Pabst entered 2020 after a “tough but good” 2019, in which the company led the industry in price at a sub-premium level, Pabst Brewing general manager and president Matt Bruhn said.
He called 2019 a “stabilizing year.”
“We headed into 2020 in a really good position,” he said. “We built momentum in Q4 ’19, started to turn some of the trends around volumetrically, launched some cool innovation, had some winners in the back half of ’19. Quarter one 2020 was excellent.”
Then the COVID-19 pandemic set in the U.S. in mid-March. By early April, the company reorganized and redirected its business.
“We lost a lot of volume because our position was strong on-premise,” Bruhn said, noting that 27% of Pabst Blue Ribbon’s business was in the on-premise.
Not much of that business has returned. But off-premise trends improved for PBR, Lone Star and Rainier. PBR trends swung about 14 points and the growth has maintained, Bruhn said. PBR is outperforming the sub-premium segment, Lone Star trends in Texas are positive and Rainier is growing double digits.
“As bad as losing the on-premise was, we saw the resilience of our brands in the off-trade, which has been great,” he said, noting that if Pabst was a publicly traded company, the company’s outlook would “remain on guidance.”
Nevertheless, Pabst has lost about a quarter of its business, about half of which it has been able to recoup in off-premise retailers, Bruhn said. Still, the headwinds keep coming, including a can shortage.
“We’re collectively between 5% and 10% below where we thought we’d be volumetrically, but we’ve got some great mix improvement through innovation, and we’ve managed our costs really smartly to kind of survive through the year and deliver you know an annualized operating profit, pretty much as we thought it would be back in October of ’19,” Bruhn said.
Bruhn added that the company’s decision to lead the industry on price in the sub-premium segment was the right decision in hindsight.
“Our price index to Miller High Life went up three or four points, and we’ve been in growth the entire COVID period, and they’ve declined the entire COVID period,” he said.
Bruhn expects a lot of the consumer behaviors to carry over after the pandemic.
Although a lot of the volume has shifted to 30- and 24-packs, Bruhn said there is also a push into 12-packs as convenience stores become “pseudo grocery stock up outlets.” In conversations with 7-Eleven and Circle K stores, Bruhn said those chains are starting to put more 12-packs on the floor.
“Twelves are going to be hitting the floor hard in convenience,” he said. “So I do think that despite big packs and grocery being a primary driver of the industry this year and probably holding, twelves are and will continue to make a huge surge, also helped by the fact that seltzer is principally a 12-pack purchase.”
Pabst, which had previously played solely in 16 oz. single-serve cans of PBR in convenience, will now push for more multipacks, particularly 12-packs 12 oz. PBR cans in 7-Eleven stores, which he called “a huge growth opportunity” for the company.
Ultimately, Pabst’s ambition isn’t to be a smaller version of large beer manufacturers such as Anheuser-Busch and Molson Coors. The goal is to be an enhanced drinks business (read more about that here.)
“That’s not who we aspire to be,” Bruhn said of a smaller version of larger beer compnies. “We aspire to be Pabst, which has its own unique, almost undefinable cool factor, it fact, weird factor, whatever you want to call it. We don’t want to lose this sense that we’re an independent different business.”
The five-year plan for Pabst started in 2019 with resetting the business, taking price and setting the core PBR model. 2020 was about stabilizing the business and diversifying, while still hitting targets. That leads to a growth mindset in 2021. Beyond that, the plan is to lead intellectually and philosophy.
“We aspire to be ultimately a lighthouse for what’s possible in the American beer market,” Bruhn said.