Monday, January 17, 2011

MGD 64 Lemonade: I'm not kidding

"MillerCoors Plans Lemonade Beer"

That's an actual headline from the Wall Street Journal. I'm not making this up. Let's get a couple relevant quotes, and then shred this. Here's a  beauty from the Chicago Tribune:
The company expects the brew to attract new consumers to the beer category and to capitalize “on the growing consumer interest in flavored beers,” Andy England, chief marketing officer for Chicago-based MillerCoors, said in a memo to employees Friday.
They better hope something works, because:
Miller Genuine Draft 64, named for the number of calories it contains, got off to an auspicious start after its national rollout in 2008. But sales have cooled. The brand’s unit sales to retailers fell by a double-digit rate in the third quarter, the company said in November, while MillerCoors’s overall sales to retailers declined 4 percent. 
Does that sound familiar? Chillingly familiar? That's right!
MillerCoors, a joint venture of U.K. beer giant SABMiller PLC and U.S.-Canadian brewer Molson Coors Brewing Co., has struggled with another fruit-flavored brand: Miller Chill. The lime-infused light lager enjoyed a strong debut in 2007, but its sales slid after larger rival Anheuser-Busch Inc. unveiled Bud Light Lime the next year.
Hey, if ABIB 'steals' lime (i.e., does it better, which Bud Light Lime did: Chill was poorly executed), just go to lemon! They'll never think of copying that! 

The two/three (your call: is "MillerCoors" one big brewer, or two?) big brewers are having a bad time of it. The economy is clobbering their main consumers, and craft beer has apparently reached a tipping point that has consumers across the spectrum interested, despite higher prices. Mainstream beer is taking an ass-whipping, even light beer sales are down (they're actually up over the last two quarters, I believe...but only because the previous year's numbers were so bad), and the mainstream imports are having their damned lunch eaten (and getting kicked around the schoolyard to boot). 

No, wait...Yuengling is pretty much mainstream -- a bit out of it, but it's essentially a light lager made with a substantial amount of corn, and they do have a light beer -- and they're kicking ass and looking for a new production plant. Could it be that it's actually...the big brewers' marketing that sucks? Oh, man, if the marketing fails...

Here's what happens when the marketing fails. ABIB's sales dropped 3.1% last year (MillerCoors fell 3.4% over that period). But things are not unhappy at the big brewers. Why?
The two brewers, which together account for nearly four out of every five beers sold in the U.S., still have managed to record steady profit growth, offsetting their weaker sales volumes by raising prices and cutting costs. 
Sound business practice, leading to expansion...well, no. What this really leads to is retiring debt, and then going to look for other breweries to buy and ravage -- sorry, lead to new heights of world domination. Rumors are rife that Diageo may finally be ready to unload Guinness (there are even some rumors that ABIB might be ready to just eat Diageo whole), and Grupo Modelo is a likely target. Carlsberg and Heineken are probably safe from takeover because of their ownership structure, but analysts are predicting that the final round of consolidation may at last be upon us, as the signs from the Book of Revelations appear. (It's getting tighter in spirits, too: Diageo, Pernod Ricard, Bacardi, LVMH (who seems more interested in buying up more luxury goods than booze lately), United, and Gruppo Campari are circling like wrasslers in a huge cage match, while Brown-Forman and Fortune hang out in the corners. That one's gonna get bloody.)

Who will win? I guarantee it won't be the consumer, and government anti-monopoly agencies seem to be nowhere in sight.

Meanwhile, that "growing consumer interest in flavored beers"? Like the smartass fish used to tell Charlie the Tuna, consumers aren't interested in flavored beer, they're interested in beer with flavor.
 

26 comments:

The Beer Nut said...

Excellent run-down and hypothesising there, Lew.

But... I thought that after buying an AB for their IB that ABIB were broke and more in the habit of offloading property (like Tennent's) than picking up new ones.

Also, aren't Bacardi in the spirits scrum as well?

Lew Bryson said...

I knew I'd miss a spirits company doing it off-the-cuff like that; thanks, I'll add them.

But ABIB's retiring debt rapidly, and should be back in the hunt before the year's out. Scary, ain't it?

TC said...

Ah, lager and lemonade. Add a shot of vodka to the mess and you have a Poor Man's Shanty, which was a drink that cost me many nights when I was 20.

Bill said...

Miller owns Leinenkugel, which does decent basic beers (well, some non-decent, like any brewery) sold in the Midwest. They've done a Summer Shandy for a few years and it sells well. It's basically a lemon-flavored premium larger, not an actual mix of beer with lemonade or soda or anything.

Since Miller knows that folks respond well to Leinie's Summer Shandy, I'd think the safer thing to do would be to turn that into a Miller beer rather than create a new MGD 64 brew.

Really, Miller could use the Leinie's line-up for a lot of things. Their wheat beers sell well. Were I the management of a large company, I'd be seeing what works well in my regional brands and think about taking them national before I create new things out of whole cloth for national brands that aren't doing that well.

JessKidden said...

@ Bill

Miller-Coors has already taken most of the Leinenkugel seasonal and flavored beer national (judging by their own website's list of state distributors). The only ones I don't see around NJ are the "traditional" beers like their original light lager and the Dark, Amber and Red.

http://leinie.com/find_leinies.html

Lew Bryson said...

Couple factors there, Bill, JK. Leinie's Shandy is heavier than this MGD 64 lemonade's going to be, I'd bet on it; this stuff is going to be more like a light beer (an ultralight beer) with a lemon and a half-packet of Equal in it, I suspect. Could be wrong, if they're calling it lemonade, but what the hell is MGD 64 Lemonade, anyway?
What these guys really want -- the marketing guys, anyway -- is a beer that has the low-calorie appeal of Lite and the flavor appeal of Blue Moon. Luckily, so far someone has had the brains to be able to convince them that just won't work. I don't expect that to last forever, with Blue Moon continuing to grow.

And thanks so much for reminding me I can't get Leinie Creamy Dark. I do like that beer...

Russ said...

In a just world, Leinie's Creamy Dark would be available nation-wide and you'd have to travel up to the Northwoods of Wisconsin to get Berry Weiss. ;-)

Stephen Beaumont said...

(your call: is "MillerCoors" one big brewer, or two?)

Surely three: Miller, Coors and Molson...

Lew Bryson said...

Coors and Molson are not one? Is there dissension in the boardroom? After all, my touchy Canadian friend...what's in a (joint venture's) name?

But really? Do it matter?

Stephen Beaumont said...

I was being facetious, 'natch, not at all touchy.

You're quite right, though, in that this consolidation game has still a few rounds to go, although more on the spirits than the beer side, I think. As I posted recently over at WoB, I don't think much is going to come of the latest round of Guinness rumours, unless someone really makes Diageo an offer they can't refuse. Modelo, on the other hand, is definitely in play, with ABIB the most likely suitor (which rules them out of the Diageo/Guinness scenario anyway). And SABMiller may decide to slay their own two-headed beast by consuming MolsonCoors.

But does it matter? Only to those whose jobs are at risk and the communities that may suffer when superfluous plants are closed.

The Beer Nut said...

And if SABMollersonCoors decide that the new Worthington Brewery in Burton is a "superfluous plant"? Eek!

sam k said...

Rumor had it that the last (and substantial) round of price increases on Bud brands was to raise capital to finance an undisclosed acquisition, as buying AB had left ABIB cash-poor in the short term. Seems like the plan is right on track so far, eh?

Gary Gillman said...

One thing that puzzles me is why the North American brewers haven't introduced a brand with a spec from, say, 1950 or 1900. Instead, they go ever lighter. The European brewers by and large have not made this error: they still make all-malt lagers (I mean the macros) with flavor or beers in which the malt at least has the principal say and the hopping is decent.

In North America, ketchup, candy bars (chocolate bars to Canucks), and most soda or pop tastes like it did two generations ago. But does Coors, or Budweiser? I doubt it. Even in my own memory, the major North American beers (some exceptions apart) aren't as good as they were 30 years ago, and in some cases are almost tasteless. Strange. There must be some sophisticated marketing thinking behind it, but I can't divine it.

Gary

sam k said...

Excellent point Gary. Many regionals have done this in recent memory--Saranac (heck, they renamed the company for the brand they created), Hudepohl, Pittsburgh, Schell, and numerous others, living or dead. Why have the majors shied away from this trend?

And the crap we keep hearing about "nothing's changed in 150 years" is just that. No major brand (nor most regionals for that matter) is anywhere near the product they were 25 or 30 years ago, let alone 100 or more.

Thomas said...

I am glad Bill brought up Shandy's and Lew had his response because my mind was going to a similar path, it was worth the clarification.

Bill said...

Jess Kidden -- I understand that Leinie's is fairly national, but I meant they should consider re-branding Summer Shandy as a Miller beer, or Sunset Weisse or Berry Weisse as Miller beers. They sell well with the minimal advertising that Leinie's does -- mostly radio and POS. I'd think if launched with serious advertising under the Miller label, they'd do well... whereas creating something new for a struggling brand seems like throwing good money after bad.

Lew -- you're in Chicago once a year for WhiskyFest -- pick up a sixer of Creamy Dark!

The Beer Nut said...

Gary, I'd be wary of generalising too much about European macrolager: there is an awful lot of it, and a lot of adjunct-riddled macrofizz, especially when you get out of the countries with a longstanding beer culture.

I very much doubt any European industrial brewery is still making beer to a spec that's more than 60 years old.

JessKidden said...

@ "Bill"- My apologies. My comment was based on your "sold in the Midwest" statement re: Leinenkugel.

@ "samk" - "Saranac" is still just a "dba" name on the beer labels- the brewery name change was from "West End" to "F. X. Matt" back in the '80's.

@ "Gary Gillman" - the macros have dipped their toes into all-malt and other "retro" beers. A-B with that World Select (Heineken clone) and returning Michelob to all-malt. Pabst has the new Schlitz Gusto (still not national)- based on a '60's recipe. Miller's done an all-malt Gettlemen $1000 Beer. Coors came out the limited "Barmen Pils" and the "Batch 19" (draught only at this point, I think).

I love the "story" on the latter. They claim it's a Coors recipe from 1919- but most beer at the time was still "war beer"- 2.75% and many US breweries had stopped brewing by late 1918. And, even more suspicious, Colorado had been under state Prohibition starting in 1916.

Steven said...

Gary -- Capital Brewing of Middleton (Madison), WI actually brewed a beer called 1900 -- supposedly based on a recipe discovered from the time.

http://www.capital-brewery.com/ourbeers/capital1900.html

Honestly? tasted very much like an American Adjunct Lager.

Then, there's also the "original" formula Schlitz that's now on shelves! (yipee)

Gary Gillman said...

Sam, I agree fully regarding Saranac. It's an inspiration. I think they and Yuengling too were closer to the origins of American brewing than the big brewers. Not time-wise, but spiritually so to speak. Other examples have been mentioned, again at regional level.

Gary

Gary Gillman said...

Hey thanks Lew, and for an excellent article.

I wanted just to point out that my earlier comments about European lager's high quality were meant to apply to the traditional beer countries such as Germany, The Netherlands, Austria, Czech Republic, northern France and Alsace-Lorraine. But even outside these areas you can get beers of high quality, e.g. Estrella Damm or Moritz in Barcelona and area, some Italian lagers, and I could go on. But Euro-fizz does of course exist in some places, I would never deny that.

The UK's mass-produced lager is not stellar (IMO), but real ale supplies the traditional element there, so that's kind of an exception.

Circa-1900 U.S. hop rates per barrel averaged much higher than today's. I believe a Budweiser or Coors or Miller High Life, made to a recipe from that time, would be a terrific beer. Adjunct use then did exist but based on what I've read about historical recreations, the percentages used, combined with high hopping rates, should still result in a first-class beer. In fact, Sam Adams Boston Lager shows this with hopping at something like a pound per barrel. An excellent, traditional American lager!

Gary

JessKidden said...

F X Matt's importance to craft beer history is often overlooked. They brewed New Amsterdam Amber Beer in 1982, at a time when there were few craft breweries and only one (Newman) in the Northeast. Thus the pioneer old-line "craft contract-brewery", a few years before Koch's BBC and Pittsburgh Brewing Co.

In the early '80's, they also started releasing an annual Christmas beer, called "F. X. Matt's Traditional Amber Holiday Beer"- which had to be among the first on the East Coast, as well (well, actually reviving an old tradition). I remember it tasting very similar to New Amsterdam Amber Beer (and figured it might be the same beer).

They've long partnered with Brooklyn (Hindy's book covers that era) and even with Brooklyn's current expansion, the numbers look like that partnership will continue. They've done some Samuel Adams beers, a number of other early craft-contracts, and kept Prior Double Dark alive for a few more years after Schmidt's folded.

I remember in the late 1970's-early 1980's, they were still making a few interesting draught-only beers, including "Utica Club Sparkling Ale". Go back to the '30's and they had an amazingly line- including 4 ales- an IPA, Stock Ale, Cream Ale (the longest lived) and the Sparkling Ale, as well as a porter and "Dark Wurzburger".

The Beer Nut said...

Moritz I'll grant you is a diamond in the rough, but Estrella Damm is absolute crap, and full of rice. There's a fair amount of shite in Germany and Austria too. Bitburger and Ottakringer, anyone? Amstel, Dommelsch, Kronenbourg. It's a big big list :)

Gary Gillman said...

As always, people will disagree on taste...

Gary

Steven said...

"They brewed New Amsterdam Amber Beer in 1982, at a time when there were few craft breweries..."

Oh man, Jess -- I'd completely forgotten about New Amsterdam -- back in the fun days of beer hunting when it was so difficult to find anything new.

I remember that holiday beer too, and thinking the same as you, "And this is different, how?"

Thanks for the good memory.

The Beer Nut said...

And no brewery is invisible to the big predators, it seems, as Sharp's of Cornwall becomes a happy member of the MolsonCoors family. Fixed grins all round.