Saturday, December 11, 2010

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Sniff of death’ taints iconic beer brands

It’s enough to make a brewery executive cry in his beer.

For more than two decades, Molson Canadian and Labatt Blue duked it out for the title of Canada’s best-selling beer. Now, they’re not within sipping distance of top spot.

While there’s sometimes an upward bump in sales, the bottles that once dominated every beer fridge in the land, and taps behind saloons and pubs across the country, are disappearing bit by bit.

“There’s absolutely the sniff of death about Blue and Canadian,” said York University marketing professor Alan Middleton. “They’re being allowed to slowly starve to death.”

Both brands are suffering from a lack of advertising and a crowded beer market filled with far more choices than drinkers had in the big brews’ heyday, Middleton said.

Today, Canadian and Blue are in third and fourth spot respectively, and both have single-digit shares of the national market.

They’re being pushed out of the picture by discount beer, the marketing clout of big U.S. brands, and even, some observers say, a deliberate strategy by Molson and Labatt. The companies, however, say they’re still committed to the brands.

The decline has been as swift as it has been deep. In 2000, Blue and Canadian held an estimated 10-11 and 11-12 per cent of the national market, respectively, according to a former senior beer industry marketing executive. Blue’s market share peaked at around 16 per cent in the late 1980s after the Calgary Olympics and the introduction of twist-off caps, while Canadian peaked at around 15 per cent in the early ‘90s.

Today, those figures have dropped to roughly 4-5 and 7-8 per cent, respectively. In comparison, Budweiser and Coors Light each has 13 to 14 per cent of the national market, said the executive.

Breweries keep their market share numbers close to their vest, but industry observers and insiders say there is no question that the former beer behemoths are fading away.

Starting in January, Prime Restaurants, whose properties include East Side Mario’s, Bier Markt and Casey’s, will start delisting draft Blue at many of its 100-plus restaurants. Blue’s corporate siblings, Stella Artois and Budweiser, will still be on offer.

Marketing experts and former beer industry executives are surprised by the speed of the former giants’ decline. Competition from imports and craft beers at the high end of the market, and discount brews at the lower end, have squeezed Canadian and Blue, according to David Kincaid, president of Level5, a marketing and brand consulting company.

“It does surprise me just how much two brands that were so dominant have suffered,” said Kincaid.

Molson and Labatt are now part of larger international companies, and that’s part of the problem, said Kincaid. In both cases — Molson-Coors and AB InBev, respectively — the companies seem determined to focus on a few big international sellers, rather than any Canadian brand. In the case of Molson-Coors, it’s Coors Light. With AB InBev, it’s Budweiser, Bud Light and Stella.

What’s especially puzzling, said Kincaid, is that Labatt has seemingly given up on what used to be one of its most profitable products. A regular-priced, mass-appeal beer was a guaranteed boost to the company’s bottom line, said Kincaid, who left Labatt’s marketing department in 1999.

“I’m scratching my head as to why a company that had something with the margin structure that Blue had let it slide so precipitously,” said Kincaid. “Both brands had such strong consumer equity and very solid margins.”

When a company in any industry, from widget-making to cars to brewing, becomes part of a larger corporate family, the natural inclination is to pare down the number of brands they sell, said Middleton. In some cases, they can go too far.

“Companies try to strike a judicious balance between cutting and marketing local brands, which they can use to fill in gaps which could otherwise be filled by competitors. What the beer companies have done, stupidly, is grab the first part of that equation without taking into account the second part,” he said.

“I’d argue that those two brands have been mismanaged. Walking away from those brands so totally is questionable,” Middleton added.

While the decline for Blue began a while ago, Middleton believes it has been worse since 2004, when Labatt’s then-Belgian owner, Interbrew, was purchased by Brazil’s Ambev. In 2008, the combined company bought American brewing giant Anheuser-Busch, creating a global juggernaut.

“They’ve recognized how inefficient and costly their global operations were, and they’ve really done a lot of cutting,” said Middleton.

Labatt vice-president of marketing Richard Musson disputes the notion that the decline in Blue and Canadian sales is because of AB InBev or Coors. Budweiser, he noted, has been brewed in Canada by Labatt since 1980.

“Budweiser been built over 20 to 30 years. . . Blue and Canadian have been declining for a lot longer than foreign ownership has been in place,” said Musson.

While acknowledging that there has been a slide, Canadian’s brand director, David Bigioni, said things have picked up somewhat this year.

A marketing and advertising push that began shortly before the Olympics helped lead to a boost in sales, said Bigioni. He believes it’s not just a one-time special-event boost, however.

“We’ve experienced seven months of consecutive growth, so it’s not just an Olympic moment, but more of a springboard to re-engage with our drinkers,” said Bigioni, who would not say exactly what the increase had been.

The “Made from Canada” campaign includes sweeping images of barley fields, rivers and maple leaves. It’s helped give the brand more of a focus both in advertising and internally at Molson-Coors, said Bigioni.

Musson insists, meanwhile, that Labatt and AB InBev are still committed to Blue.

“Blue is still a very big volume seller for us. It’s absolutely a priority for us,” says Musson.

Much of that volume, however, is only there because the price of 24 Blue was slashed to $29.95, effectively making it a discount brand, says Kincaid.

For beer author and long-time industry watcher Stephen Beaumont, the first sign that Labatt was not interested in pushing its long-time champion was in 2006, when he noticed Blue was no longer being sold at the Rogers Centre. Its corporate siblings, Stella and Budweiser, were still hanging around.

“When they stopped selling Blue at the stadium, that to me was a sign that Labatt had given up on the brand,” said Beaumont.

Still, while a slide in Canada’s beer megabrands might have wounded a patriotic drinker’s pride a generation ago, that’s probably not the case now, Beaumont adds.

“I think the idea of Canadian beer patriotism is pretty much dead. If it weren’t, they wouldn’t be having so much success with Budweiser and Coors Light. People who want to drink a Canadian beer are more likely to be drinking a craft beer these days than something from one of the big brewers.”

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