Mid Atlantic Brewing News February/March 2012 : Page 3

By Greg Kitsock Out of Alignment Congratulations to D.G. Yuengling & Son in Pottsville. Not only is it the country’s oldest brewery, but it’s now the largest 100% American-owned brewery in the United States, states a Jan. 16 article in the Morning Call , a Lehigh Valley, Pa. newspaper. Yuengling sold 2.5 million bbl in 2011, up a health 17% over 2010. It reached that pinnacle on the basis of a torrid December, which saw sales soar 70% over the same period in the previous year. A triumphant entry into Ohio put some extra wind at Yuengling’s back. There were press reports of beer drinkers pitching tents overnight outside the Beer Dock east liquor mart in suburban Columbus so they could be first in line to buy cases of Yuengling Tradition Lager , Light Lager and Black & Tan . “I've never, in my entire 20 year beer industry career, seen a brand gain so much volume in such a short amount of time,” wrote Harry Schumacher of Beer Business Daily . Yuengling’s meteoric rise is worrying Anheuser InBev, the world’s largest brewer (which, although it owns a 25% share of the global market and is bigger than Yuengling by a factor of nearly 100, can’t claim the title of biggest American-owned brewer because it’s controlled by Brazilians). At his fall distributors’ meeting, AB InBev’s CEO Carlos Brito reportedly was “offended” that so many Bud distributors were taking on Yuengling. AB-InBev has set forth a new policy of “alignment.” Basically, it designates “anchor distributors” in a given area who will be given priority in buying up neighboring Bud wholesalers who want to sell their businesses. One of the criteria for being an “anchor” is to demonstrate alignment – that is, you only acquire brands “that compete in segments underserved by our current portfolio … not brands that have a negative impact on the A-B portfolio,” states a company guidebook, This seems to be an indirect way of pressuring distributors to drop competing brands, reminiscent of August Busch III’s “100% share of mind” dictum of the late 1990s. Brito, however, is unlikely to command the loyalty that Busch did. In fact, he’s shown little loyalty to anything other than the bottom line of the company he took over in 2008 after the Anheuser-Busch/ InBev merger. The company laid off 1,400 employees before ringing out 2008 and has continued shedding jobs since. (Granted, many of them were corporate executives with golden parachutes, but what about the cleaning staff at AB’s Newark brewery, who were ceremoniously replaced with cheaper non-union help supplied by contractors offering near-minimum wages?) AB InBev has angered suppliers by imposing a take-it-or-leave-it policy of paying them within 120 days instead of the previous agreed-on 30 days. (Can you imagine how your grocer would react if you walked out with a sixpack of Bud and told him you’d pay him sometime in May?) Under Brito the company has expressed an interest in eliminating the middleman by buying distributors where law permits, most recently snapping up Western Beverage Co. in Eugene, Ore. and Premium Beers in Oklahoma City. That hasn’t gone over well with defenders of the three-tier system in America. Brito, last spring, received a $4.18 billion bonus for his performance, according to the St. Louis Business Journal , after AB InBev reported a profit of $4 billion for the year 2010. But Brito surely realizes that there is only so much fat that he can trim, and that sooner or later the company will have to do something about stagnant sales. What’s AB’s big innovation for 2012? Bud Light Platinum (beat still my heart!). And it’s in a blue bottle! If you translate this ad-speak into English, it seems that AB is pitching its beer to snobs who want to show off with a fancy-looking package. This line extension is a higher-alcohol version of Bud Light , measuring 6% abv instead of 4.2%), and containing 137 calories per 12-oz serving (only 8 fewer than normal Bud , which makes it the not-so-light light beer). "There are opportunities for light beer to expand into new occasions, and we think Bud Light Platinum is the beer to take us there,” Mike Sundet, senior director for Bud Light , was quoted in AdAge . “Bud Light 's ability to innovate and its social personality makes [sic] it the ideal brand to introduce Bud Light Platinum to a growing number of image-conscious beer drinkers." If you translate this ad-speak into English, it seems that AB is pitching its beer to snobs who want to show off with a fancy-looking package without knowing anything about beer or appreciating its flavor. When you get down to it, Bud Light Platinum is no more than a slightly more efficient alcohol delivery system. AB intends to introduce Bud Light Platinum in an ad during Superbowl XLVI, where air time costs an average of $3.5 million per 30-second spot. This isn’t the first time the world’s biggest brewer has shelled out big bucks to promote a new brand. It bought an entire show’s worth of advertising during an episode of Saturday Night Live in 2009 to premier Bud Light Golden Wheat . That beer is hanging on by its fingernails, having failed to light the market on fire. (I guess it wasn’t ready for prime time.) It seems that the corporate offices of AB InBev, not the distributors, are the ones out of alignment. They’re out of alignment with America’s beer drinkers, who are increasingly flocking to Yuengling and to craft brands because they want a beer with some flavor to it, something with authenticity, something with a name and a face behind it (not a marketing department’s hype). Can you imagine anyone camping overnight to snag the first case of Bud Light Platinum ? 3 PUBLISHERS Bill Metzger bill@brewingnews.com Jamie Magee jamie@brewingnews.com EDITOR Greg Kitsock greg@brewingnews.com ADVERTISING MANAGER Mike Horkan 301-587-7821 mike.horkan@brewingnews.com Next Advertising Deadline: Mar. 7 STATE COR RE SPON DENTS DELAWARE George Hummel george@brewingnews.com MARYLAND Kevin Smith kevin.smith@brewingnews.com BALTIMORE Alexander D. Mitchell alexander.mitchell@brewingnews.com PENNSYLVANIA Jack Curtin (E.Pa.) jackcurtin@brewingnews.com Zachary Hubbard (Central Pa.) zachary@brewingnews.com George Hummel (Phila.) george@brewingnews.com VIRGINIA Steve Marler steve.marler@brewingnews.com WASHINGTON DC Stephen Lipps stephen@brewingnews.com WEST VIRGINIA John Yevuta john.yevuta@brewingnews.com NEW JERSEY Mark Haynie mark.haynie@brewingnews.com CONTRIBUTORS Ralph Bucca homebrew@brewingnews.com Hank Stewart hank@brewingnews.com Rick Lyke rick@brewingnews.com Martin Morse Wooster martin@brewingnews.com Steve Frank & Arnold Meltzer brewsbrothers@brewingnews.com 20 Rotating Taps & Rotating Bottle List Growler Fills Tues -Fri: 3pm-2am Sat -Sun: 2pm-2am Monday: Closed Jefferson Evans, Lyle C. Brown, Noreen Burns, Rich Wagner, Nathan Zeender BREWHAHA: Mitch Scheele mitch@brewingnews.com ILLUSTRATIONS:Hans Granheim hans@brewingnews.com DESIGNER/LAYOUT: Shari Kozminski koz@brewingnews.com WEBMEISTER: Jamie Magee jamie@brewingnews.com Office Phone: 1-800-474-7291 Fax 1-888-665-5007 Mid-Atlantic Brewing News is published bimonthly, on 100% recycled paper. At least 55,000 copies are distributed to breweries, brew on prem-ises, homebrew supply shops, and high variety beer bars and stores across the Mid-Atlantic region. One year sub scrip tions (6 issues) are available for $20 US or $25 Canadian at the following address: Mid-Atlantic Brewing News , 571 South Park Ave.Buffalo, NY 14204. All material ©2011 by Mid-Atlantic Brewing News , unless otherwise noted. 323 Ridge Road, North Arlington, NJ 07031 www.thecopperminepub.com

Editorial

Greg Kitsock

Out of Alignment<br /> <br /> Congratulations to D.G. Yuengling & Son in Pottsville. Not only is it the country’s oldest brewery, but it’s now the largest 100% American-owned brewery in the United States, states a Jan. 16 article in the Morning Call, a Lehigh Valley, Pa. Newspaper.<br /> <br /> Yuengling sold 2.5 million bbl in 2011, up a health 17% over 2010. It reached that pinnacle on the basis of a torrid December, which saw sales soar 70% over the same period in the previous year. A triumphant entry into Ohio put some extra wind at Yuengling’s back. There were press reports of beer drinkers pitching tents overnight outside the Beer Dock east liquor mart in suburban Columbus so they could be first in line to buy cases of Yuengling Tradition Lager, Light Lager and Black & Tan.<br /> <br /> “I've never, in my entire 20 year beer industry career, seen a brand gain so much volume in such a short amount of time,” wrote Harry Schumacher of Beer Business Daily.<br /> <br /> Yuengling’s meteoric rise is worrying Anheuser InBev, the world’s largest brewer (which, although it owns a 25% share of the global market and is bigger than Yuengling by a factor of nearly 100, can’t claim the title of biggest American-owned brewer because it’s controlled by Brazilians).<br /> <br /> At his fall distributors’ meeting, AB InBev’s CEO Carlos Brito reportedly was “offended” that so many Bud distributors were taking on Yuengling. AB-InBev has set forth a new policy of “alignment.” Basically, it designates “anchor distributors” in a given area who will be given priority in buying up neighboring Bud wholesalers who want to sell their businesses. One of the criteria for being an “anchor” is to demonstrate alignment – that is, you only acquire brands “that compete in segments underserved by our current portfolio … not brands that have a negative impact on the A-B portfolio,” states a company guidebook, <br /> <br /> This seems to be an indirect way of pressuring distributors to drop competing brands, reminiscent of August Busch III’s “100% share of mind” dictum of the late 1990s. Brito, however, is unlikely to command the loyalty that Busch did. In fact, he’s shown little loyalty to anything other than the bottom line of the company he took over in 2008 after the Anheuser-Busch/ InBev merger. The company laid off 1,400 employees before ringing out 2008 and has continued shedding jobs since. (Granted, many of them were corporate executives with golden parachutes, but what about the cleaning staff at AB’s Newark brewery, who were ceremoniously replaced with cheaper non-union help supplied by contractors offering near-minimum wages?)<br /> <br /> AB InBev has angered suppliers by imposing a take-it-orleave- it policy of paying them within 120 days instead of the previous agreed-on 30 days. (Can you imagine how your grocer would react if you walked out with a sixpack of Bud and told him you’d pay him sometime in May?)<br /> <br /> Under Brito the company has expressed an interest in eliminating the middleman by buying distributors where law permits, most recently snapping up Western Beverage Co. In Eugene, Ore. And Premium Beers in Oklahoma City. That hasn’t gone over well with defenders of the three-tier system in America.<br /> <br /> Brito, last spring, received a $4.18 billion bonus for his performance, according to the St. Louis Business Journal, after AB InBev reported a profit of $4 billion for the year 2010. But Brito surely realizes that there is only so much fat that he can trim, and that sooner or later the company will have to do something about stagnant sales.<br /> <br /> What’s AB’s big innovation for 2012?<br /> <br /> Bud Light Platinum (beat still my heart!). And it’s in a blue bottle!<br /> <br /> This line extension is a higher-alcohol version of Bud Light, measuring 6% abv instead of 4.2%), and containing 137 calories per 12-oz serving (only 8 fewer than normal Bud, which makes it the not-solight light beer).<br /> <br /> "There are opportunities for light beer to expand into new occasions, and we think Bud Light Platinum is the beer to take us there,” Mike Sundet, senior director for Bud Light, was quoted in AdAge. “Bud Light's ability to innovate and its social personality makes [sic] it the ideal brand to introduce Bud Light Platinum to a growing number of image-conscious beer drinkers."<br /> <br /> If you translate this ad-speak into English, it seems that AB is pitching its beer to snobs who want to show off with a fancylooking package without knowing anything about beer or appreciating its flavor.<br /> <br /> When you get down to it, Bud Light Platinum is no more than a slightly more efficient alcohol delivery system.<br /> <br /> AB intends to introduce Bud Light Platinum in an ad during Superbowl XLVI, where air time costs an average of $3.5 million per 30-second spot. This isn’t the first time the world’s biggest brewer has shelled out big bucks to promote a new brand. It bought an entire show’s worth of advertising during an episode of Saturday Night Live in 2009 to premier Bud Light Golden Wheat. That beer is hanging on by its fingernails, having failed to light the market on fire. (I guess it wasn’t ready for prime time.)<br /> <br /> It seems that the corporate offices of AB InBev, not the distributors, are the ones out of alignment. They’re out of alignment with America’s beer drinkers, who are increasingly flocking to Yuengling and to craft brands because they want a beer with some flavor to it, something with authenticity, something with a name and a face behind it (not a marketing department’s hype).<br /> <br /> Can you imagine anyone camping overnight to snag the first case of Bud Light Platinum?

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