The high end beer segment is poised to grow by 170 million cases over the next two years, according to Constellation Brands executive vice president Paul Hetterich.
Speaking to more than 200 beer industry professionals attending the Beer Marketer’s Insights winter seminar, Hetterich, as well as leaders from Anheuser-Busch InBev and MillerCoors, discussed the consumer shift toward high end products and their companies’ strategies for competing in that segment.
Constellation — owners of brands like Ballast Point, Modelo and Corona — is driving much of the growth in a high-end segment that Hetterich defined as products priced at $25 per case and above.
“We’re fortunate that we’re winning in the high end, and we’re winning big,” Hetterich said.
According to Beer Marketer’s Insights publisher Benj Steinman, Constellation will likely grow by 2.3 million barrels in 2016. That growth comes at a time when the country’s two largest beer makers — Anheuser-Busch and MillerCoors — have lost more than 14 percent of their combined volumes since 2008, Steinman added.
Some of those barrels have also been swallowed up by the 4,938 U.S. craft breweries that industry trade group the Brewers Association now counts.
Combined, Constellation Brands and all U.S. craft breweries have grown by 12.5 million barrels in the last three years, Steinman said.
During his presentation, Hetterich illustrated how the craft category has evolved over the last four years by segmenting companies into three distinct groups: local brands (those sold in as many as three states), regional brands (those sold in 4 to 32 states) and “national” brands sold in more than 32 states.
By his count, smaller and more locally focused craft brands have grown from 4.5 to 9.3 percent share of the craft segment since 2012. National brands — which Hetterich split into “established” and “emerging” groups — added 6.8 share points during the same period. Those companies’ growth was driven primarily by rapidly expanding operations like Ballast Point that have moved from regional to national status over the last four years.
Regional brands, however, collectively ceded 11.2 share points over the last four years, according to Hetterich.
The takeaway?
“As the category fragments, we’ve got to learn how to be more adaptive,” Hetterich argued.
Driving much of the growth in the high end are millennial consumers, said Hetterich, who noted that 45 percent of high end beer is consumed by younger drinkers.
For his part, Anheuser-Busch InBev CEO Carlos Brito said the growth of high-end products is a global phenomenon.
“Everything that happens in the United States goes global,” he said.
Brito saluted the work of Felipe Szpigel, the president of A-B InBev’s High End division, and noted that the company’s craft portfolio — which includes Goose Island, Blue Point, Elysian, 10 Barrel, Golden Road, Devils Backbone, Four Peaks, Breckenridge and Karbach — has grown 30 percent.
“We’re just trying to compete in a segment that’s growing and is profitable,” he said.
Meanwhile, MillerCoors CEO Gavin Hattersley said although it took his company a little longer to get serious about acquiring smaller craft breweries — it has purchased majority stakes in Revolver, Terrapin, Hop Valley and Saint Archer over the last 14 months — his company is far from finished.
“I don’t think we are satiated, but I think it would be nice if we had some breathing room,” Hattersley said, noting that MillerCoors is still digesting a summer shopping spree that included three purchases in three weeks.
Hattersley also said MillerCoors’ strategy has, so far, been aimed at acquiring craft outfits in diverse geographies and focused on “gaps” in the portfolio.
Hattersley called Terrapin the “best developed” of MillerCoors’ new acquisitions, but he expressed excitement at the potential of Texas-based Revolver, which is primarily available only in the Dallas-Fort Worth area.
“The whole of Texas is waiting for us,” he said. “We really like the Revolver brand and particularly Blood and Honey (the company’s American wheat ale flagship).”