Big beer hasn't been able to drive big sales numbers lately as craft beer steadily sips away at its market dominance. Image source: Budweiser.
As beer drinkers will attest, big doesn't necessarily mean better. Although Anheuser-Busch InBev (BUD +0.18%) celebrated its massive size during last year's Super Bowl with an ad extolling the virtues of being not just a megabrewer, but producing what it called "macro beer," it's the craft beer market that's been best at tickling beer drinkers' palettes. And when it comes to buzz -- how well positive perception outweighs negative -- it's not the big beer boys that top the charts.
The true "king of beers"
According to the Brewers Association, there were 4,144 breweries operating in the U.S. as of the end of November, most of which were craft breweries and surpassing the record of 4,131 breweries hit in 1873. The last time there were so many breweries operating, Ulysses S. Grant was starting his second term as president, Levi Strauss just got a patent for using copper rivets to strengthen denim jean pockets, and Coors was beginning to brew beer in Golden, Colo.
Craft beer is the only segment of the beer market that's growing, and it now accounts for 16% of all suds brewed. Between January and June 2015, craft beer volumes hit 12.2 million barrels, while mass-brewed beer has fallen. Between 2009 and 2013, U.S. beer volumes were down 6%, and they dropped another 0.6% in 2014.
While we're waiting to see the final numbers on last year, mega brewers -- er, macro brewers -- like Anheuser-Busch, SABMiller (NASDAQOTH: SBMRY), and Molson Coors (TAP 1.59%) are all busily tapping the keg of the craft beer movement.
In addition to buying out its biggest rival Miller in a huge, $106 billion merger, Anheuser-Busch was also busily acquiring L.A.'s Golden Road Brewing, Toronto's Mill Street Brewery, Elysian Brewing in Seattle, Long Island's Blue Point Brewing, 10 Barrel Brewing in Oregon, and Goose Island in Chicago, not to mention launching its own Shock Top brand in 2006.
To be considered a true craft beer -- the big breweries that put out small batch beer are considered "crafty" more than craft -- the Brewers Association says a brewer must be small, independent, and traditional.
- Small: Annual production of 6 million barrels of beer or less.
- Independent: Less than 25% of the craft brewery is owned or controlled by big brewers.
- Traditional: Derive its flavor from the use of traditional or innovative ingredients and their fermentation. Flavored malt beverages like A-B's Straw-Ber-Rita, Smirnoff Ice, or Four Loko are not considered beers.
The craft brew industry's growth, strength, and popularity shows why, when it comes to favorable impressions consumers have about the alcoholic beverage, it's far and away more popular than anything produced by mass brewers.
Big beers go flat
The brand intelligence folks at YouGov take a daily pulse of consumer perceptions about a brand and through its BrandIndex rankings gauge a company's "buzz" on a rating of 100 to -100. To determine a company's score, YouGov asks whether consumers have heard about a brand, regardless from what source, and whether the perception they formed as a result is positive or negative, then tallies the score.
According to the 2015 BrandIndex for beer, A-B's Corona from Mexico's Grupo Modelo, which is distributed in the U.S. by Constellation Brands (STZ +0.98%), was the fifth most popular brand with a buzz score of 7.9, which put it just behind Dos Equis from Heineken (HEINY +0.60%) with an 8.0 score.
Those rankings indicate that imported beers, much like craft beer, are seen as a vast improvement over mass-brewed beers. Similarly, Miller's Redd's Apple Ale came in third with an 8.6 rating, which, not surprisingly, was one of the brewer's few brands to actually see growth. In its third quarter earnings report last November, Miller said the Redd's portfolio of beer enjoyed mid-single digit growth.
In surprise second-place showing in this survey Budweiser, the macro-est of macro beers, scored an 8.7 rating, and likely reflects the massive marketing budget Anheuser-Busch InBev assigns to its beer. Yet it also ranks as Forbes' 25th most valuable brand at $22.3 billion.
So which beer was ranked the best by YouGov's BrandIndex? Maybe a not-so-surprising choice, as it's the brand that for years has been considered by many to be the face of the craft beer industry itself: Boston Beer's (SAM 2.51%) Samuel Adams.
Samuel Adams Boston Lager is what many people think of when they think of craft beer. Image source: Boston Beer.
A macro-sized lead
The leading craft beer garnered a macro 14.4 rating on the buzz scale, which would be in line with its premier position in the industry. Yet the brewer has also suffered some slack demand recently for its flagship brew because of the intense competition in the space. Those 4,000 breweries currently in existence are also vying to take it down a peg or two, and in its third-quarter earnings it reported that the Boston lager's depletions were down once again.
Whether you call the mass-brewed, mega, or macro, it's tough to see Samuel Adams losing its top ranking to them anytime soon. For investors, Boston Beer's ability to maintain positive mind share with consumers even amid record levels of competition can only body well for long-term sales and earnings growth.
