Analysts Question Value of Flood of Beer Brands
At a time of heightened consumer health-consciousness, the nation’s three largest breweries are rapidly increasing their offerings in a battle to retain loyal customers and draw in a new audience by expanding their product lines.
Beer companies have introduced light beers with fewer calories, cold-filtered drafts, dry versions with less aftertaste and a fast-growing category of non-alcoholic beers, among an expanding number of brews.
The three largest U.S. beer companies--Anheuser-Busch, Miller Brewing Co. and Coors Brewing Co.--together hold three-quarters of the American beer market. And they have had early profits and seen steady increases in market share with their newer beers.
But analysts are now wondering if these spin-off brands have the staying power necessary for long-term sales. They question whether adding new brands has reached a glass ceiling of success for breweries, and they argue that a surplus of brands on store shelves contributes to customer confusion.
Industry watchers contend that introducing more brands threatens to cannibalize brand allegiance and fragment a loyal drinking public--and could eventually tarnish flagship brands and the family name itself.
“It is better to have one name than 25 brand-extension names,” said Tom Pirko, president of Bevmark Inc., a Los Angeles-based management consulting firm. Beer companies “are working twice as hard for the same sales. Each time there is a line extension, the brand name is more diluted. The more you dilute the (company) name, the more the product name is weakened.”
Beer companies are trying to stir up consumer interest during this year’s drop in beer sales. The decrease in sales was prompted in part by federal excise taxes, which jumped early in 1991 to 32 cents from 16 cents on a six-pack.
Beer companies simultaneously added their own price increases, which they had planned. Coupled with California’s increased alcohol tax, all beer shipments in the state dropped by 3.97% in the first six months of this year, according to the California Beverage Hotline.
Until the 1960s, some of the leading beer companies offered only two versions of beer--their flagship brand and a low-end version. After Miller had “runaway success” with Miller Lite’s introduction in 1974, other beer companies followed, eventually varying the style to match what they believed would be appeal to the American palate, said Paul Gillette, a beverage consultant and publisher of California Beverage Hotline, an industry newsletter.
In 1985, Anheuser-Busch’s products other than its flagship Budweiser brand accounted for 32.4% of the No. 1 brewer’s shipments. Five years later, after the company added Bud Dry, Busch Light and Michelob Dry, it witnessed growth in the newer brands, which commanded more than 40% of the company’s total shipments for sale in 1990. But the original brand had a consistent consumer market, hovering around 49.5 million barrels shipped from 1985 to 1990, according to Beer Marketer’s Insights.
The figures for Coors give an even more telling indication of greater sales growth for the company’s newer products at the expense of its original brand. Including Coors Light, which outsells its regular brand, the company’s shipments for newer brands grew from 42% in 1985 to 77.5% in 1990.
The offerings included its Keystone beers, Coors Extra Gold and Killian brands, according to Beer Marketer’s Insights. Shipments for the original Coors during this five-year period dropped by more than 35 percentage points to 22.5% of all shipments in 1990.
For Coors, new beer brands came out of necessity, analysts said, noting that shipments for its original brand plummeted to 4.3 million barrels in 1990 from 7.9 million barrels in 1986.
Meanwhile, Coors Light shipments blossomed into the company’s leading brand, increasing to 11.8 million barrels in 1990 from 7.2 million barrels in 1986 , according to Beer Marketer’s Insights. Coors Light commanded 61.3% of the entire company’s shipments for the 1990 figures.
“If Coors hadn’t come out with Coors Light, the company would no longer exist--it would be a dead company,” said Jerry Steinman, publisher of Beer Marketer’s Insights.
Jon Runge, manager of new product development for Coors, said the Golden, Colo., company is expanding its product line because consumers’ tastes are changing.
“The era of the flagship brand of beer is over,” he said. “The growth in sales in recent years has been in new brands. Consumers want new and different things.”
Despite a recent slowdown in beer sales overall, the new brands that the three leading beer manufacturers have introduced have accounted for nearly all of the successful beers in the 1990s. The reason, in part, is because breweries tend to invest large amounts of money in promoting the brand’s latest extension, analysts said.
With the drinking public consuming less alcohol and Americans more health and weight conscious, perhaps the fastest growing beer products are in non-alcoholic brews. Americans have yet to acquire a strong interest in low-alcoholic beers, such as Anheuser-Busch’s LA. But sales of non-alcoholic beers, such as Miller’s Sharp’s and Anheuser-Busch’s O’Douls, have jumped in the few years they have been on the market. Coors entered the non-alcoholic beer market in September with Coors Cutter.
But as the Big Three breweries create new varieties of beer, analysts remain uncertain about how much more companies can extend their product lines without confusing consumers with a surplus of brands.
Breweries “might squeeze another drop out of the lemon,” said Gillette of the California Beverage Hotline, “but they’re not going to get a cup full of lemon juice.”
Brewing Troubles Product line extensions for the three major U.S. breweries make up an important segment of beer shipments. In recent years, while two of the three largest U.S. beer makers have shipment declines for their original brands, all three have increased shipments for their light beers. And the breweries have steadily increased shipments for other line extensions. Source: Beer Marketer’s Insights Inc.
