Tapping Into the Top Beer Growth Brands

The statistical data and anecdotal intelligence on beer sales in the on-premise can be a cipher to interpret — particularly for a busy bar manager with everything from bar cleanliness to compliance to staff training on his or her plate.

In considering which beer brands and categories to stock behind the bar as we continue through 2008, the house must weigh the fact that certain imports are down considerably this year over previous years. Craft beers, which continue to enjoy robust growth in the United States market, may look like a sure bet for pouring on new revenues and profits.

Yet what these phenomenal sales numbers do not reveal is that craft beer sales tend to be skewed heavily to certain major markets and demographics around the country, with individual results varying significantly from market to market and venue to venue.

Overall, it's also worth noting that beer sales remain somewhat flat –– around 2 percent for last year –– versus the 3- to 4-percent growth rates posted by wine and spirits. Indeed, the beer segment has continued to lose market share over time, both on- and off-premise, going from more than a 60 percent share just a few years ago to approximately 55 percent today.

How They Pour

So, is the proverbial beer glass half full or half empty? That is to say, is the beer industry any closer to the comeback that has been prophesized by industry watchers for years? And does beer as a beverage alcohol segment yet hold out the prospect of the kind of profitability that high-end spirits have generated for at least two decades?

Despite all of the conflicting figures and counterintuitive logic, the answer is a resounding and qualified "yes."

With beer volumes reaching an astronomical 214 million barrels (6,634,000,000 gallons) and approaching dollar sales of $95 billion last year, Eric Shepard, executive editor of the industry's closely monitored Beer Marketer's Insights (BMI) newsletter, says it often can be difficult to see the needle move in beer growth.

"It is fair to say that beer is underperforming in terms of wine and spirits," Shepard says. Yet even so, he adds, "Given the volume, 2 percent growth can be nice."

This past year witnessed both growth and reversal across various beer segments that arguably make it more important than ever for beverage professionals to pay close attention to market conditions that can affect their bottom lines. Among domestics, Anheuser Busch and Miller Brewing saw their leading Bud Light and Miller Lite beer brands off to a fast start, with Bud Light sales jumping by 1.9 percentage points and Miller Lite with a 2.2 percent gain on the BMI sales charts.

Other net winners in the light beer segment included Coors Light, up by 3.5 percent, Natural Light, with a plus 1 percent showing, and Busch Light, which saw a 3.3 percent increase in sales over the previous year.

Still other brands driving the beer growth segment were Heineken, up by 3 percent, Miller High Life, also boasting a 3 percent gain, Michelob Ultra, with a 2.2 percent increase in sales that put the brand at No. 12 in terms of overall market share, and Keystone Light, a Coors Brewing Co. brand that saw its sales increase by 10.9 percent from 2006 to 2007.

While these brew icons may represent only a handful of the hundreds and even thousands of beers on the market today, Shepard says even seemingly modest peaks in their sales performances are significant and worth noting by anyone interested in profiting from beer sales.

"Unlike wine and spirits, beer sales are much more concentrated at the top," Shepard says. "The top 10 brands together represent two thirds of all beer sold in the United States. And the top 25 represent more than 80 percent."

Still, Shepard says the brightest spot for beer continues to be the craft segment, a category that grew by 12 percent last year. Although crafts represent three percent of the overall volume to date, Shepard says, "Craft beers such as Sam Adams lager are growing fast, and craft seasonal brands are doing particularly well," he says.

While beer volume still leans heavily toward the domestic end, dollar-wise, it's a different story for those purveyors seeking more bang for their beer buck.

"Crafts and imports can represent 20 percent of sales in parts of the country," Shepard says. And, he adds, the percentage may be as high as 30 percent in cities such as New York or San Francisco.

Even among imports, a segment that saw negative growth performances by some of the top Mexican and Canadian brands in 2007 due to price increases and a downturn in the U.S. economy, Shepard says there are a number of brands that still can deliver a sales punch for the house.

"Stella Artois is growing very fast," he notes. "They are somewhere up in the range of 40 percent," he says. "If you look at the top imports, Corona is down 2 percent, Heineken is up by 3 points, Modelo Especial is higher by 10 points." Coming in just under Modelo's double-digit performance, Tecate jumped 8 percent and Guinness posted a 3 percent gain.

Back to Beer?

Contrary to all the downside statistics concerning beer sales in the on-premise, a recent survey of 700 bar owners and operators by The Nielsen Co. suggests that sales trends for beer appear to be growing versus wine and spirits.

"They tell us that draft beer is leading the charge," says Nick Lake, vice president of client service for Nielsen's beverage alcohol service. "Overall, the trend is more favorable for beer. The switch rate from beer to spirits is slowing down."

According to Nielsen data, the turnaround is being fueled by popular craft brews such as Blue Moon, Fat Tire Amber Ale, Goose Island and regional brands such as Atlanta's Sweetwater.

"Certainly, the crafts industry is driving category growth," Lake says.

Innovative new products from domestic brewers such as the recent launch of AB's Bud Lite with Lime and the successful rollout of Miller's new Miller Chill also are contributing to the beer segment's growing momentum, Lake says. And it hasn't hurt beer's cause at all that brewers and brew houses alike are getting better at meeting the lifestyle and cultural preferences of customers.

"Fifty percent of category volume is in light beer," Lake says, reflecting a consumer concern about wellness as Baby Boomers age. At the same time, he says higher-end craft brews, domestics and imports are upgrading the image of beer across the board. This trend, Lake says, can be seen in beers such as Blue Moon being served with a slice of orange.

"With an emphasis on presentation, finally there is a little bit of price play for the beer category. It becomes a savings for the consumer. It costs more to invest in a cocktail than a craft beer, and it is equally satisfying."