readily available than in a state like California, which boasts more than 300 craft breweries.
Or consider West Virginia, which also has seven breweries. We might assume that BMC beers are widely available. Why would people spend more time in bars there? I asked a friend who’s lived in Morgantown for 10 years.
“It’s probably so that they won’t think about their shitty lives as often,” he said jokingly. But when I pushed him on it, he conceded: “There’s not much else to do here. That’s probably a big part.”
The real answer to what Pete Coors suggests probably lies within several aspects: an area with a large population of young males who are employed, but lack other options for entertainment or recreation.
But this is just me spitballing. I’d be curious to know what you think.
+Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac
