Yesterday, the Denver Post’s “First Drafts” blog ran this story: “Pete Coors, big beer industry continues to grapple with craft beers.”
No kidding. It was one of many interviews Coors is providing as he stumps for Denver to host the next Republican National Convention. Naturally, he talks about beer, too.
There are several figures used in the post to show how things have been rough for MillerCoors and its chairman, like fourth quarter earnings for the company down 2 percent to retailers and 2.2 percent to wholesalers. Generally speaking, we know that beer sales are down for big brands like Budweiser, Miller or Coors.
But what struck me most were some of Coors’ comments about the beer industry, which came off misguided, crotchety and sometimes downright false. It surprised me, considering we’re talking about the head of the seventh largest brewer (by volume) in the world.
Which led me to this post. Consider it an exercise in crowdsourcing, venting and general confusion over Coors’ quotes in the Post story. You can read that piece here, but we’ll walk through some of the comments below and see if we can iron out details and facts. I encourage you to leave your own thoughts or findings in the comments.
Without further ado, let’s see what Pete Coors had to say…
On competing with craft…
“Basically the biggest trouble we have is on-premise sales,” he said. “We have a lot of bar owners who are enamored with craft beers. They are beginning to take off the premium light handles and putting bottles behind the bar instead and replacing the handles with craft beer handles. We lose 50 percent of our volume when that happens.” …“We have done research that shows it’s not in the economic benefit for a bar to do that.”
Let’s first acknowledge that bar owners are running a business and when craft beer sales are beating macro lagers solidly, it makes sense to give the people what they want. Growth of the craft brewing industry in 2013 was 18 percent by volume and 20 percent by retail dollars. If you can charge an extra buck for a craft beer over Coors, that’s good for a business, especially when a customer doesn’t mind paying extra for higher quality.
But let’s also consider the issue of variety. I’ve noted before the rising interest in variety packs and the idea of the “portfolio drinker,” but also consider that having a large beer menu – like one featuring craft beer styles that people are nuts for – moves product:
According to the Alcoholic Beverage DemandTracker, 33 percent of alcohol drinkers who visit restaurants regularly report that they are more likely to order beer when offered a large selection of beer brands.
A good portion, about 26 percent, also said they are more likely to order more servings of beer with a better beer selection than they would have otherwise.
That’s not specifically bars, but I imagine the argument could be made it’s transferable to that kind of location as well.
On growth and market share…
“They all want to grow, but the more they grow the less crafty they are,” he said. “They are getting fairly large and they are getting into each other’s space. They are having a hard time defining themselves as craft brewers because of their size.”
That comment was made in regard to fast-growing craft breweries, for which Coors believes there is a correlation between getting larger and a lack of innovation or diversification.
Except for Sierra Nevada, which has more variety packs than they suddenly know what to do with. Or New Belgium, which continuously releases new Lips of Faith offerings and just added Snapshot as a year-round beer and has their Hop Kitchen brews. Or Stone, which is seeking to open a second location while sending out the Enjoy By series or their Spotlight Series.
Defining oneself as a craft brewer – so long as you’re below the magic threshold of 6 million barrels – has never been as easy. The Brewers Association has made sure of that at a time when consumers are anxious to buy craft beer. The hardship for breweries isn’t defining themselves, it’s defining all the variation they take on to stand out in an ever-increasing market. Diversification is the brass ring to reach toward, not an iron anchor dragging businesses down.
On today’s industry…
Coors said he is baffled about trends that show the more expensive craft beer market growing by about 7 percent, the light premium beer market staying flat and the economy beer market with brands such as Pabst Blue Ribbon and Keystone dropping by 7 percent or even into double figures.
This situation is not baffling, not after craft beer beat the recession. From 2007 to 2012, craft beer sales more than doubled from $5.7 billion to $12 billion. This is all while Average Joe and Jane were hurting financially.
Even when economic trouble hit, you can’t beat a superior product:
About 24% of beer drinkers told Mintel that they drank more craft beer sold at stores in 2012 than they did compared to 2011, while 22% upped their craft beer drinking in bars.
On the “trend” of craft beer…
“In this economy that is difficult to understand,” Coors said. “But people are staying at home now, not buying cars or houses. They have money to spend. They want to spend it on something that they think has more value. … You talk about the millennials. The world is very different.”
Just to be clear, used car sales are up. New car sales are up. Home sales are up. There is additional money to be spent.
What got me was his acknowledgment that Coors products apparently aren’t something that people think has value. Pete Coors seems to intimate he thinks Coors has value, but consumers don’t. Especially those pesky Millennials, who are making the world very different and won’t get off his lawn.
I’ve written at length about the importance of Millennials to the beer industry so kudos to Coors for taking the bold step of writing them off.
On changing tastes…
Pete Coors … said he still drinks the same beer he has consumed for decades.
“I am a Coors Banquet drinker,” he said. “I grew up on it and just can’t get myself to change.”
… and that’s an issue. In an industry where innovation, variety and change are embraced, Pete Coors’ biggest problem is that he doesn’t want to.
The Undisclosed Wild Card…
The strangest thing of all from the interview was this comment from Coors, discussing why it’s valuable for businesses to have his beer on tap:
“Having a premium light brand, whether it’s Coors, Miller or Bud on tap actually improves the economics of their business. People stay in their seats an average of 18 minutes longer when they have a light premium beer on tap. That means they are spending more money, leaving bigger tips. We have a little algorithm and an app that we give to our distributors to evaluate and analyze these businesses and bars.”
This is a little trickier because I neither have a magic app or access to mathematicians who create algorithms to determine the amount of time people spend at a bar. However, this comment just seems silly. Aside from the fact that we should expect a businessman to say businesses flourish when they use his product.
There are far too many variables to consider here, including location of a business, demographic makeup, weather, regional job type and availability, etc. But let’s assume this is correct, that bars with Coors, Miller or Bud do have customers that spend more time buying beer. This is a slippery slope, especially because at the root of this discussion is the idea of people drinking more beer than they would elsewhere. Please be responsible when you drink.
I’d assume these businesses are primarily in geographic locations where craft beer options are sparse. If we know that craft sales across the board are up and that more locations are adding more craft taps, it may be a safe assumption that businesses that still heavily sell BMC beers are more stranded geographically when it comes to craft beer and have less access.
A state like North Dakota, for instance, only has seven listed craft breweries. That’s roughly one brewery per every 100,000 people in the state, which is also the top state in the U.S. for consumption of beer at 45.8 gallons per capita. I point this out because as a state that consumes the most beer, but with a severe lack of craft beer options, it would suggest Bud, Miller or Coors are more readily available than in a state like California, which boasts more than 300 craft breweries.
Or consider West Virginia, which also has seven breweries. We might assume that BMC beers are widely available. Why would people spend more time in bars there? I asked a friend who’s lived in Morgantown for 10 years.
“It’s probably so that they won’t think about their shitty lives as often,” he said jokingly. But when I pushed him on it, he conceded: “There’s not much else to do here. That’s probably a big part.”
The real answer to what Pete Coors suggests probably lies within several aspects: an area with a large population of young males who are employed, but lack other options for entertainment or recreation.
But this is just me spitballing. I’d be curious to know what you think.
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac
37 thoughts on “He Said What? Pete Coors and His Magical Mystery Press Tour”
Apparently there’s an app that can show you how much profit can be made from craft beer as well. I think Mr Coors may be being a little disingenuous as his company is producing a few ‘crafty’ beers and has bought some micro breweries, including one here in Ireland. So he or his company are well aware that there’s money to be made from craft beer.
Craft beer has come a long way here in the last few years but you won’t find it in every pub by any means. Some customers will still opt for a macro when given the choice but which app will we use to ascertain the possible choices of the remaining customers?
I’d LOVE for Coors to make their secretive app public, or at least disclose what kind of factors they use for their magic algorithm. The whole thing is so silly I wonder if people just don’t throw a spreadsheet at him and that’s it.
It’s just too difficult to go from A to B in this case.
Well if you’re paying statisticians to be Yes Men they have to give you something!
Reblogged this on Inky Beer.
Bryan Roth, killing it as usual!
The comments Pete Coors made in the Denver Post’s article left me flabbergasted. “We know a lot about brewing crafty beers….”. Yep, they sure do. Can’t say I’ve tried Colorado Native or Batch 19, though.
I love how Coors considers Blue Moon to be the #1 selling craft beer in the country. Now, I’m not one to define craft beer or crafty beer, but that is hilarious.
Also, it was interesting to see that Coors isn’t happy being a minority interest in Terrapin. I wonder if they want to completely take over, or if that relationship just isn’t working out. Maybe Pete Coors just doesn’t like their peanut butter porter!
That Terrapin comment really threw me off. Last I checked, they seem to be more active than ever with specialty releases. They can’t be suffering too much.
As for the #1 selling beer – you could argue the top-selling beer that matters most right now is
Lagunitas IPASierra Nevada’s Torpedo. (Updated to reflect correction. See this post for more info)
If you forget to include Sierra Nevada Torpedo in your numbers.
Thank you for that catch. Silly me, considering I’ve reported that before…
Coors Summer beer though.
It’s funny because all of the Blue Moon campaigns are trying to convince beer consumers that it’s a craft brew, when in fact it’s MillerCoors. Hell, wasn’t their slogan “artfully crafted?” CRAFTed. Hmmmmmmmmmmm.
Kidding aside, I think geography and generation are the key factors that extend beyond beers. Living in Lexington, KY, there’s a HUGE movement to buy everything local, including beers. There are two big craft breweries both located downtown and they’re thriving (West Sixth and Country Boy). I’ve noticed that trend being picked up by those pesky millennials and their rap music. I’d be curious to see how the numbers look across multiple industries .
That’s a great point. What really interests me is the prospect of change in these “craft beer wastelands.” Even if we’re talking about states that have a lack of options today, I suspect it’s still much better than it was even five years ago. Going local is most certainly a national trend, but I think it would hold even more importance to these kinds of places where small changes toward craft beer are bigger than elsewhere.
Very well written and insightful – thanks for the read!
Thank you for reading! Appreciate the nice words.
I think you hit the nail on the head towards the end. A lot of what Coors is saying is probably true in areas where BMC rule the local bar scenes and the most “craft like” beer available is Yuengling. But in areas where there are true craft beer bars, I think his words lose some weight. I know none of the CBBs around me seem to be hurting because they don’t have a premium light beer on draft. As to a few other things:
“They all want to grow, but the more they grow the less crafty they are” – let’s not confuse a supposed industry watchdog’s inability to lock in on a definition as the same as breweries getting too big for their britches. Whether you like them or not – Sam Adams is still producing the same level of quality product now as they have in the beginning, and they are the ones continually making the BA change their definition.
“People stay in their seats an average of 18 minutes longer when they have a light premium beer on tap.” – having watched multiple episodes of Bar Rescue, it seems the only thing that makes people stay longer in a bar according to John Taffer (outside of service and personal comfort) is food. But he’s just a blow hard with a “reality TV” show, so what would he know I guess
I have never watched Bar Rescue, but that seems like a really good point to make. If only for one more variable to include, blowhards be damned.
These craft beer stranded states seem to stand for the last oasis for BMC beer, but it’s hard to not see craft closing in slowly. The biggest hurdle is most certainly demographics. As younger consumers move around the country, there will most certainly be more interest in craft.
I do think it will be interesting to see what happens as craft brewers continue to grow and get into each others space (ie. competing with each other more for the craft market share).
what’s the worst that can happen? i mean, if they got bigger than AB and MC, who would be sad?
Big Beers’ investors, for sure.
But let’s be honest – if competition forces MillerCoors to consider these kinds of things and make changes (perhaps when new leadership comes in) then it’s not the worst thing in the world. Even in the case of craft breweries getting bought out or selling a stake in their company, they still seem to be performing fine in keeping to their roots of craft.
But I’d also be interested to see how that stands in 10 years.
I feel it comes back to once again focusing on your local base. Even if that means only the small town in which you exist.
His comments seem to suggest that by growing too big, companies lose their “craft” identity. But I don’t think that’s the case. As you breweries get bigger, it seems they try even harder to stay within the rules they set to get them to that point. Being “craft” is – as cliched as it sounds – as much a state of mind as a business practice.
While statistics from the US and here in Australia show consumers of discernment are abandoning mass-produced, often flavourless beers at a growing rate in favour of ales and lagers more deserving of the name, macro-beer manufacturers still hold such a swathe of market share it will be a long time before craft brewers are stepping on each others’ toes. If at some point craft brewers exceed the 6-million barrel threshold, it will be a function of their seizure of the market from SABMiller-Coors and ilk rather than the cannibalisation of the microbrewer/craft brewer segment, one would think. Pete Coors has much to fear from this process, so it is of no surprise that he would poo-poo his fastest growing competitors. As others have pointed out, Coors entry into the “crafted” category demonstrates he is not so ignorant of the change in consumers behaviour. He just doesn’t understand why…
An excellent point! I feel part of the fear of market share comes from the Brewers Association’s new 20/20 goal – to have craft beer make up 20 percent of the market by 2020. That’s still just a sliver of the whole pie, but I imagine the Big Boys are still sweating just a little about each percentage point they lose.
Meanwhile, craft beer chugs along and even as competitors, businesses seem to have a rather cordial relationship.
My favorite part was when he said that he “bought” Terrapin.
YOU GET OFF HIS LAWN, WHIPERSNAPPER!
Good analysis… the one thing I’d note is that if you did the math, I think you’d find the per-capita breweries ratio between North Dakota and California is about the same or actually worse for CA (6 for 700k ppl, vs 300 for 38 million). But geographically speaking, I suspect most people here in CA have multiple breweries close by…
Yes, good catch and thank you for that.
The difference for California would certainly lie in saturation, where even with a higher population, the volume of breweries would make it easier for businesses to stock up on beer from a variety of sources. In North Dakota, you’re even more restricted between geography and distribution for those few breweries that do exist.
I am really torn about this article. I love Craft Beer, and would rather try some beer i have never herd of (and pay more for it) then choose a Coors or a Bud. That being said, i grew up in Golden, CO and love coors. It kinda upsets me that Pete ( who i have met) looks down so much on the craft beer scene. In the past year alone, there have been 2 new craft breweries (Cannonball and Mountain Toad) that have opened up less then 2 miles away from Coors Brewery, and Golden City Brewing (GCB) is right down the street and has been open for years. They are all fantastic.
Coors’ Batch 19 and Colorado Native are both wonderful beers in my opinion, but i don’t consider them craft brews at all.
I think the craft industry in Australia is similar to you guys. In 1990 three companies controlled the market and there were 11 breweries. Yet by 2013, Australia’s beer industry consists of over 130 breweries. But the big international are so scared of the rise of craft beers that they have gone out looking for craft breweries to buy. For example, Fosters Group which is owned by SAB-Miller) bought Matilda Bay, and Lion Nathan owned by Kirin Holding)acquired Little Creatures and White Rabbit. Our local craft beer in Ballarat is now producing half doz beers plus three Gluten free beers which ar really good. And home brewing is big here including a big range of kits and lots of full mass brewing and a mixture.
Keep it up man. I love your blog.
Thanks a bunch for the encouragement! It’s exciting to hear about such growth in Australia. I’ve seen Sixpoint beers have shown up there, but I can’t get them here in North Carolina!
I’ve actually seen some of the information from their app, although I haven’t actually played with it yet. It’s basically predicated on the idea that you will sell less of whatever beer you replace one of their products with. It’s nothing really that profound. Also, the last part of your piece is probably correct on how some of their numbers and ideas work. It’s like they’re trying to turn back time.
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