One Blog |August 13, 2018 | POS Tracking Software

Is America’s Long Love Affair with Beer Really On-the-Rocks?

Mark Fullerton

Wasn’t it Bob Dylan who said:

“You don’t need a weatherman to know which way the wind blows”?

Of course, it was.

Who do you think said?

“Budweiser and to a lesser extent Bud Light are ‘dead beers walking’ they just don’t know it yet”?

Well, under penalty of death I’ve been sworn to secrecy regarding the specific source.

Those of you who follow this blog know that OnTrak provides POS Tracking, Line Cleaning and Tap Handle Survey Software to beer, wine and spirits distributors. So, our sources are distributors – either customers or prospects. Of course, similar quotes about MillerCoors beers (notably the light beers) have been made, with similar confidentiality threats.

Second Quarter 2018 Beer Volume Results

Now that the second quarter data is in – along with some supporting articles from Business Insider (Note 1) and The Wall Street Journal (Note 2) – it’s starting to look like the distributors have known about the “death” – or decline – of some Big Beers for a while now.

Here Are the Beers Americans Aren’t Drinking Anymore (Or At Least Not As Much)

Anheuser-Busch InBev’s (ABI) Q2 results demonstrated U.S. depletions were down 3.1% for the quarter, which was only slightly better than Q1’s results. Putting on a “What me worry?” face, ABI blamed overall weak industry trends (-2.4%) and the inconvenient timing of this year’s Easter and 4th of July holidays. Additionally, ABI shipments were down, even more, 5.1% vs. Q1’s, which were down 4.4%.

Things aren’t any better at MillerCoors. According to Beer Business Daily August 2, 2018:

“MillerCoors' goal of flat volumes by 2018 looked to be a longshot after the first quarter of this year. And now with the second quarter in the books – which is a much larger quarter in terms of volume – the goal is officially out of reach, according to MillerCoors chief Gavin Hattersley.

"We're not going to get to flat in 2018," Gavin said during yesterday's earnings call.”

The realization comes as MillerCoors saw its depletions/STRs drop 4.8% in Q2. This after depletions fell 3.8% in Q1. The larger Q2 drop in sales is ominous, as it represents an enormous drop in barrelage in the summer quarter.

Elsewhere, however, there is perhaps some encouraging news from numerous “I’ve never heard of them before. . .” breweries who continue to enjoy growth perhaps as profound as the Big Beers’ declines. According to the Brewer’s Association (full-year 2017 data):

“Craft brewer sales continue to grow at a rate of 5% by volume.” And, “Retail dollar sales of craft increased 8%, up to $26.0 billion, and now account for more than 23% of the $111,4 billion U.S. beer market.”

Here the full picture for 2017:

US Beer Sales Volume Growth 2017

Beer, Beer Everywhere (And Data to Make Us Think)

In support of the preceding craft statistics, I offer the following unscientific study:

Every Friday at 5:30 PM, a local but very large, grocery retailer called Jungle Jim’s sponsors “Pint Night” at their on-premises bar/taproom.

Every Friday a different craft brewery (most of them not local) is featured. Their beers are $3.00 or $4.00 per glass and they usually offer free logoed glassware for the first 100 customers and $1.00 after that.

Considering that OnTrak develops and sells Point-of-Sale (POS) Marketing software, I can usually track down the brewer’s representatives and ask them about how they see the importance of POS to their brand. Remember, I’ve never heard of any of these breweries, so I already have an idea that they’re at “Pint Night” because they place value on at least some forms of POS (glassware and coasters).

These breweries always say,

“POS and word-of-mouth are their keys to their success, their growth, and their viability.”

I also ask their reps about TV advertising and they always say,

“TV ads don’t work, because no one pays attention to them.”

Or they say,

“Our targeted customers don’t watch traditional TV”. They go on to say people listen to other people and they pay attention to POS because their customers “. . . [see POS] at the place and time that they are shopping and buying. The same can’t be said for TV ads since most people don’t go to the store to watch TV”.

All of this is what I’m hoping to hear. There are fewer and fewer TV spots for beer on commercial TV. And there are no ads on Netflix, Amazon, HBO and Showtime, and the other premium cable channels. Further, newspapers are on life support and the online versions, to my recollection, don’t have beer ads.

The takeaway from these “unheard” of brands that are growing in an overcrowded marketplace is: “POS rules”

Additional Market Information

According to the Business Insider and the WSJ articles I have linked to below, big beer sales are down and the remedy, thus far, is to raise prices.

That’s like saying, “Raise taxes to stimulate the economy.”

What we’re seeing, this year, especially, is that ABI wants to track their wholesale distributors utilization of POS.

We’re assuming they must believe they can learn more from their POS data. We’re also assuming they are tracking POS “investments” as part of an initiative to increase sales. And, in part, they are doing so to provide their distributors with additional opportunities to receive increased POS co-pays and other support.

One thing is for certain. ABI believes in the value of POS data, and they are beginning an earnest effort to track, measure, and manage it.

Perhaps this indicates they also believe that famous Peter Drucker quote:

“If you can’t measure it, you can’t manage it . . .”

Let’s hope all distributors begin to believe this. Our customers do.

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Note 1 – Business Insider

https://www.businessinsider.com/americans-are-ditching-beer-heres-how-anheuser-buschs-new-incoming-marketing-chief-plans-to-fix-it-2018-8

Note 2 – Wall Street Journal

https://www.wsj.com/articles/americas-long-love-affair-with-beer-is-on-the-rocks-1533133041?mod=searchresults&page=1&pos=15

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