The good news for Americans is that it's always "beer-thirty" somewhere around the world, giving you permission to tip one back regardless of the time. The bad news is that there are an enormous and growing number of beers for consumers to choose from, making it very difficult for consumers to decide which beer to buy.
There are well over 40,000 different beers in the world, according to RateBeer, an informational beer-focused website that allows users to rate beers they've tasted.
Data from the Brewers Association is even more striking. After hitting a bottom in the late 1970s, the number of breweries in the U.S. has exploded from 89 to more than 2,500 as of 2013. At the current pace of brewery growth per year, we could be looking at more than 6,000 breweries in operation by 2025, and who knows how many different beer variations by then.
Amid the growing competition, it's never been more important for large beer producers, like Anheuser-Busch InBev (NYSE:BUD) and Molson Coors (NYSE:TAP), to build brand loyalty by forging an emotional connection with consumers.
Why customer loyalty matters
The first advantage of a loyal customer is that they offer free brand advertising. If your friend orders a Budweiser, you may just be likely to order the same. If a friend brings over Coors Light for the game, are you going to say no and not drink it? Subtle introductions and recommendations like these from loyal consumers can bring in new loyal customers.
Plus, loyal customers don't wholly require discounts and special offers when buying their favorite beers. Sure, happy hour specials draw in crowds of people, and sales at the local grocery store on beer attract consumers to try new brands, but loyal beer customers are willing to pay an extra dollar or two for a 12-pack of their favorite brand, thus boosting the pricing power and margin on companies that maintain high levels of consumer loyalty.
Yet, measuring brand loyalty isn't always easy. It's not like you can throw a beer festival the size of Kansas and have beer drinkers offer their opinions -- it's just not feasible. Instead, we turn to Brand Keys and its 19th annual Customer Loyalty Engagement Index, which examines how consumers interact with a brand, how that brand engages consumers, and finally, how consumers view one brand relative to its peers.
Brand Keys examined both light beer and regular beer in its rankings. Let's take a look at the one company that dominated both the regular and light beer category, as well as a few brands that didn't quite hit the spot with consumers.
Big beer misses the mark
Although Brand Keys' list is limited to just eight beers in each category (because Brand Keys needed a certain number of responses just to reasonably include these brands in their rankings), one readily apparent theme is that big beer generally struggles to stand out from the pack. It's the entire reason we've seen such a flurry of microbreweries popping up, which are focused on unique tastes and the experience of drinking beer rather than kicking out huge volume for a lower cost.
Coming in dead last in the regular beer category was Anheuser-Busch InBev's Budweiser -- although this really isn't a huge surprise, as its sales have been declining for some time. Budweiser continues to be hurt by a calorie-conscious consumer who's opting for light beers. Or, if they don't care about calories, consumers have been turning toward beers with a more palatable flavor.
Per Anheuser-Busch InBev, sales of Budweiser have declined every year between 1988 and 2013, from 50 million barrels sold to just 16 million. Furthermore, 44% of adults aged 21 to 27 have never tried Budweiser. It's safe to say this flagship beer isn't likely to gain traction anytime soon. But to calm the Anheuser-Busch InBev shareholders, the company's Michelob brand in the regular beer category, and Bud Light and Natural Light in the light beer category (a tie), took second place, signaling Anheuser-Busch InBev's product diversity is helping it reach all walks of consumers.
Molson Coors was also a "middler," tying for third with its Coors brand in the regular beer category, and taking fourth in the light beer category with Coors Light. Its Miller and Miller Lite brands fared even worse. Coors has tried a number of marketing campaigns to rebrand itself, but for the time being, all it's done is boost expenses and hurt its profitability. With management changes on the way, one can only hope it'll figure out a way to market the brand effectively to younger adults.
Craft beer remains king
Sitting atop this year's brand loyalty rankings as America's favorite regular and light beers are Boston Beer's (NYSE:SAM) Sam Adams and Sam Adams Light.
Why is Boston Beer, the company behind Sam Adams beers, dominating when it comes to brand loyalty? The bulk of the answer has to do with its ability to think small while growing into a notably large beer producer.
For instance, Sam Adams has an extensive lineup of regular, seasonal, and limited-edition beers. This assortment allows Sam Adams to appeal to both beer snobs, which I'm not afraid to say I've called myself before, as well as the typical beer consumer. In other words, there's a palatable taste in this line-up for most, as well as a price point for practically everyone. To be clear, Budweiser, Coors, and Miller are going to be able to undercut Sam Adams on price, but the sheer variation of flavors is more than enough encouragement for consumers to pony up the extra cash.
Another key point is that Boston Beer's founder Jim Koch is good at driving home the point that Sam Adams is a people's beer. He appears in most of the company's commercials, often dressed in casual clothing and interacting with beer drinkers on a personal level. If the CEO is willing to get dunked into a tank of beer for a commercial, it shows he's a down-to-earth leader. And aside from its beer offerings, Boston Beer has garnered a reputation as being a great place to work under Koch's leadership. Ultimately, Boston Beer is a company people can get behind -- and be proud to enjoy its products.
Relative to its big beer peers, it's tough to see Sam Adams or Sam Adams Light losing their top ranking anytime soon. For investors, this exceptional loyalty toward the brand should translate into stronger sales and bigger profits. If 2014 was any indication -- sales growth of 22% and adjusted EPS growth of 29% -- then investors are probably in for a pleasant increase in value over the long term.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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