Relax, this week’s post is not about today’s election! It is about…. Beer! In 1970, the Jos. Schlitz Brewing Co. sold 15,129,000 bbls. making them a strong second place brewery behind AB. Even by 1980, Schlitz sold over 12,000,000 bbls. that year but the loss of more than three million bbls. was due to the quality issues they were beginning to experience.
In the early 80s, I had around a 40% share of market with Schlitz, but as the trend worsened, the Schlitz wholesalers became worried. Schlitz ultimately returned to brewing the quality of beer they had brewed prior to the QA issues. Unfortunately for Schlitz, by that time it was too late, and Stroh purchased the Schlitz Brewing company. Although this was initially well received by the wholesalers, it soon came apparent that even Stroh could not, or would not, be able to save the brand.
Obviously, Schlitz wholesalers were very nervous as they watched their businesses die. Almost all had to make a decision: buy or sell. Many, including Schlitz wholesalers in big markets like San Antonio, Dallas and Austin, sold out, feeling it was time. Other Schlitz wholesalers, especially those in south Texas where Coors had expanded, but had not become a market success, went after those Coors houses. Pundits can make a case that the death of Schlitz created the beginning of the consolidation of the beer industry.
Even today, it is difficult to believe that Schlitz lost all that volume! More than 15 million bbls. of beer is huge, but put that number in perspective, and consider that since 2008, ABI and MC have lost over 17 million bbls.! That is more beer lost than Schlitz sold at its peak!
Just last week, both ABI and MC reported their third quarter results and the numbers have shown that their declines are not only continuing, but appearing to accelerate. ABI and MC were both down about 4% in depletions. Bud Light depletions were down 3.8%, resulting in their worst quarter of the year.
For MC, the numbers indicate that their premium lights gained segment-share, while Lite was down mid-single digits and Coors Light was down low-single digits. AB had previously published that Bud Light share was down 65 bps. All three leaders in the light segment were down. All three beers lost a great deal of volume.
It took Schlitz 20 years to become an insignificant brand after being the number two brewery. Both MC and ABI have now been on the losing end for 10 years. Wholesalers for both must to be concerned about the future of their businesses. Compared to the Schlitz wholesalers of the 70s, both MC and ABI are in a much better situation and, based upon their portfolio diversity, are positioned for survival.
There have been, however, a number of wholesalers selling out in recent months. The continuing AB negative trends must be part of this emotional decision-making process for these wholesalers. As long as the senior brewery executives continue to be highly compensated on increasing shareholder value, their focus will not be altered. Similar to the Schlitz wholesalers, is it time to throw in the towel?
We have been hearing so much political spin in recent months that maybe we are numb to the spin the brewery executives are spouting. Gaining share, while losing volume from another brand, who is losing more volume and increasing dollars, is a formula that will eventually hit a wall. Wholesalers see exactly what is happening.
We live in a world of denial, and we don’t know what the truth is anymore….
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