Molson Coors Beverage Company has, over the past three months, announced a “slew” of partnerships with other beer and beverage makers, marking a change in strategy for the multinational. Rather than push its internal brewing teams to churn out the next big thing, the company is watching the products—alcoholic and non—that succeed organically, then throwing money, production, and distribution might behind them.
Major moves began this fall. First it was a joint venture, announced Sept. 15, to distribute D.G. Yuengling & Son, Inc. beers to 25 new states. Just two weeks later, Molson Coors said it would partner with The Coca-Cola Company to launch Topo Chico Hard Seltzer in select U.S. markets in 2021. Within the last two months, the company also announced deals with Belgian brewery Brouwerij Duvel Moortgat (to import and distribute its beers in Canada) and La Colombe Coffee Roasters (to distribute its canned lattes and cold brew in the U.S.).
The shift comes as Molson Coors is one year into its revitalization plan, which restructured the company to expand further into non-beer beverages as beer consumption across the country continues to decline.
While the company’s net sales revenue fell -3.1% in the third-quarter, dragged down by COVID-related declines in on-premise sales, hard seltzers were a bright spot. Molson Coors’ portfolio, including Vizzy Hard Seltzer and Coors Seltzer, has doubled its share of the U.S. hard seltzer market so far in 2020, per Nielsen data. (Yet still far behind category leaders White Claw and Truly.) And with two more planned for 2021—Topo Chico Hard Seltzer and Proof Point—the company has a goal of capturing a double-digit share of the U.S. hard seltzer market by the end of next year.
The underlying philosophy of Molson Coors’ new partnerships—take beverages that drinkers recognize and like, then scale them—also extends to its craft partners and even the products it touts as homegrown innovation, like Coors Seltzer or Blue Moon LightSky. This strategy is especially logical the longer COVID ravages the country: Drinkers are looking for readily-available, recognizable products.
This penchant for partnerships isn’t brand new for Molson Coors. In 2002, it teamed up with Jack Daniels and SKYY Vodka to produce Jack Daniels Hard Cola and SKYY BLUE, respectively. But internal development of new products has also been a focus as recently as last year, when, as part of its restructuring plan, Molson Coors said it would accelerate “new product development from 18 months to four.” The goal was to increase the churn-and-burn pace of new products until the brewery struck gold—which it hasn’t yet. That internal development has thus far only produced wins when new beverages were line extensions of already-existing brands.
Its splashier product announcements, instead, have come from partnerships with other companies.
What’s been notable this year is the speed at which the company has forged such alliances, says Mike Kallenberger, president of Tropos Brand Consulting and a former consumer insights manager for Miller Coors.
“They certainly seem to be willing to strike quickly when they see an opportunity now,” Kallenberger says. “Most of that is because they see the beverage category fragmenting so much. It’s overwhelming to do all of that internally when there are so many subcategories of drinks now. It’s easier and makes more sense to do it through partnerships or buying things.”
The appeal of such partnerships is clear: They save Molson Coors time and effort in brewing and marketing a product from the ground up, and therefore there’s reduced risk of failure. The company would like to avoid a repeat of Saint Archer Gold, for example. Saint Archer Gold was a Michelob Ultra competitor Molson Coors debuted in 2019. After a splashy, $20 million marketing push that included a 30-second commercial during this year’s Super Bowl, the company discontinued the brand in July.
Extensions of existing brands are a safer bet. Topo Chico is a 125-year-old “cult favorite” brand that’s enjoyed wider popularity over the last three years thanks to its acquisition by The Coca-Cola Company. Yuengling is a 191-year-old brewery that similarly has an existing customer base and brand history. La Colombe’s ready-to-drink coffees and lattes were already a category growth leader before Molson Coors came knocking.
Molson Coors’ chief communications and corporate affairs officer Adam Collins says it’s fair to say that established reputations make these products an easier bet than brand-new beverages.
“You don’t have to go educate people in most of the U.S. about what Yuengling is if they’re beer consumers,” he explains. “You start with more advantages maybe. […] The consumer will understand it when they see it, even having not tried it, and might be more willing to try it rather than something they have no familiarity with.”
Removing the education barrier for consumers is more crucial than ever. The beer aisle is crowded, and COVID-era shoppers are making quick decisions as they try to get in and out of stores. With many bars and restaurants closed or operating at reduced capacity, there’s less opportunity for bartenders and servers to introduce and explain new products. Large beverage companies are seeing success with brands that are familiar, recognizable, available, and cost-effective.
Unfamiliarity was part of what doomed Saint Archer Gold, according to Molson Coors. When it discontinued that brand, it blamed the pandemic for the company’s inability to “trial” drinkers on the new beer, meaning that without in-store programs and events designed to introduce customers to the brand, there wasn’t enough incentive for drinkers to try it. The reality, though, is that Saint Archer Gold still sold $11.7 million in retail stores tracked by market research company IRI through the end of October, representing 57% of Saint Archer Brewing Company’s dollar sales this year in those channels. It’s likely that Molson Coors, anticipating adding similar beers like Yuengling Flight and Yuengling Golden Pilsner into its fold, simply didn’t want to continue putting money behind Saint Archer Gold and cannibalize dollars from Yuengling brands.
With Topo Chico Hard Seltzer’s debut next year, Molson Coors is again betting on drinkers' affinity for an existing brand. The plan, Collins says, is for a scaled national launch “starting in the markets where it’s known and loved.” That means large metropolitan markets across the U.S. where Topo Chico has already done the legwork to build a loyal following; Molson Coors declined to name any cities specifically.
While Molson Coors cites Topo Chico Hard Seltzer as an example of innovation, Kallenberger draws a distinction between that type of product, which is built on an existing beverage, and “true innovation.” Something like Topo Chico, Coors Seltzer, or Blue Moon LightSky—which allows a brewery to enter a product category that already exists—is distinct from an entirely new beverage.
“If you look back to the history of the big breweries, there’s a lot more copycats than true innovation,” he says. “Big companies have a hard time innovating because they’re not willing to place really big bets on things whose potential can’t be quantified.”
He says big beer companies like Molson Coors and Anheuser-Busch InBev get internal approval for their innovations by projecting how many barrels those products will sell, or how much they will generate in sales.
“You can’t really do that with true innovation,” he adds. All that combines to make partnerships to produce line extensions more appealing for a large—and therefore risk-averse—company like Molson Coors, which has recently been burned by the failure of short-lived experiments like Millennial-targeted Two Hats light fruit beer, in addition to Saint Archer Gold.
Molson Coors appears to be applying this “take what’s working and scale it” approach to the five acquired craft breweries in its Tenth and Blake portfolio as well. It appears to be working: Together, the four breweries that Tenth and Blake had in its portfolio last year (it acquired Atwater Brewery in January 2020) outpaced the overall craft beer segment in 2019. Saint Archer, Terrapin Beer Company., Hop Valley Brewing, and Revolver Brewing combined for +16.2% volume growth for the year, compared to +0.1% growth in the overall craft segment, according to Nielsen data cited by Molson Coors.
Paul Verdu, vice president of Tenth and Blake, emphasizes a patient, largely hands-off approach the parent company takes when it comes to acquired craft breweries’ development of new beers.
“Molson Coors offers strong consultation on brand building, but [acquired craft breweries] do all their own innovation,” Verdu says.
It’s a contrast from Molson Coors’ largest rival, AB InBev, Kallenberger says. AB InBev, following its acquisition of Goose Island in 2011, had the goal of making—through distribution and pricing—Goose Island’s IPA the country’s top-selling IPA. (Goose Island IPA sales in IRI-tracked chain retailers are on pace to end 2020 down -12% from their 2017 high of $53 million.) Molson Coors is more patient, he says, waiting to see what organically takes off from its craft breweries.
Verdu offers Hop Valley as an example. Thanks to strong sales for its Stash series of Cryo Hop beers, the brewery is on pace to increase sales by +27% this year in IRI-tracked grocery, convenience, liquor, and other chain stores. Distribution of Hop Valley has grown about +6% this year, Molson Coors says, and velocity has grown over +17% this year. Molson Coors intends to continue leaning on its distributors to grow Hop Valley into the top-selling brewery in the Pacific Northwest. But that wasn’t the plan from day one; it’s a response to existing sales growth.
“We’ve gotten better internally at delineating between what we need our craft partners to do on their own and what we need the larger organization to do in chain sales,” Verdu says. “We’ve been more focused on the things that are working.”
In practical terms, this means that each acquired craft brewery has a “chain lead” whose role is to plug into the larger Molson Coors chain sales structure while making sure the brewery’s voice and branding aren’t diluted. That chain lead might have direct interaction with chain stores near the brewery’s home base, while the Molson Coors regional chain teams promote those products in farther-flung markets.
While Molson Coors hopes partnerships yield the new products that will grow the company’s bottom line, there is a potential downside to this approach.
“When you can [internally] come up with the next true innovation, that’s a home run,” Kallenberger says. “There’s motivation to keep trying; it’s good for morale.”
Partnering with other products and scaling them, he says, doesn’t necessarily yield the same high-fives and back slaps. When executives can tout a homegrown product that becomes dominant in its category, he says that enthusiasm does trickle down to everyday employees who can “share in that pride.”
But facing headwinds from the coronavirus and coming off a corporate restructuring, Molson Coors seems ready to count these partnerships as big wins. Investors agree: Molson Coors’ share prices have increased since their nadir of $33.25 in July, rebounding to $42.49 on Nov. 11 as analysts see a “remarkably improving earnings outlook.” Any boon to the bottom line, however it came about, is also a boost to morale this year.
Collins says on his recent visit to the company’s production facility in Golden, Colorado, employees asked him questions about the Yuengling rollout and plans for Topo Chico Hard Seltzer and non-alcoholic products.
“That kind of enthusiasm inside our business, you can feel it. […] Look at the challenges the beer industry has had—forgetting the entire global economy—over the past year, we’ve made progress against our goals in spite of that,” Collins says. “It’s motivating.”
Words by Kate Bernot