Can These Craft Beers Thrive at Age 30?
There aren't many craft beers that have lived to the age of 30, but two brewers -- Boston Beer and Craft Brew Alliance's Widmer Brothers -- plan to celebrate that milestone in 2014.
More recently, however, both Boston Lager and Widmer Hefeweizen have had their share of troubles in the way of flagging sales in a fast-growing craft-brew market, which includes offerings from AB Inbev , Molson Coors and SABMiller. But both have also shown signs of light in the most recent quarter.
With Widmer and Boston Lager each celebrating three decades next year, Boston Beer and Craft Brew are banking on a continued turnaround and hoping for momentum from an anniversary marketing push. Could these celebrations ring in a rebirth?
Craft brew pioneers
Much like the colonist who serves as its namesake, Sam Adams Boston Lager was a true rebel on the beer scene in the early to-mid 1980s. There were fewer than 100 American brewers operating then, and most were putting out a very similar straw-colored, light, pilsner-style lager. Jim Koch seized the opportunity and his brewery never looked back.
But as the craft beer market matured and Sam Adams further extended its offerings, its flagship was blown off course.
In 1998, Boston Lager made up nearly 60% of all of Boston Beer's shipments, and it was still growing in the high single digits. By 2011, the flagship beer was contributing just 24% of shipments -- and shrinking. Seasonal beers -- and ancillaries like ciders and teas -- had become the new engines of growth.
But the tide turned in the most recent quarter. Boston Lager is suddenly growing again. And with a 30th anniversary marketing push planned, Koch and company are hoping to build on that momentum. It will be aided by the new Sam Can, which is helping to put Boston Lager into more coolers for backyard barbecues and tailgate parties, where bottles are often avoided.
A German specialty, Americanized
Widmer has been a trouble spot for Craft Brew as it looks to ramp up growth of its three primary labels. While sales of Craft Brew's Kona brand grew at a heady 26% over 2012's third quarter and its Redhook brand grew at 20%, Widmer sales were flat.
More telling is that those flat sales were seen as a good thing. Just two quarters earlier, Craft Brew was wrestling with a 12% drop in Widmer sales. When a craft brand is lagging in such a fast-growing market, it's trouble.
One of the big drags on Widmer sales has been the struggles of its hefeweizen. Widmer was one of the true pioneers of bringing this light, refreshing German-style wheat ale to the U.S. Its initial weizenbier lays claim to being the first commercially produced American hefeweizen.
With that history, Widmer Hefeweizen served as a great flagship beer for the Portland brewer. To say it's a key product is an understatement. Hefeweizen made up more than 60% of Widmer's revenue in 2012, despite the brewery's array of more than 25 offerings.
As a craft beer, hefeweizen is a great introduction for the uninitiated. It's light, takes on a natural fruity character from the yeast fermentation, and goes down very easy. As such, it makes a great conversion beer -- one that wins over non-craft and non-beer drinkers.
Competition, great and small
But those qualities also made it a natural choice for just about every other craft brewery that has sprung up in more recent years. With the number of U.S. breweries doubling to more than 2,500 since just 2005, that makes for many a hefeweizen on store shelves and tavern tap handles. Widmer's flagship beer was simply inundated with competition.
Adding to that problem are the crafty labels now being sold by the megabrewers, AB InBev and MillerCoors, the U.S. beer partnership between Molson Coors and SABMiller. MillerCoors' Blue Moon -- with its own flagship wheat beer -- is one of the biggest craft-style labels in the U.S. At the same time, the Leinenkugel is growing fast, with shipments of lemony Leinenkugel Summer Shandy up 24% over last year.
AB InBev, meanwhile, has been successfully expanding its Shock Top line of crafty beers. And guess what? All of its Shock Top beers are wheat beers.
Craft Brew has decided to refocus with Widmer, where it has begun to experiment at the high end, introducing high-alcohol, bourbon-barrel-aged ales and barleywines. Bold beers like these could help to give Widmer an identity it now lacks outside its familiar markets.
The Foolish bottom line
Craft drinkers may be displaying what Boston Beer CEO Martin Roper called a "return to quality and familiarity," fueling growth in some of the old labels that have struggled in this explosive phase of the American beer market. That's helped Boston Lager return to growth, which should help maintain momentum for the company.
Widmer may also be turning a corner. But for now, it's just too hard to tell where the brand stands, or if the new approach will be successful. With a big celebration on tap for 2014, investors should get a clearer picture of the brand's future and its place in Craft Brew's portfolio.
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The article Can These Craft Beers Thrive at Age 30? originally appeared on Fool.com.John-Erik Koslosky has no position in any stocks mentioned. The Motley Fool recommends Boston Beer and Molson Coors Brewing Company. The Motley Fool owns shares of Boston Beer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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