Beer Executives Discuss Industry-Wide Trends in Las Vegas

Sam Calagione at the 2013 NBWA Convention

Five of the beer industry’s top executives, all staunch competitors, agreed on one thing at the 76th annual National Beer Wholesaler’s Convention: continued, overall volume declines of the category are cause for serious concern.

So on Tuesday, when a panel featuring Dogfish Head founder Sam Calagione, Anheuser-Busch president Luiz Edmond, Crown Imports president Bill Hackett, MillerCoors CEO Tom Long and Heineken USA CEO Dolf van den Brink took the stage to address thousands of U.S. beer distributors, it was with an eye toward ways to lessen the bleeding.

“Volume concerns are a real issue,” said Long. “Our aim in putting together MillerCoors was to grow the size and value of the entire beer category. We are doing a good job of driving the value of the business but the volume has been down.”

Overall beer volumes have been in decline throughout the year. Industry-wide sales are down 2.1 percent and domestic brewery depletions are down 3.3 percent through August, according to the Beer Institute.

Although total beer volumes increased from 205 million barrels to 207 million barrels in 2012, most industry professionals will claim that it was an anomaly and note the three previous years of declines. If this year’s trends continue, the industry could lose upwards of 5 million barrels.

So what’s to blame? Large domestic brewers have pointed out poor weather, the loss of drinking occasions to wine and spirits and the growing consumer shift towards higher alcohol craft beers.

While that shift has helped Calagione, he said that he’d still like to see overall beer consumption improve.

“The craft beer community recognizes that we do need to see overall beer trends return to the positive,” he said. “We are hopeful that we can start getting some of that share back from liquor and wine.”

And while each panel participant agreed that the U.S. beer industry needs to work collectively to return volumes to their peak of 213 million barrels in 2008, there were a variety of suggestions for making that happen.

“If we together, decide to shape the industry, we can grow per capita consumption of beer,” said Long. “Focus on quality, invest in brands, not styles, and don’t forget about the economy drinker.”

Hackett made similar remarks.

“It is about building brands and brand equity,” he said. “That is going to be the marker of success for our industry. You can’t change the weather or what competitors are doing, but you can control what you do.”

But Van den Brink believes the secret to improving the declines is by continuing to appeal to the “younger generation.”

While much of the talk resembled typical ‘big beer’ rhetoric, executives broke with the entrenched past by spending a considerable amount of time discussing the need for a continued focus on the high-end. On the other hand,Calagione, surprisingly, took an opportunity to point out the sessionability of the average craft beer — even comparing the ABV to that of “lighter lager.”

“The high end is where craft shines,” he said. “But high end does not equate to high ABV. Craft breweries’ beers average 5.7 percent ABV, a lot closer to the light lager flagships than to the 12 percent average wines and 15 percent average mixed drinks.”

Van den Brink believes there is still plenty of run room in the high-end and even said he thinks the entire industry could do a better job of innovating.

“Today, high-end beer represents about 23 percent of beer business in U.S.,” he said. “In France and Italy it is 35 percent. We are only half way on our journey to growing the high end. At the end of the day it provides good margins and excitement to consumers.”

But don’t imagine this way of thinking has fully pervaded the big beer companies, where marketing and appearance — brand identity — are still key to maintaining share.

“It can’t be about styles and flavors,” said Hackett. “It has to be about brands. That is the challenge the craft category has.”

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