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1990: the year in review.

1990: The Year In Review

Statistics and pertinent developments of the past year.

So it was in 1990 for the beer industry. It was a year marked by the onset of new taxation and the threat of further regulation, but despite this, 1990 was marked by resurging business for select brewers. As the year played out a familiar pattern, America's top three brewers chalked up strong gains in sales, though clearly at the expense of other players. During 1991, market shifts promise to continue, with the potential for significant alterations to the corporate landscape.

U.S. beer sales rose to an estimated 193,083,000 barrels, an increase of 2.7 percent over the 1989 figure of 188,060,000 barrels.

Sales improvements were chalked up in many categories and in whole market segments, a heartening trend after flat and down performance in recent years. This upward trend was based on strong performance by light beers and new brands-- welcome in a year when the flagship brands of the top three brewers were flat or slipping.

This upward trend also benefited from an incremental increase in per capita consumption. Despite increasing neo-prohibitionistic pressures and health concerns, U.S. per capita consumption ticked upwards to 24.0 from 23.4.

In another encouraging development, it seems that the demise of the import segment was much exaggerated. Sales in 1990 were estimated at 8,783,000 barrels, an increase of 1.4 percent (welcome after last year's 7.9 percent decline).

Once and future industry leader Anheuser-Busch enjoyed a very productive 1990. The brewer reported sales of 86.5 million barrels, an increase of 5.8 million barrels, 7.2 percent over 1989. The banner year further clinched A-B's hammerlock on the American beer market, standing at 43.7 percent of total sales. Most significantly, the brewer began to bestir itself for the coming challenge--an overdue assault on the international market.

Perennial number-two Miller Brewing Co. posted a 3.8 increase in sales over 1990, with 43.5 million barrels.

An up-and-coming Coors Brewing Co. achieved the largest percent increase of any brewer, over nine percent. The Golden, CO-based company reported sales of 19.2 million barrels.

Things were not quite as rosy at Stroh, which reported another down year. The brewer sold an estimated 16,100,000 barrels, placing the company behind Coors in the pecking order for the first time since the early '80s. Despite the 11.7-percent decline, in other respects the company is stronger than a year ago. Through divestment and retrenchment, a leaner Stroh is emerging.

Whether fifth-ranked brewer G. Heileman can similarly pull its chestnuts out of the fire remains to be seen. The brewer accepted a six-percent decline in 1990, and succumbed to its enormous burden of debt early in 1991, filing for protection under Chapter 11 of the U.S. Bankruptcy Code. In early 1991, the issue remains in doubt.

The Legislative Front

If the year 1990 was welcome for the warming sales trend, elation was damped by the chill wind of legislative threats. An excise tax increase, which had been a diaphanous threat for decades, suddenly took on alarmingly tangible form, confronting the industry with a real challenge to its tenuous prosperity. The success of previous efforts at deflecting the tax only served to increase the perceived need for such a tax among legislators. As Beer Institute President Jim Sanders pointed out early in 1990, "Each year as we duck the bullet once more, it gets more likely that we won't be able to do it again." In 1990, it proved impossible.

The debate over an increased national excise tax was at times overshadowed by an even more sweeping tax initiative proposed for the bellwether state of California.

This initiative first surfaced in January of 1990, when California health officials kicked off a campaign to impose a "nickel-a-drink" alcohol tax to raise money for health and treatment programs. Supporters of the measure stated it would raise $736 million to contribute towards alcohol induced societal costs.

New NBWA president Ron Sarasin truly received a baptism of fire as he led the association in its efforts to turn back the excise tax proposals. Fortunately, the California proposition received a drubbing at the ballot box. Perhaps inevitably, however, the national tax went through. Of the passing of the excise tax increase, Sarasin said, "Is that a victory? Hell no. But is it a defeat? No, it isn't. It does not represent the potential five-fold increase and it does not represent equalization." Sarasin commented on the unprecedented unity of the industry under fire. "We have been in this fight as a united group, and we will continue to work together on putting together responses to whatever comes our way."

The practical effect of the legislation was to double the tax on six 12-oz. containers of beer from 16 to 32 cents. The tax on a barrel of beer went from $9.00 to $18.00. The Bureau of Alcohol, Tobacco and Firearms predicted that the increased excise taxes (on spirits and tobacco as well) would put $3 billion in tax revenue into the national coffers.

Labeling regulations were finalized early in 1990, to specify a more readable warning label. According to critics, the initial type size specified by the BATF was too small and difficult to read.

The National Beer Wholesalers applauded a U.S. Supreme Court Decision in May, which affirmed the broad powers of all 50 states to control alcohol beverage distribution within their borders.

The NBWA had filed a "friend-of-the-court" brief in the case, North Dakota vs. United States, supporting the state of North Dakota's right to impose labeling and other requirements on out-of-state supplies of liquor destined for military bases in the state. The Defense Department had challenged the state's regulations as an improper intrusion into federal power.

In the court's decision, it adopted the position urged by the NBWA. Justice Antonin Scalia stated, "The 21st Amendment binds the federal government just like everyone else."

Ron Sarasin called the ruling, "a long overdue correction to a series of recent court decisions which have eaten away at state authority under the 21st Amendment."

In July, the issue of transportation undercharges came before the House Subcommittee of Surface Transportation. NBWA president Sarasin called for a legislative solution to the problem of motor carrier undercharge liability facing many beer wholesalers. "Beer wholesalers may not be experts in transportation law," he said, "but they know an injustice when they see one."

He explained that the "Catch 22" created by the undercharge issue has a had a potentially devastating impact on small businessmen who are unfamiliar with terms like "unpaid tariff charges" and "filed rate doctrine."

Neo-prohibitionistic Pressures

In May, the American Automobile Association (AAA) released a report called "Beer and Fast Cars." The report contended that young people, particularly young blue-collar males, are susceptible to beer advertising connected with motor-racing events.

BI president Jim Sanders took issue with the report's findings. As an example, Sanders cited a statement that 30 percent of beer drinkers were in the ranks of the unemployed. "Given that there are 80 million beer drinkers," he pointed out, "30 percent equates to 24 million unemployed, four times the figure released by the Bureau of Labor Statistics."

Sanders also pointed to the condescending tone of the report. "They note that motorsports fans are |lower on the educational ladder'," he noted, "and |tend to resent government pronouncements on what's good for them.'

"To achieve their political goals," Sanders concluded, "the groups funding and promoting this booklet take broad license with what they offer up as fact and logic. This book continues an absurdist tradition."

The question of warning labels incorporated into advertisements was hotly debated on Capitol Hill. The issue was the focus of a hearing called by Rep. Joseph Kennedy (D-MA) and Sen. Albert Gore (D-TN) proponents of the alcohol ad ban. Kennedy told the panel that beer and other alcoholic beverage ads glamorize drinking. "Like it or not," he said, "beer ads educate Americans that taking a drink is needed to win that race or score with that new girl or guy."

The BI's Jim Sanders noted that if such a bill passed, he expected that brewers would withdraw advertising that underwrites sports events or television coverage of the sports. "With such a mixed message," he pointed out, "the ads would no longer be effective."

Wholesaler Associations

Sunbelt wholesalers met in Opryland in August. The keynote speaker was August Busch III, who delivered an address on the challenges facing the industry. Busch stressed the importance of the industry's three-tier system working together to defend against "misguided legislative challenges."

Busch noted that the best way to accomplish this objective is to have every beer wholesaler participate in both state and national organizations, to strengthen the industry. He said that a key part of the industry's success is its three-tier system.

Busch also addressed neo-prohibitionism. "The most serious challenge is that beer is being linked to illegal drugs," he pointed out. "This is extremely serious and symptomatic of the growing anti-alcohol movement in this country which has the elimination of all alcohol consumption, including safe consumption, as its goal."

Busch stressed the fact that beer is the beverage of moderation, and encouraged wholesalers to join Beer Drinkers of America to bolster their lobbying efforts.

In one of his first engagements against the neo-prohibitionists, NBWA president Ron Sarasin propounded the industry point-of-view during a meeting with the House Ways & Means Committee. Taking issue with witnesses who suggested that alcoholic beverages be included as targets in the drug war, Sarasin said, "The vast majority of Americans who consume our products do so moderately and responsibly. By way of contrast, there is no such thing as moderate and responsible consumption of drugs."

Linking the two classes of products, Sarasin explained, would erroneously imply that alcoholic beverages are as harmful as crack.

The National Beer Wholesalers held its annual convention as the tax drama unfolded in Washington, D.C. Predictably, much was said on the tax issue, but some industry figures looked beyond current troubles towards a united and pro-active future.

In his address at the convention, Leonard Goldstein, president of Miller Brewing Co., called for unity, saying, "In a time when walls between nations are being torn down, we must begin to take down the walls within our industry. The future for the beer industry is not just one of challenge, but of tremendous opportunity. If we act together," he said, "we cannot lose."

In June, The Beer Institute announced the first recipients of the organization's Community Assitance Fund. According to BI's Jim Sanders, the campaign is designed to combat drug abuse among young people. "The key to winning the battle against substance abuse can be found in communities across America," Sanders said, "wherever people see the problems first hand. We want to help those communities in their efforts to protect young Americans."

Anheuser-Busch Brewing Co.

Anheuser-Busch kicked off the year with a new brand introduction in the non-alcoholic segment. The national debut of a O'Doul's helped throw a spotlight on the non-alcoholic segment, which responded with rapid growth. "O'Doul's was created to fill the need for a non-alcoholic brew," reported Michael Roarty, then executive v-p and marketing director, "indicated by extensive research and field monitoring. It is our belief that there is a potential for future growth in the non-alcoholic brew category."

In another large-scale introduction, the company announced the national roll-out of Bud Dry. The new addition to the Budweiser family had been in a number of test markets previously. August Busch IV, in his first high-profile role with the company, was named senior brand manager.

In limited introduction, the company began to test-market Busch Cold-Filtered Draft in a clear glass bottle. In early 1991, other Anheuser-Busch test products were in the offing.

In a reshuffling of top management, Michael J. Roarty, executive v-p of Anheuser-Busch marketing since 1977, was named executive vice president for corporate marketing and communications with the brewery's parent company. At the same time, August Busch III announced the appointment of Patrick T. Stokes as president of Anheuser-Busch, Inc.

In the early summer, Anheuser-Busch launched an unusual attack on Coors, charging that the company has engaged in "false and deceptive" advertising by implying that its products contain only "Rocky Mountain Spring Water." The attack may have been provoked by Coors' "Where is your beer born" ad campaign.

In a more productive strategic move, Anheuser-Busch led the brewing industry's fight against the beer tax with its highly visible "can the beer tax" effort. The campaign included radio, television and print ads. "Beer drinkers already do much more than their share when it comes to taxes," said A-B vice president Stephen Lambright.

Miller Brewing Co.

Miller indicated that it might be opening its dormant Trenton, OH, plant now that the company can make use of the additional capacity.

A new product, Miller Genuine Draft Light, was moved into expanded test markets. The move widened the brand's test markets into a total of 15 states.

In another test market introduction, Miller fielded Premium Reserve in four markets. The product is a 100-percent barley beer, targeted to the above-premium category. Miller followed this product with Premium Reserve Light, a lower-calorie version of the 100-percent barley product.

Coors Brewing Co.

Coors held talks with Heileman at the beginning of 1990, in the wake of the break-off of talks with Stroh. The Colorado brewer was eager to add to its strained capacity and was casting about in all directions for more physical plant.

This came as the Colorado brewer was about to overtake Stroh as the nation's number three brewer.

In March, the brewer made a commitment of $40 million over the next five years towards efforts to reduce illiteracy. "This is the largest single corporate commitment we have ever had," noted Peter Waite, director of the National Volunteer Literacy campaign.

In April, Peter Coors gave an articulate address to the California Beer & Wine Wholesalers, stating that the brewing industry had to go on the offensive. "If we continue on the same track in the '90s as in the '80s," he said, "we should start looking for other work. We are losing a battle, let's not lose the war."

Coors suggested the industry should unite on an issue--such as mandatory recycling, and promote it nationally. He said such a move would eliminate the crazy quilt of laws on the subject and further the recycling cause. He said his company was prepared to offer staff and resources for such an effort.

He also declared the industry should take the high road on advertising, and should maintain high standards. "Halfway there is of no use," he said, citing the case of one brewer that rented billboard space during Spring Break promoting responsible consumption, and then proceeded to field numerous giant six-pack balloons.

"I am tremendously excited about our industry and its opportunities," he said. "It's time we gave Congress something to chew on."

In another public-service oriented gesture, Coors launched its "Pure Water 2000" campaign. The campaign is designed to raise public consciousness about pollution problems.

Stroh Brewery Co.

Early in the year, there was a great deal of interest in Stroh as a takeover target. The company was courted by suitors as diverse as Coors and Artois Piedboeuf Interbrew of Belgium. When the deals fell through, Stroh stripped for action, and began divesting itself of assets to generate cash. The company peddled its ice-cream business and Sundance non-alcoholic fruit beverage brand and sold its Memphis, TN, plant to Coors. In its largest and most profitable divestment, Stroh sold off its interest in La Cruz del Campo, Spain's largest brewer. The sale gave Stroh a much-needed infusion of cash. The company also closed its Van Nuys, CA, plant and laid off a large number of employees.

G. Heileman Brewing Co.

Heileman announced in February that it would put two of its breweries on the block. The Frankenmuth, MI, and St. Paul, MN, breweries were offered for sale as part of an ongoing retrenchment by the beleagured brewer. In late February, it was announced that the brewer's debt exceeded $1 billion. Alan Bond, architect of the shaky international brewing empire that included Heileman, resigned as chairman of Bond Corp. in October, in a move to appease corporate creditors owed an estimated $6 billion.

Events came to a head in January of this year, when Murray Cutbush departed as company president, to be replaced by Thomas Rattigan, a financial expert with soft-drink experience. A week after the management change, Heileman filed for bankruptcy protection.

The Import Segment

The clear trend in the segment was consolidation, as large foreign brewers moved to streamline their importing operations and build their brand portfolios.

In the first such move, Guinness PLC acquired All-Brand Importing, giving the worldly brewer a strong foothold in the American market (An estimated 11.7 percent share). The company's new portfolio includes Pilsener Urquell, Dos Equis and Moosehead. Of the move, Guinness Import Company president Michael Hughes said, "A broad perspective on this industry shows every category changing through consolidation, leaving a smaller number of stronger, smarter players. That trend has reached the import category," he said, "and the result will be greater consolidation among the importers. We wanted to lead that consolidation."

Continuing that trend, March saw the merger of Century Importers with Martlet Importing. The new company adopted the name Molson Breweries U.S.A. The move gave Molson 22 brands, and an estimated 18.8 percent market share.

Finally, in the largest consolidation move in the segment, Van Munching & Co. announced the sale of its business to Heineken N.V. The importer had a 31.4 percent share of market in the U.S. A Heineken spokesperson said of the purchase, "It is the normal follow-up to a long and extremely successful relationship as far as both parties are concerned."

Small-Scale Brewing

According to a court ruling in April, a Michigan brewup ban doesn't break federal anti-trust laws. The brewpub ban had been supported by wholesalers, who had called the case, "one of the most vicious and far-reaching attacks on the legislatively mandated three-tier distribution system. Although the ruling did not set a precedent in other circuits, other federal and state courts may use it as such in the absence of their own precedent-setting cases. In 1990, thirty states allowed the existence of brewpubs.

The annual microbrewers conference in late August proved a good forum for debate on the issues facing the industry at large. Many small brewers were agitated about the prospect for increased regulation and taxation, which can have a crushing impact on a small operation.

Daniel Bradford of the Association of Brewers delivered an address on neo-prohibitionism. "The heart of the neo-prohibitionist movement lies in the desire to solve a very real problem," he said, "that of alcohol abuse. Along with gang warfare and drug abuse, alcohol is in fact one of society's diseases. however," he continued, "neo-prohibitionists would have the public believe that through restriction of consumption, of availability and of marketing, the problem of alcohol abuse would vanish.

"Because you own community-based businesses," Bradford told the microbrewers, "you are in a position to move forward and help build a consortium creating community programs that will effect the overall level of alcohol abuse.

"Your challenge," he said, "is not to ignore the tide of neo-prohibitionism, nor the problems of alcohol abuse. Your challenge is to create a grass roots strategy to protect your livlihoods and help alleviate the problem."

Alcohol & Health

The beneficial qualities of moderate consumption of alcohol for elderly patients was discussed in the Johns Hopkins Medical Journal. According to the Journal, "Moderate amounts of alcoholic beverages have been recognized as useful therapeutic agents for the aged for centuries." The Journal said recent research has borne out early suppositions, stating, "Taken together, studies support the belief among many physicians that small daily amounts of alcohol can improve the quality of life for the elderly."

In another study, published by the American Heart Association, consumption of small amounts of alcohol was said to have positive effects on the levels of so-called "good" high-density lipoprotein chloresterol in women. The beneficial effect was not measured in men. The researchers said that because of the other effects of alcohol on health, their findings should not be interpreted as a general recommendation for alcohol consumption to decrease the risk of heart disease. Doctors said that people should govern their alcohol consumption by many factors, including coronary disease risk and drinking history.

Conclusion

The year 1990 was an eventful one for the brewing industry, marked by ongoing structural change. Importers were gobbled up by their foreign suppliers and wholesaler consolidation continued at a measured pace.

Most significant were the continuing large market shifts among the major brewers. As the big five become the big three, enormous areas of the market are up for grabs. It is impossible to predict with certainty what the industry will look like in a few years, but the statistics speak volumes.

Over the past twenty years, the structure of the industry has changed dramatically. As the larger brewers have accrued market share, the share allotted to brewers outside the charmed circle has dwindled strikingly. It is clear that a consolidated industry is destined to become ever more monolithic.

These monoliths have to compete for an ever dwindling piece of the pie. Even if per capita consumption remained stable, an ever-growing beer market is not something that brewers can count on. The internecine market-share war of recent years is symptomatic of an American beer market with its' major growth years behind it.

In and of itself, this will not condemn the beer industry to stagnation. Unfortunately, broader economic and societal factors may come into play. If the American economy continues in a prolonged recession, the industry will suffer. Historically, recessions are not accompanied by declines in consumption, but the combination of a weak economy with the rising tide of negative publicity could damage the industry.

Futher, it is very unlikely that the industry will get another four-decade respite before the next excisetax increase. The past fiscal irresponsibility of the government will exact a cruel price on the American economy. It will be necessary to pay the piper, and the alcoholic beverage industry will be asked to foot more of the bill.

If these future demands for revenue are to be blunted, and negative publicity countered, it will be necessary to continue building industry unity. In a time when many of the societal and economic factors affecting the industry are beyond its control, it becomes particularly important to channel and direct the one force the industry can harness--the human contributions available from a unified industry of wholesalers and brewers. There are many obstacles to a unified industry, but they pale beside the consequences of disharmony.

The coming decade will offer new challenges to brewers and wholesalers. These challenges must be met by an industry with its house in order.

1990 U.S. BEER IMPORTS
 1989 1990 %
 GALLONS GALLONS CHANGE
Netherlands 79,443,482 82,366,407 3.7%
Canada 67,412,841 65,274,150 -3.2%
Mexico 52,571,990 49,704,478 -5.5%
F.R. Germany 32,166,293 33,684,464 4.7%
U.K. 8,907,189 9,905,361 11.2%
Ireland 6,633,736 7,365,929 11.0%
Australia 4,798,643 6,718,991 40.0%
Japan 4,674,106 4,513,056 -3.4%
China 1,806,219 2,044,442 13.2%
Denmark 1,774,587 1,652,118 -6.9%
New Zealand 1,279,790 1,561,464 22.0%
Jamaica 861,199 1,067,569 24.0%
Philippines 461,087 649,866 40.9%
Italy 547,010 601,488 10.0%
Czechoslovakia 471,017 596,050 26.5%
France 500,798 586,003 17.0%
Thailand 476,971 485,580 1.8%
Venezuela 575,492 375,549 -34.7%
Korea 232,318 355,849 53.2%
Switzerland 238,041 295,225 24.0%
Belgium 207,939 227,116 9.2%
India 138,425 175,032 26.4%
Dom. Rep. 216,977 161,520 -25.6%
Austria 114,602 150,200 31.1%
Norway 273,927 148,537 -45.8%
Peru 127,102 133,743 5.2%
Portugal 158,599 128,115 -19.2%
Trinidad 322,656 112,812 -65.0%
East Germany 27,832 110,003 295.2%
Yugoslavia 110,246 99,280 -9.9%
Brazil 84,340 84,787 0.5%
Hong Kong 40,111 83,314 107.7%
Singapore 50,942 80,526 58.1%
El Salvador 49,783 77,810 56.3%
Ivory Coast 82,918 73,170 -11.8%
Greece 74,573 65,450 -12.2%
Bulgaria 23,002 51,819 125.3%
Sweden 143,817 44,638 -69.0%
Poland 86,134 39,253 -54.4%
USSR 95 36,736 N/A
Guatemala 54,732 13,633 -75.1%
Spain 6,547 8,962 36.9%
Taiwan 4,198 7,249 72.7%
Lebanon 0 5,440 100.0%
Neth. Antilles 0 1,954 100.0%
British Virgin Is 3,596 1,100 -69.4%
Israel 96,159 0 -100.0%
Niger 3,151 0 -100.0%
Monaco 3,089 0 -100.0%
Senegal 2,460 0 -100.0%
Argentina 2,425 0 -100.0%
Indonesia 2,067 0 -100.0%
French West Indie 1,732 0 -100.0%
Romania 127 0 -100.0%
Total Gallons 268,469,807 272,281,171 1.4%


Grand totals include some countries not listed above. Source: U.S. Department of Commerce, Bureau of Census. Compiled by the Beer Institute. Canada and Mexico amounts subject to revision.

Domestic Market Share, Top 5 Brewers
 1979-1990
 A-B Miller Coors Stroh Heileman
1978 25.6 19.3 7.7 3.9 4.4
1979 27.5 21.3 7.7 3.6 6.6
1980 28.7 21.3 7.9 3.5 7.6
1981 30.4 22.5 7.3 3.4 7.8
1982 33.0 21.9 6.7 12.8 8.1
1983 33.7 20.9 7.6 13.5 9.8
1984 36.0 21.1 7.4 13.4 9.4
1985 37.2 20.3 8.1 12.8 8.9
1986 40.5 21.7 8.5 12.8 9.0
1987 42.0 22.0 8.8 12.2 9.1
1988 43.3 22.4 9.1 11.3 8.4
1989 44.0 22.8 9.7 10.0 7.1
1990 45.9 23.1 10.2 8.5 6.5


Does not include imports. Copyright 1991 Modern Brewery Age.

Barrelage of Top 5 Brewers, 1978-1990
 (in millions of barrels)
 A-B Miller Coors Stroh Heileman
1978 41.6 31.3 12.6 6.3 7.1
1979 46.2 35.8 12.9 6.0 11.2
1980 50.2 37.3 13.8 6.2 13.3
1981 54.5 40.3 13.3 6.2 14.0
1982 59.1 39.3 11.9 22.9 14.5
1983 60.5 37.5 13.7 24.3 17.5
1984 64.0 37.5 13.2 23.9 16.8
1985 68.0 37.1 14.7 23.4 16.2
1986 72.3 38.7 15.2 22.8 16.1
1987 76.1 39.3 15.7 21.6 16.3
1988 78.5 40.7 16.5 20.5 15.3
1989 80.7 41.9 17.7 18.2 13.1
1990 86.5 43.5 19.2 16.1 12.3


Copyright 1991 Modern Brewery Age
COPYRIGHT 1991 Business Journals, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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Title Annotation:1990 Statistical Study; statistics and developments in the brewing industry
Publication:Modern Brewery Age
Date:Mar 11, 1991
Words:4622
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