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  Beer Wars   Beer Wars  Mya Frazier  
         
 
Beer Wars The rise of the beer behemoths in America—and those seemingly limitless TV advertising budgets—steadily wiped out the diversity of beer brands available to consumers as brewers shifted to mass production to cut costs and take advantage of economies of scale.

How does one explain this huge shift in the marketplace? Was demand fundamentally altered because of a change in the supply side, instead of the other way around? Did the big brewers win dominance by unfairly altering the distribution system and, therefore, the economics of the beer business?

Those are just some of the questions raised in the quirky, low-budget documentary Beer Wars, released recently. It weaves a classic David v. Goliath narrative about the struggle craft brewers face when growing a brand and trying to steal share from the beer behemoths like Budweiser, Miller and Coors. The documentary aired in more than 400 theaters in mid-April 2009, a one-night event that included a live panel with the filmmaker, independent brewers and industry experts moderated by an ever-snarky Ben Stein.

 
The narrative in Beer Wars focuses on craft brewers’ fight for retail shelf space. It’s a battle any upstart brand understands and, in the consolidated retail landscape of today, must overcome to be successful. In the beer business, the gatekeepers are the beer distributors, who have longstanding relationships with the major beer companies.

Beer Wars explains this distribution system and offers a lengthy digression involving a trip to Washington, DC, for an inside look at lobbying. Big brewers hold parties to ingratiate themselves with members of Congress and other Washington insiders—for the sole purpose of protecting the so-called three-tier distribution system. (A system where brewers make the beer, wholesalers distribute it, retailers sell it and none of the three can do one of the other two things at the same time.) Beer Wars argues this favors the powerful big brands that can command retail shelf space at will and therefore take advantage of the “billboard effect.”

The film’s director is Anat Baron, a former general manager of Mike’s Hard Lemonade, a brand that itself struggled to get shelf space and grow share after its launch in 1999.

Beyond the conspiratorial lobs thrown at big beer brands and nasty insults about the watered-down taste of mass market beers, there is a moment in the film that poignantly addresses what could be a time bomb for major beer brands: the problem of commoditization. The scene takes place in a nondescript bar that could be in any city in America. The film’s moderator is conducting an admittedly unscientific taste test of sorts. Paper bags are placed over three beers—Bud Light, Miller Lite and Coors Lite—as the beer drinkers confidently proclaim allegiance to a particular brand (as in “I’m a Bud man”).

All three beer drinkers fail to pick their supposed favorite beer, proving that the taste testers are susceptible to marketing and packaging (although it’s hard to discern how many other unscientific taste tests ended up on the editing room floor). If we believe it took only one take to find three beer drinkers who really didn’t know what they were drinking, one can only conclude this: All is not well in mass-market beer land.

Despite dominating the beer category with a 78 percent market share, the three major beer brands in the US—Budweiser, Miller and Coors—are arguably suffering from a dangerous brew of sameness and commoditization.

Is that what explains such lackluster beer sales, essentially flat in 2008? It’s still an enormous category, with total sales of US$ 101 billion last year on 210 million barrels of beer. But could the big brands now be paying a price for all this uniformity in taste and mass-market dominance?

The beer category’s only hot spot for growth is in the craft beer category, which grew by 5.9 percent in 2008, according to the American Brewers Association. Meanwhile, sales of imports declined 3.4 percent and non-craft domestics (a category that includes the likes of Bud and Coors) were essentially flat, at 0.6 percent growth. (The ABA defines a craft brewer as small, independent and traditional, with annual production of less than 2 million barrels annually.) Nevertheless, the top three brewing companies in the US—Anheuser-Busch InBev, Miller Coors Brewing Co. and Pabst Brewing Co.—remain firmly on top of any list of annual sales.

 
But fourth place belongs to a once tiny little brewery based in Boston, Mass., started in 1985. The fast-growing Boston Beer Company manages the now well-known Samuel Adams line of 20 beers, and in 2008, the company logged sales of US$ 398 million, up from just US$ 217 million in 2004. The branding question for the category is clear: Can the feisty upstarts in the craft category take advantage of this opening in the market?

With shoestring marketing budgets and limited distribution, new beer brands must rely on the sheer force of personality and a dedication to authenticity, quality and uniqueness. Commoditization was never an option. The big brewer brands, however, aren’t idling either, but are responding to shifts in consumer tastes by launching new product lines and by importing and distributing foreign brewers’ brands.

Beer Wars exposes a clear and lasting dichotomy of cultures between the big brands and the smaller upstarts. In interviews with big beer brands, the executives and brewmasters come off as stuffy, establishment types. On the other hand, the craft brewers—among them Sam Calagione of Dogfish Head, Greg Koch of Stone Brewery Co. and Jim Koch of Boston Brew Company—are passionate, fun, anti-establishment and maybe even a little eccentric, the kind of guys you’d want to sit down and have a beer with. Just consider the self-deprecating tagline for Dogfish Head beer—“Off-centered beer for off-centered people”—not exactly in the same vernacular as the boastful “King of Beers.”

Dogfish experiences a growth tear throughout much of the film, and Calagione is depicted managing the opening of a newer, larger brewery operation to keep up with demand for his product. Greg Koch of Stone Brewery talks unabashedly about his feisty “angry” beer brand based in San Francisco, CA, a line of beers known for strong biting flavors and caustic names like Arrogant Bastard Ale.

Despite the arguable unfairness of a distribution system that favors the big breweries, the unbridled lust for growth by the Goliaths of the world isn’t keeping down the indomitable Davids like Stone Brewery, which saw sales grow by an astonishing 47 percent in 2008.

Maybe the three-tier distribution system is unfair, but it isn’t preventing these upstart brands from finding a niche and, perhaps, radically changing the demand side of the business in the process.     

[8-Jun-2009]

 
  
  

Mya Frazier is freelance business journalist. She can be reached at www.myafrazier.com.

     
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Beer Wars: Branding Lessons of the Independents
 
 I am not sure I agree with the description. The beer war, like many other wars, take place in the mind. however, there are not many strong beer brands in the market. Bud used to be the leader, and will continue to do so. Distribution system will follow the leaders. 
- June 6, 2009
 
 Note to the author: Stone is located in Escondido, CA, not San Francisco. I know because I'm lucky enough to live nearby. 
- June 8, 2009
 
 In Canada micro-breweries also compete in a market of large mulitnationals. This first TV ad for Steam Whistle Beer just started airing today. It shows how this small brand differentiates itself from the lack-lustre landscape of traditional beer ads. See info and ad at http://mktgcliks.blogspot.com or navigate to YouTube to find the Steam Whistle ad. 
Christina Clements, Professor, Humber College - June 8, 2009
 
 I've been fortunate enough to hear from SAB's own marketing team - that the consumers can hardly ever differentiate amongst their beer brands! Although a student taste-test proved contrary.
Distribution is the deathgrip by which SAB have operated in South Africa and is the way they'll do it everywhere. As for quality you're better off going for a Windhoek!
 
BobO - June 16, 2009
 
 Regarding the so-called "beer wars", the romanian market is somehow distinctive to the US market.
Here we can choose from a wide range of beer brands, a lot of them beeing owed by multinationals like SAB Miller, InBev, Heineken or Carlsberg, but also some of them being domestic brewers.
In terms of market strength, the foreign competitors still run the show.
Speaking about distinctive tasteness, i can tell that there is a somewhat differentiation between different brands.
Furthermore, i can give you the example of taste distinctivenes between Miller brands like Ursus, Redd's, InBev brands like Becks or Stella Artois and Heineken brand.
There is no such thing as commoditization present on the romanian market, at lest not that pertinent as in US.
On the other hand, slogans like "king of beer" still work here, at least in the case of Miller's most powerful romanian brand Ursus.
Still, i can assure you, as a loyal consumer of the brand that it has the necessary distinctive taste 
Sergiu, Student - June 16, 2009
 
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