Bamboozles abound in the American supermarket. The fish counter is a vector of misinformation. The snack aisle is a hotbed of shrink- and skimp-flation. You are shopping for stories first, and products second. Sometimes they sync up! Other times, you are getting had.
Virtually every commodity in the modern grocery store is “mediated by marketers,” as Benjamin Lorr, author of “The Secret Life of Groceries,” told me in a 2021 interview about his excellent five-year investigation into the powerful retail channel. “The more you can get away from that, the better off we are [as consumers.] The problem is, there aren’t easy ways of getting away from that that maintain a lot of the other ‘virtues’ of global sourcing” — low prices thanks to cheap labor, chief among them.
With imported beer, the inverse is true. Imports — particularly those from Western Europe, with their green glass bottles and can’t-miss-it foil neck labels — impressed drinkers with the romance of centuries-long brewing traditions and visions of continental glamor, and started stealing share from American brewers’ higher-priced “super-premium” segment when they arrived on the scene in the late ‘60s and early ‘70s. Imports were “the main beneficiaries” of American drinkers’ “heightened demand for high-priced beer” in the ‘90s as the economy boomed, according to “The U.S. Brewing Industry,” a widely cited 2009 reference book by Victor J. and Carol Horton Tremblay. In 2000, only “microbrewers” commanded a higher average price per case than imports, and on a much smaller base. Two decades later, that dynamic largely holds.
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This was “premiumization” before the industry had a buzzword for it. Choosing brands like Beck’s (Germany), Löwenbräu (ditto), and above all, Heineken (Holland) “bespoke sophistication, worldliness, and appreciation for ‘the finer things,’” wrote Maureen Ogle in “Ambitious Brew,” a vital history of the American beer business. (For much more on this Europhilic halo effect, check out my two-part Taplines episode with Philip Van Munching, the third-generation American importer of Heineken.) The higher prices imports typically commanded were inextricable with the places they came from and the age-old legacies they’d built there — and, of course, gobs of marketing to hammer those unimpeachable credentials.
For decades, macrobrewers have been trying to pull off with import beers an alchemy roughly opposite to the one many consumer packaged-goods products are engaged in. The goal is to brew foreign beer brands in American facilities without shedding the prestige from whence they came — or the attendant price points. Until fairly recently, this was considered by many to be a CPG bamboozle of “false-advertising” proportions. Anheuser-Busch famously demanded the Federal Trade Commission investigate Miller Brewing Company in 1977 for selling domestically produced Löwenbräu under misleadingly Teutonic branding; four decades later, descendant firm Anheuser-Busch InBev would go on to settle a class-action lawsuit brought by Beck’s drinkers for similar allegations.
None of this stemmed the tide of imports-that-aren’t. If anything, it’s picked up over the past few years, for reasons laid out by longtime beer journalist Joshua M. Bernstein for this very publication late last year. It’s not a pure margin capture: Domestically brewing, say, Sapporo (which the Japanese conglomerate now does here in Richmond, Va.) allows for fresher beer, more nimble portfolio adjustments, and so on. Sapporo’s onshoring effort, an impetus of its 2022 acquisition of Stone Brewing Company (and its 2017 acquisition of Anchor Brewing Co., workers of that in-flux firm told Hop Take last summer) followed ABI’s own announcement in 2021 that it would brew Stella Artois for this market in four of its U.S. breweries. Earlier this year, Molson Coors announced it would do the same with Italy’s Peroni starting this summer at the firm’s Albany, Ga., facility.
“We’ve spent the last few months working closely with Peroni’s talented master brewers” to ensure quality control, said chief supply chain officer Brian Erhardt in a company blog post in late May. “By brewing Peroni at home, we can ensure consumers can get fresh, great-tasting Peroni at even more of their favorite restaurants, bars, shops and events across the country.”
The bit about the benefits of “brewing Peroni at home” stands out for two reasons. First, Peroni’s home is Italy, where its popular Nastro Azzurro lager has been brewed since 1963. (The brewery has been turning out beer since 1846.) Maybe Erhardt meant the home of MC, which is headquartered in Chicago, or that of the intended audience for its corporate blog, which, as far as I can tell, is me and a bunch of distributors thirsty for those sweet, sweet Happy Thursday updates. Who knows! (MC did not respond to a request for an interview.)
Second is the absence of even a whisper about “capturing efficiencies,” or “tapping into synergies” or any of the other standard corporate euphemisms for “making more money.” The closest anybody comes is chief marketing officer Sofia Colucci, who says by producing Peroni in Georgia, MC will be “positioned to fully unlock its potential” in the U.S. Even to investors, the margin benefits of “onshoring” production of the Italian brand remain an abstraction, though maybe they don’t care: A Hop Take review of the past four quarters’ worth of MC earnings call transcripts indicates Peroni was discussed just once, and briefly. Maybe it’ll bear more mention in this current quarter’s call, which will be the first since the firm announced the move.
It might. After all, nothing warms an analyst’s heart like “driving meaningful margin improvements,” and whatever else this gambit may accomplish — make no mistake, that’s the ultimate goal. A 2023 report by Rabobank spelled out the opportunity in great detail. Downward margin pressure from energy, shipping, and packaging costs have been especially harsh on European imports, some 60 percent of which arrive on U.S. shores in heavier, more expensive glass bottles. Domestically producing imports offers compelling operational solutions to all those problems, and insulates the brands from disruptions due to trade wars, extreme weather events, and the like. “In this context, moving production from Europe to the U.S.,” wrote co-authors Francois Sonneville and Jim Watson, “has obvious advantages.”
(Mexican imports are the exception that proves this rule. Mexico offers a far cheaper labor market that American brewers can easily access thanks to free-trade agreements and the country’s northerly land border with the U.S. Lo, Constellation Brands has invested in plants that take in American grains and churn out Mexican lager headed for American shelves.)
The disadvantages are limited, from a business perspective, at least. Some European firms, like Guinness and Heineken, might actually forfeit operational efficiencies in their home breweries by shifting volume closer to the American beer drinker. Those two, like Constellation, lack the sort of domestic brewing capacity of the bigs, so they’d be looking at an acquisition à la Sapporo. (Or Asahi, or Kirin; we talked earlier this year about how and why Japanese brewers have been aggressively coming to America as of late.)
But consumer backlash? Pfff. Not no mo’. Sonneville and Watson note that ABI’s stateside Stella shift, unlike its Beck’s gaffe, “was well communicated, highlighting the Belgian recipe, sustainability, and US employment aspects.” Its sales tracked Heineken’s almost exactly in the year before and after the move. “[T]the consumer appears fairly indifferent to (or uninformed of) the shift to production in the US.”
In other words, you either don’t care, or don’t know, but either way, it ain’t hurting sales. Is that a bamboozle, or just business as usual? I’ll let you decide for yourself. Remember: “Both” is always an option.
🤯 Hop-ocalypse Now
Forgetting about China? In THIS economy? Couldn’t be Hop Take. We’ve discussed the potential opportunities for American craft breweries to shore up sagging domestic sales by exploring exports to the Chinese market. It’s consistently a top-five foreign market for this country’s pioneering artisanal brews, as tracked by the Brewers Association. Still, while young, urbane Chinese drinkers may want American craft beer, the country doesn’t want for beer in general. American craft brewers shipped a cumulative ~14,000 hectoliters across the Pacific in 2022, a drop in the pint glass against the 359,080,000 hls Chinese beer-makers, led by China Resources Snow Breweries and Beijing Yanjing Beer Group (the world’s third- and ninth-largest producers by volume), pumped out in 2023, according to a recent global review from the German hop trader BarthHaas. So, y’know, make sure you really emphasize the “small, independent” angle in any marketing materials you plan to translate into Mandarin, craft brewers!
📈 Ups…
Cleveland’s venerable Great Lakes Brewing Co. is expanding into New England after 36 years holding it down in the Midwest… At-the-brewery pint prices are trailing overall inflation a bit, per BA analysis of Arryved and Bureau of Labor Statistics data…
📉 …and downs
At this point, Twisted Tea is providing Boston Beer Co.’s only meaningful growth… Americans’ booming thirst for Mexican lager has sent the country’s beer exports skyrocketing 175 percent in the past decade, straining an already scarce water supply… Bud Light ran third in NielsenIQ-tracked off-premise dollar sales behind Michelob Ultra and Modelo Especial in the four weeks through July 6… Global hop production was up 11.5 percent even as global beer production was down 0.9 percent in 2023, per BarthHaas…
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