THE GIST
While Anheuser-Busch InBev (ABI) has made layoffs and sales among its craft breweries and Constellation Brands has sold its craft brands entirely, Molson Coors Beverage Company’s craft division, Tenth and Blake, hasn’t made such drastic cuts among its craft brands. With big spending and grand visions of an ever-growing craft category, the retreats of ABI and Constellation are particularly stark. And they’re in contrast to their competitor, Molson Coors, which has taken a more methodical approach as times get tougher.
“Back in 2015 or 2016, the first question that a lot of folks asked in the context of acquisitions was: Can this brand scale nationally?” says Jeff Agase, president of Tenth and Blake. “What feels more reflective of this moment is ‘Could we make this work in a handful of states and really develop the pull for this brand at home and in the backyard for this brand?’”
Regardless of size, these are questions many craft breweries are struggling with at a time when the category declined -7.6% in chain retail volume last year and zero growth is considered an acceptable development for all sales volumes across stores, bars, restaurants, and taprooms. Molson Coors has proven willing to make tough cuts—discontinuing its acquired Saint Archer brand last year—but so far in 2023, it’s hung on to its portfolio despite challenges:
All of Molson Coors’ craft brands saw production declines last year, as reported by the Brewers Association, with the steepest losses coming from Eugene, Oregon-based Hop Valley Brewing (-14%). That brewery was was the first Tenth and Blake brand to hit national sales.
Smaller losses defined Georgia’s Terrapin Beer (-8%), Texas’ Revolver Brewing (-5%), and Detroit’s Atwater Brewery (-3%). Molson Coors also owns Leinenkugel’s (-9%) and Blue Moon (-3%), though they are not part of Tenth and Blake.
Breweries had spots of individual success last year, led in chain retail by Leinenkugel’s Juicy Peach (launched in 2022, the brand crossed 100,000 case equivalents last year) as well as Terrapin’s Krunkles IPA Travel Trunk Variety Pack (+9%). But collectively, all of Molson Coors’ craft brands saw sales volumes fall -7.2% last year in chain retail stores tracked by market research company Circana, a hair better than craft overall.
Even citing a positive spin for larger producers underscores current challenges: There was growth for some regional craft brands, but it came from less than half of them, according to Brewers Association production data. For Molson Coors, this presents an unexpected “last brewery standing” sort of scenario as its largest peers back away from craft and it shows patience—for now—as its craft subsidiaries weather a storm created by new preferences among today’s consumers.
WHY IT MATTERS
Agase says success isn’t about taking a brand like Terrapin national, but increasing rates of sale in its most established markets. That’s a return to craft’s “local, local, local” refrain from years ago that has been key for smaller producers. It’s also in contrast to ABI, which is now focused on developing national hits among its craft brands, and Constellation, which treated its craft breweries as a footnote.
Both ABI and Constellation took impairment charges of roughly $65 million earlier this year on their craft brands; Molson Coors took an $845 million non-cash partial goodwill impairment charge related to its businesses in North America. When asked, Molson Coors didn’t provide details about whether or how much that stemmed from its craft brands’ performance.
Molson Coors says it’s willing to be patient with a regional strategy for its craft breweries. That may stem from the culture and structure of Molson Coors, which is itself an amalgamation of breweries with strong regional roots such as Miller Brewing, Coors, Leinenkugel’s, and since 2020, a joint venture with long-running East Coast craft brewery D.G. Yuengling & Son, Inc. Molson Coors also has 28 years of experience with managing a craft brand (Blue Moon launched in 1995), a contrast to ABI, which bought its first craft brewery, Chicago’s Goose Island Beer Company, in 2011, and Constellation, which bought its first, Ballast Point Brewing Company, in 2015.
But there will be challenges ahead even for a regionally-focused craft strategy.
“The further away you get from the brewery proximity-wise, where it’s born and bred, it does matter,” says Brittney Lewis Webber, vice president of Bison Beverage, a Molson Coors-aligned distributor in eastern Wyoming. “Regional craft can be challenging. Leinenkugel’s and Blue Moon at least have national name recognition.”
As distributed craft beer has seen its sales dip since pandemic-fueled 2020 highs, Molson Coors and other beverage companies must revise expectations and decide where their acquired brands fit into the company’s overall strategy.
During the biggest growth period for craft beer—in the mid-2010s when Molson Coors scooped up numerous smaller breweries—the category differentiated itself based on two premises: Craft beer was more flavorful and better quality than other beer options. But today, flavor-packed alcohol increasingly means ready-to-drink cocktails like High Noon or flavored malt beverages like The Beast Unleashed. Indeed, a Molson Coors blog post from early June centered on flavor mentioned no beer brands, only seltzer and flavored malt beverages.
Premiumization can be found across the beer and non-beer spectrum, from Michelob Ultra to Casamigos tequila. In a summary of its fiscal year 2022 performance, Molson Coors touted its premiumization efforts across “beer and beyond beer.” The Blue Moon family’s higher revenue in 2022 compared to 2019 was the only U.S. beer brand mentioned by name.
As flavor and premiumization are no longer exclusive to them, Agase says craft breweries like the ones in Tenth and Blake now have to play a card that appeals to drinkers’ desire for local roots and in-person experiences.
“We can deliver flavor in a bunch of different ways, but we like to pair flavor and experience and that begins locally,” he says.
Again though, this is a challenge for distributed craft such as Terrapin, which is sold in the Southeast, Northeast, and parts of the Midwest, or Hop Valley, which is sold across America. Lewis Webber says that after carrying Hop Valley products for three years in Bison Beverage’s territories in Wyoming, her company eventually dropped the brand last year.
“Hop Valley just did not stick. People didn’t know where it was from. It wasn’t relevant,” she says.
It’s not only name recognition that was a problem, but product fit. One of the largest summer events Bison Beverage serves is Cheyenne Frontier Days, a weeklong rodeo that annually draws about 200,000 attendees. When Molson Coors suggested Bison Beverage make a big push for Hop Valley’s IPAs at that event, Lewis Webber said she balked: Relatively high ABV, intensely hoppy beers just didn’t seem like the beverages that rodeo-goers would be looking for in the heat of summer. Explaining the nuances of Cryo hops—which feature prominently in Hop Valley’s lineup—also didn’t seem like it would move the needle for drinkers who usually prefer Coors Banquet or Leinenkugel’s Juicy Peach. Nonetheless, Bison Beverage sampled Hop Valley beers for rodeo attendees, to disappointing results.
“Staff was looking at us like, ‘You guys want us to pour this beer for thousands of people at an outdoor rodeo?” Lewis Webber says.
The rodeo anecdote illustrates just how nuanced local markets can be.
Leinenkugel’s sales volume is up +200% year-to-date (from a relatively small base) in the five northern Wyoming counties where Bison Beverage distributes it.
At the same time, Blue Moon is down about -4% across Bison’s full 10-county territory.
Other larger brands are a mixed bag, too: Blue Moon Light Sky is down -8%. Coors Light is up +7% for Bison this year, potentially part of broader shifts away from Bud Light.
A one-size-fits-all approach doesn’t work everywhere, which means that beer styles and geographic goals will increasingly be personalized brand-to-brand. Atwater will focus primarily on growing its sales in the three counties that comprise the metro Detroit area. It also must brew what its local market wants: Despite more than half of the craft beer sold in Michigan being IPAs, IPAs made up less than 2% of Atwater’s production last year. So, earlier this year, Atwater released an eponymous IPA, with plans to launch two more IPAs next year. Atwater president Katy McBrady says the company is “hyper-focused, more than ever, about being Detroit’s beer.”
Elsewhere, A.C. Golden remains Colorado-only while Terrapin digs deep in the Southeast and in Wisconsin, its third-largest market despite the fact that it’s almost 1,000 miles from its Georgia headquarters. One shared strategy across companies focuses on a key trend: All five Tenth and Blake breweries now offer 19.2-oz. cans, a package that’s doing especially well for craft breweries in convenience stores.
“Distributors love growth, but they demand the truth from us. Acknowledging some of the changing conditions in the industry has been important,” Agase says. “The route to sustain growth is to understand that we need to drive focus, attention, and resources against our home and backyard markets geographically.”
If breweries like Atwater and Revolver remain tight in terms of geographic distribution, it may mean a slower, steadier path back to growth than would come from rapid expansion to new states. But Tenth and Blake is betting on that being a more sustainable path for its smaller breweries in the long term.
“It’s understanding the playing field and making sure that you have your expectations in a place that reflects the current environment,” Agase says. “We’re trying to be more purposeful and deliberate in this moment.”
Words by Kate Bernot