I got a review copy of the new book, Dethroning the King, which is all about the hostile takeover of Anheuser-Busch by InBev, a few weeks ago but haven’t had a chance to read it yet. It looks fascinating and I’m looking forward to devouring it as soon as I can. For now, I’ll have to make do with the Wall Street Journal review of the book, which only makes me want to read it more. Anybody else read it yet? Thoughts?
Heineken announced at the beginning of December that next year they’ll be launching redesigned bottles and cans along with a big reduction in the number of sizes they’ll be selling worldwide. The packaging redesign is cosmetic, but the package size reduction is more worrying.
According to the press release, “[t]he restyling aims to streamline the visual identity and make the brand even more consistent and recognizable in all 170 markets worldwide where Heineken can be enjoyed. The new bottle will come in five different volume sizes and will be available in Western Europe at the beginning of 2011 and across the rest of the world by 2012.”
While I realize that packaging, brand identity, etc. are very important, I still can’t help but laugh at some of the language and the way in which the new packaging design is framed. For example, check out this description:
The new bottle, replacing the XLN (extra long neck) and Heineken shortneck packaging, is introduced in two versions: embossed and standard. The new design features a unique curved embossment on the neck and back, which not only looks good, but also adds a pleasing to-the-touch feel, whilst a distinctive embossed mark acts as a stamp of quality and authenticity. Additionally, the new shape makes it look proud while enhancing the premium positioning of the bottle.
Yes, nothing says quality like a “pleasing to-the-touch feel” except perhaps the actual taste of the beer. How “proud” the new bottle looks. Huh? The “embossments,” made by using “strategically placed indents and tactile ink” somehow add “to the overall drinking experience.” Hilarious. Nothing makes me enjoy my beer more than having little raised spots on my bottle to hold on to. Of course, I always pour my beer into a glass, but I’m weird that way. No worries, a newly redesigned glass “features an embossed curve on the side, adding a pleasant feeling when held.” So they got us glass-drinkers covered, too. Whew.
But all this attention paid to their “revolutionary tactile ink” just cracks me up, and is indicative of why the big brewers are stagnating. They continue to focus on marketing and ignore what’s really important: how their beer tastes. Undoubtedly, marketing is going to keep them huge for a long time to come, but slowly it is having an effect. So this “revolutionary ink, created by a series of small raised dots on the surface of the can, gives the consumer a better feeling in the hand, enhanced grip and allows the brand to appear more refreshing and recognizable.” Nothing like an “enhanced grip” to make the beer “appear more refreshing.” I’m certainly interested in how that process works. How exactly does my grip on the beer bottle give the beer inside “the power to restore freshness, vitality, energy, etc.,” which is the definition of refreshing. That’s some pretty impressive osmosis.
The new “magic” embossed Heineken bottle.
But snarkiness aside, the real news is that Heineken will be reducing the number of package sizes they offer worldwide “from fifteen to five bottles sizes.” I understand any company’s reasons for reducing the number of items they sell, to a point at least. As they concede, it’s being done to achieve “greater efficiencies in the supply chain.” And it may not mean anything, but then again I can see at least one possible scenario that could play out. If Heineken cuts two-thirds of its package sizes, it’s not too hard to imagine the other international beer companies doing likewise. With the vast majority of glass manufacturer sales going to just a few companies, most likely they’d simply discontinue making the package sizes that Heineken and the others abandon. That would make those other ten bottles sizes unavailable for smaller breweries, too, or at least prohibitively expensive. Maybe that’s a stretch, but at a minimum I think it at least bears watching.
The changes will start early next year, first in Western Europe, and then the rest of the world over the balance of the year.
The new can with “tactile ink.”
Today in U.S. District Court, for the Southern District of New York, Anheuser-Busch InBev filed a lawsuit asking for a declaratory judgment against Major League Baseball. In “Anheuser-Busch, Inc. v. Major League Baseball Properties, Inc.,” ABI alleges that MLB “reneged on a renewal of its beer sponsorship rights this year and demanded ‘exponentially higher’ fees.” Back in April of this year, ABI believed it had reached a deal to renew its long-standing status (over 30 years) as the “official beer of baseball,” but apparently the baseball league tried to renegotiate the deal “due to ‘a change in marketplace dynamics,’ according to the lawsuit.” Naturally, MLB was seeking to increase the amount of money they would receive from ABI and also wanted to negotiate with rival beer companies for the same rights. The lawsuit asks the court to enforce the April deal and further prevent “MLBP from negotiating with any other brewers for sponsorship rights. The lawsuit doesn’t request money damages.” Baseball’s position is that the April deal was not binding and that they could “offer sponsorship rights to Anheuser[-Busch]’s competitors.” In addition to sponsoring the league as a whole, Anheuser-Busch also sponsors 26 of the total of thirty individual baseball teams in MLB.
The story has already been picked up by Bloomberg, Reuters, the St. Louis Business Journal and the Wall Street Journal.
For many years, Coors has been the brewery obsessed with cold. But that may be changing, as Anheuser-Busch InBev is debuting their own cold-activated labels on bottles of Busch Light. ABI is calling their version of the cold-activated label an “ice-cold easy indicator.”
According to an article today by AdAge:
An “ice-cold easy indicator” thermometer turns blue when the temperature is just right, an Anheuser-Busch spokesman told Ad Age, noting that the special packaging has already hit some stores. The innovation resembles what competitor MillerCoors has done with its Coors Light bottles, which feature mountains that turn blue “when it’s as cold as the Rockies.”
“Thermochromatic ink on beer [bottles]? I’ve heard that’s been done before,” said a MillerCoors spokesman.
Coors Light is one of the few big beer brands whose sales are growing, albeit slowly, and the cold-activated bottles are a focal point of its advertising. It is unclear if A-B plans a big promotional push for its new Busch Light bottles. The sub-premium brand traditionally gets less advertising attention than Budweiser and Bud Light.
As far as I’m concerned, the only good reason to make sure either of these beers are cold enough to turn the label blue is so they’re cold enough to numb your taste buds so you can no longer taste them. But it’s that reliance on marketing gimmicks instead of making products people actually want that makes this such a bad idea to me.
The American Customer Satisfaction Index (ACSI) today released their latest findings for a variety of products, and beer again continued to drop. I should point out, however, that the ACSI tracks only the big brands. As far as I can tell, they do not track any craft brewers. Since they refer to “Corona, Heineken, and Samuel Adams” all as “smaller brands,” I feel confident that very few, if any, craft breweries are on their radar. As a result, these findings — while interesting — are only relevant for the big picture and don’t reflect the continuing gains and positive growth in the craft sector.
From the press release:
Beverages: Anheuser-Busch Tanks
Beer drinker satisfaction falls from its all-time high in 2009 by 2.4% to 82, driven by a sharp decline for Anheuser-Busch products. Last year, shortly after its acquisition by Belgian InBev, Anheuser-Busch recorded its best ACSI score ever and captured the industry lead. Now that gain evaporates, as the company drops 4% to an ACSI score of 82. Sales of the Budweiser brand fell by nearly 10% over the past year, the largest decline on record, as younger drinkers have increasingly turned to microbrews and low-calorie products. A-B’s weakness is Miller’s gain. Without improving, Miller claims the top ACSI spot among brewers, unchanged at 83. Molson Coors also remains unchanged, stalled at the bottom of the industry at 81.
And here’s additional analysis from a second release:
Beverages
Customer satisfaction with beer fell from its all-time high in 2009 by 2.4% to 82, driven by a sharp decline for Anheuser-Busch products. The rest of the measured brewers—Miller, Molson Coors, and the aggregate of smaller brands such as Corona, Heineken, and Samuel Adams—held to the same scores received one year ago.In 2009, a year after its acquisition by Belgian InBev, Anheuser-Busch advanced to its best ACSI score ever and captured the industry lead at a record 84. In 2010, the gain has evaporated as the company lost 4% and slid to 82. The number-one seller of beer in the United States also has struggled with sales of its Budweiser brand. Sales of the brand fell by nearly 10% last year, the largest decline on record, as younger drinkers have increasingly turned to microbrews and low-calorie products.
Miller is a beneficiary of A-B’s plunge. Miller assumes the industry lead in customer satisfaction by standing still at an ACSI score of 83, sharing the top spot with the aggregate of smaller brands (also unchanged). A year ago, Molson Coors slumped to the bottom of the industry. The company is stalled there for a second year at an unchanged score of 81. Value for money remains a challenge, as consumers are increasingly price sensitive and Molson Coors brands tend to be higher priced than many of its competitors’ brands.
USA Today is reporting that Anheuser-Busch InBev‘s plan to reverse slumping sales trends is to give away their beer. Not all of it, of course, but part of a new marketing barrage to begin next Monday includes stepping up sampling significantly, to record levels of free beer giveaways.
According to the article, Latest ad strategy to freshen Budweiser’s image: Free beer, by Bruce Horovitz, ABI is poised to “announce plans to push free beer and a hipper Bud image to younger beer drinkers over the next several weeks” in an effort to reach the under-30 crowd growing up under the influence of the more flavorful and more local craft beer segment.
The new marketing campaign will feature the tagline Grab Some Buds, a phrase ABI has applied to trademark, and starting Monday, Budweiser “will unleash its biggest-ever national free-sample effort in trendy bars and eateries.”
From the USA Today article:
The hype culminates on Sept. 29, when the brand hosts the “Budweiser National Happy Hour,” a bid by Bud to nudge folks to at least try a free brewski. The free samples for those 21 and up range from 6 ounces to 12 ounces, depending on state and local rules.
At issue: a brand that’s lost mojo. Bud unit sales were down 9% last year and are down the same this year, says Beverage Marketing Corp. Beer drinkers have lost loyalty to Bud for the past seven years, research firm Brand Keys reports. Bud’s ranking among national product brands slipped from 16th in 2003 to 220th in 2010.
Here’s their four-prong approach:
The article concludes doubtfully, with “Brand consultant Robert Passikoff [expressing] serious doubts about Budweiser’s effort. ‘They’re in trouble because they don’t know how to talk to consumers,’ he says. ‘They no longer know how to create an emotional bond.'”
Frankly, I think they’re in trouble because they’re not keeping up with what customers want. All their “fixes” for dwindling sales (though to be fair sales are still ginormous) involve the same old tried and true marketing tricks that have seen them through the last half-century. Sampling, new ads and more TV spending are hardly revolutionary, and neither is finally trying to figure out how to use Facebook.
ABI is losing the battle for customers perceiving them as a patriotically American company, however jingoistic and emotional that is. They’ve also taken hits for the way they’ve treated employees — laying off hundreds (is it thousands yet?) — and keeping the remaining ones fearful for the next round of layoffs and working many jobs and too many hours. They’ve also taken a hit for asking suppliers to wait as long as four months to be paid.
ABI could produce beer every bit as flavorful as the best craft beer, but they wouldn’t know how to sell it. It’s not their business model. ABI president Dave Peacock thinks sampling will work, of course. “‘When we get the trial, we find we have a positive result,’ Peacock says.” But I honestly can’t see how sampling will be a positive experience for young people that recognize there are more flavorful alternatives to mass-produced American-style light lagers.
I think the Hans Christian Anderson fairy tale, The Emperor’s New Clothes, provides a useful analogy. If we think of flavor as clothing, sampling young people on Budweiser will only serve to reinforce that indeed the Emperor has no clothes.
KDAF-TV in Dallas, Texas is reporting that Anheuser-Busch InBev is increasing the price on a number of their products this week due to “slumping sales.” The price increases will be anywhere from 50 cents to $2.00 on packages ranging from six-packs to 30-packs. MillerCoors will also take a similar price increase in October. To me that’s good news for craft beer, too, because it makes the gap between beer from the big breweries and their diminutive rivals smaller.
Here’s another interesting infographic that nicely shows both the production and consumption of beer worldwide. It’s interesting to see the relationship between the two for each nation side by side. You can then easily work out how much beer they export or how much beer is imported into each country. One caveat, it shows Europe producing more than Asia — which recently changed — suggesting the data may be at least older than this year.
In a provocative article today, the business-oriented website, TheStreet.com, which describes itself as the “leading digital financial media company,” pondered whether Anheuser-Busch InBev might possibly be considering buying the Craft Brewers Alliance (CBA). The piece, by Miriam Reimer, entitled Anheuser-Busch Takeover Target: Craft Brewers Alliance?, certainly had the wags wagging on the blogosphere today.
There’s a great reminder of just how insignificant craft beer is to the business world in the opening paragraph, which refers to the CBA as that “little-known craft beer maker.” Compared to the big two, that’s understandable, but given that the brands in CBA are some of craft’s biggest players, it’s also pretty funny and humbling. But it’s good to remember that what many of us take so seriously is just a very small sliver of a much bigger pie.
At any rate, the idea of ABI buying the CBA was floated by Washington Street Investments president Bryce Peterson. Despite stating that “such speculation is premature,” he had no problem engaging in it himself. The thinking is, apparently, that ABI “might think it’s smart to buy a strong brand in the craft area and use its incredible distribution and marketing strengths to grow the acquired business.” Which sounds good on paper, but that’s exactly the reason that Anheuser-Busch earlier invested in the CBA brands individually, before their merger in 2008. When craft beer was beginning it’s latest growth trend, A-B distributors started wanting to carry some, too, and that drove A-B to partner with RedHook and Widmer to satisfy that demand. As a result, I’m not sure what buying the remaining 64.4% of CBA that ABI does not own would accomplish. The bulk of the article is given over to share prices, quarterly sales, and other business analysis. It’s interesting, up to a point, but all the numbers don’t seem to manage to answer the basic question of what advantage there would be for ABI. Plus, isn’t ABI still trying to trim the fat to pay for buying Anheuser-Busch?
The article concludes with a poll, asking readers to answer the question posed by the title: “Yes — Anheuser-Busch sees long-term potential in Craft’s growing corner of the market” or “No — Anheuser-Busch wouldn’t bother with such a small-time player.” What’s surprising is that as of this evening better than 17% thought “no.” They obviously are oblivious to A-B’s history. I’ve never seen a niche market too small for them try to own or destroy … ever. And InBev is even more ruthless than A-B was, so it’s hard to imagine them not going after craft beer in some fashion. Whether it will be by buying the CBA, at least at this point, is still an open question.
UPDATE 8.26: Author Miriam Reimer did a follow-up article to this one, Anheuser-Busch Thirsty for Craft Brewers, Poll Says, focusing on the poll at the end of it. She contacted me about the piece, and we spoke on the phone for a good half-hour, quoting me briefly in the article on page 2.
While MillerCoors had already announced their intention to start up a new division dedicated to its smaller brands and imports, today they announced that Tenth and Blake Brewing Co. was open for business. There’s no website yet, but there is a Facebook page.
Here’s the press release:
Tenth and Blake Beer Company Opens for Business
Earlier this summer, MillerCoors announced plans for a new company focused on craft and import beers, aimed at strengthening relationships within the beer industry and enhancing the overall segment’s volume and growth. Today, to reflect the passion, great brewing tradition and entrepreneurial spirit of its beer brands, the company announced its new moniker. Tenth and Blake Beer Company is now officially open for business.
“This is a unique and exciting period in the beer business,” said Tom Cardella, the company’s CEO and President. “With the added focus on our craft and import brands and the talent within our brewing network, Tenth and Blake Beer Company has the opportunity to make an impact and continue to help grow this segment. We’re made up of passionate brewers and merchants of the world’s finest specialty brews, and we look forward to celebrating the joy of beer with beer drinkers throughout the U.S.”
The organization wanted a name that reflects its great beer heritage from MillerCoors, while highlighting its unique and differentiated position in the industry. The 10th Street Brewery in Milwaukee brews Leinenkugel’s and various specialty beers. And Blake Street in Denver is home to the Blue Moon Brewing Company at the Sandlot. These facilities will be primary sources of many of the company’s brews, while serving as incubators of ideas and future beers.
The company’s network of brewing expertise extends beyond Denver and Milwaukee, with the Leinenkugel’s Brewery in Chippewa Falls, Wis. and the AC Golden brewery in Golden, Colo. In addition to craft brews like Blue Moon, Leinenkugel’s, and Colorado Native, Tenth and Blake Beer Company features top imports, such as Peroni Nastro Azzurro, Pilsner Urquell and Grolsch.
“Employees of Tenth and Blake Beer Company will take beer passion, education and capabilities to the next level,” Cardella said. “All team members will participate in training at one of our breweries, take part in beer merchant sessions and go through sales training to better understand and serve our customers.”
As an independent yet connected company, Tenth and Blake will own the strategic business drivers — marketing, trade marketing and an independent sales organization dedicated to the craft and imports business. The company will in-source other capabilities from MillerCoors, including legal, communications, HR, marketing services and consumer insights.
Hmm, I’m not sure what to make of that. Is it an admission that such a large, global company is too big to think small in the way one needs to for promoting and successfully selling smaller, niche brands? Or is it simply easier to parse out the tasks to two independent groups, one that has to think big picture, freeing the other to think small and more local? On the other hand, with sales of core brands flat or soft, perhaps it makes sense to give more focus to the smaller brands that actually are doing well.
Harry Schuhmacher from Beer Business Daily, reports that “Tom, in a letter to distributors obtained by BBD, writes that they have built a team of ‘brewers and merchants of the world’s finest specialty brews, celebrating the joy of beer with our customers and consumers’ to build a ‘deeper relationship’ with customers.” That sounds a little too rah-rah for my tastes, but then that was probably its intention.
Schuhmacher spoke to Tenth and Blake head honcho Tom Cardella, and he told him the following:
Tom says that their “entire team will participate in specially designed on-boarding programs that will include spending several weeks working inside our breweries and being certified in our beer merchant training. And everyone from the janitor to the CEO will go through sales training to better understand and serve our distributor and retailer customers. We will be an organization of merchants sharing our love of our great beers and creating value in the market.”
The new unit will have a “dedicated new sales organization” that will bring “focus” and they will provide a “dedicated supply chain function to ensure coordination of the fine motor skills needed to service smaller specialty brands” while still providing the services of a big corporation with regards to “legal, communications, HR, marketing services and consumer insights.”
The new unit will develop “distributor beer merchants (DBMs) in a whole lot of markets working side-by-side with you, our distributor partners.” DBMs will be “soley” dedicated to their import and craft brands with dedicated brewery “managers” who will “own and execute the craft and import portfolio for each of their respective management units, delivering wins to our general managers.”
And the Milwaukee Business Journal added:
MillerCoors’ 10th Street Brewery in Milwaukee brews Leinenkugel’s and various specialty beers, and Blake Street in Denver is home to the Blue Moon Brewing Co. at the Sandlot. The facilities will be primary sources of many of the company’s brews, while serving as incubators of ideas and future beers, the Chicago-based brewer said.
MillerCoors also operates the Jacob Leinenkugel’s Brewing Co. in Chippewa Falls and the AC Golden brewery in Golden, Colo. In addition to craft brews like Blue Moon, Leinenkugel’s and Colorado Native, Tenth and Blake Beer Company will be responsible for imports such as Peroni Nastro Azzurro, Pilsner Urquell and Grolsch.
Actually, according to the Facebook page, here’s the list of beers Tenth & Blake will be responsible for:
That should keep them busy.
