THE GIST
MillerCoors this week announced a "restructuring plan" in which it will eliminate about 350 salaried positions across the company. On its blog, the company said the moves are "a recognition that the company’s organization and cost base are now out of line with the scale of its business and increasing costs."
This was the first such MillerCoors reorganization in five years. It will include about 200 current employees and about 150 unfilled positions. A voluntary severance program will be offered.
“While we know we still have some challenges ahead,” MillerCoors CEO Gavin Hattersley said in a note to distributors, “we’re establishing a realistic, achievable plan for 2019 to put us on the path to long-term sustainable growth.”
MillerCoors didn’t specify where layoffs and buyouts might come from, but three other reorganizations may provide something of a hint. In 2016, Brown Distributing laid off 84 staff members in its "specialty division" and Anheuser-Busch InBev ended positions for hundreds of High End-related employees in 2017. Just last month, Constellation Brands terminated 60 to 100 “craft and specialty reps,” according to Brewbound.
WHY IT MATTERS
The company's move comes amid a collection of other actions MillerCoors says have been taken to get "business back on track." Oddly enough, as other companies cut from craft-focused areas, MillerCoors' recent attempts to revitalize a bottom line from that same space. It's just in the form of products, not people.
It had already discontinued a short-lived attempt at the Millennial- and Generation Z-focused Two Hats brand, a fruit flavored, light beer. The search for a new CMO as well as new marketing agencies and strategies for Blue Moon and Leinenkugel's are on the way. MillerCoors will also launch another new brand, Cape Line, which fills a thematic space for the loss of Two Hats, acting as a flavored, "sessionable" flavored malt beverage that swaps fermented cane sugar for malt.
Most important, however, is the company's interest in reversing a downward trend for Coors Light, which still sits as the #2 selling beer in the U.S.
That could be easier said than done. Coors Light has lost about six million case equivalents from 2013-2017 (-5% growth) in IRI-tracked grocery, convenience, and other stores. Miller High Life (-8.5%) and Keystone Ice (-14.7%) were also down in that five-year timeframe, with Miller Lite growing 2.3%. The short-term wasn't as kind to any of them, with the 2016-2017 growth of Coors Light (-1.9%), Miller Lite (-1.3%), Keystone Ice (-.1%), and Miller High Life (+.4%) all down or flat.
Only Hamm’s, which the company has highlighted as a valued source of growth since the start of the year, has seen significant increases in volume during this same time. It sold almost 1.2 million case equivalents in 2013 in IRI stores, and hit almost 1.8 million last year. Through mid-August, it had already sold nearly 1.3 million equivalents in 2018.
With U.S. beer more or less stagnating in overall growth, it's likely no surprise the domestic/value brands so commonly associated with macro beer experiences are struggling. MillerCoors’ craft family, which consists of brands like Blue Moon, Leinenkugel's, Hop Valley, Terrapin, Revolver, and Saint Archer, could provide some of the growth in a higher price point to help buoy those losses.
From a volume standpoint, Blue Moon and Leinenkugel's, the elder statesmen of the bunch, play the most important role, representing more than three-quarters of the craft space for MillerCoors, based on IRI's definition. The Blue Moon family of brands is essentially flat in growth, but mostly because of a lack of success from beers that aren't Belgian White. That beer is up more than 20% in IRI-tracked volume from 2013-2017 and was at almost 6% growth from 2016-2017. As a whole portfolio, Leinenkugel's was at 9% increase in the five-year span and about 5% for 2016-2017.
While the largest and longest-tenured brands need some amount of rebound considering their sheer volume of production, MillerCoors’ variety of craft breweries show strong potential, especially Terrapin and Hop Valley, which have rapidly expanded in sales volume thanks to investment for production and expanded opportunities via distribution. Another opportunity is coming via Canadian arm Molson Coors, which invested in HEXO, a cannabis-focused company.
In today’s climate, the situation isn’t exactly uncommon for businesses as large as MillerCoors, but the possible solutions certainly speak to broader challenges facing the company. With large-scale, flagship brands from the likes of ABI and MillerCoors declining every year, the idea of turning around a slumping brand comes across more as an effort to slow bleeding, not cauterize a wound. The antidote for future success doesn’t lie in changes in marketing, but strategy.
On size alone, craft beer, cannabis, or whatever else can be innovated or invested in will always be small in scope compared to what brought MillerCoors to this moment in time. But as the loss of employees shows, adjustments will need to be made in all areas of business, for better and worse.
—Bryan Roth