Import Beer – A World of Opportunities

For the past decade and a half, a very craft-centric narrative has dominated coverage of the U.S. beer market. It made sense because, for a while, it was the only segment whose growth far outpaced that of the overall, flat-to-down, category. Eventually, however, imports rebounded and now, surprisingly enough, their respective growth trajectories are nearly identical.

Across the major retail channels, import volume grew by 6.6 percent, while revenue rose 8.4 percent, for the 52-week period that ended in mid-July 2017, according to market research company IRI. That’s not far off from craft’s full-year 2016 performance, as reported by the Brewers Association, which puts the volume gain at 6 percent and the dollar increase at 10 percent. The import numbers are even more impressive when you consider that the segment is still roughly 1.5 times the size of craft.

SOUTH OF THE BORDER

Mexican brands continue to be the top performers. Case volume for Corona, the No. 1 import brand in the country, grew 6.2 percent and revenue surged more than 8 percent, IRI notes. In the No. 2 spot was the Modelo trademark family, jumping nearly 21 percent in case volume and 23 percent in dollar sales. And that’s great news for Constellation, which holds a perpetual license for those brands in the U.S. market, as per the terms of Anheuser-Busch InBev’s 2013 acquisition of Grupo Modelo. Anheuser-Busch InBev produces and markets the brand for Mexico and the rest of the world.

In fact, three of the top 10 import brands in the country, based on IRI data, are Constellation imports from the erstwhile Modelo portfolio. Pacifico, the No. 9 import brand in the country, saw its volume increase by 21.4 percent and its revenue rise nearly 25 percent, though off a considerably smaller base than its higher-volume sister brands.

“Really the strength of the Constellation portfolio is driving all of our business,” says Jamie Salois, vice president of Auburn, Mass.-based Atlas Distributing. “Modelo Especial, Negra Modelo, Pacifico – the smaller brands from Constellation – they’re going to continue to grow and they’re going to scale pretty quickly.”

Corona’s biggest competitor among Mexican imports, Heineken-owned Dos Equis had been on a tear in recent years, as well, but it seems to have slowed a bit for the most recently measured 52-week period. Volume for the brand grew a respectable 2.1 percent and revenue rose 3.9 percent, but such gains are modest relative to its performance for calendar years 2016 and 2015 when Dos Equis’ growth was in the double digits. Salois has witnessed a similar slowing for the brand in his market.

“Years ago we were seeing very strong numbers from Dos Equis,” Salois reports. “For some reason we’re not seeing the same trend.”

Salois isn’t sure if any one factor is exerting more influence over Dos Equis’s slowness. Most of the Heineken portfolio’s major brands have been soft.

A shift in the Mexican brand’s advertising could be playing a role, but how much of a role is unclear. Last year, Dos Equis retired its original, iconic “Most Interesting Man in the World,” portrayed by American actor Jonathan Goldsmith since 2006. The brand replaced him with the much-younger French thespian Augustin Legrand last fall.

Salois says it’s unclear whether the casting change has had any impact on sales of Dos Equis.

“It’s tough to tell,” he says. “People gravitated more toward the older guy because [the ads] were so off-the-wall. [The new ads] appear that they’re supposed to be more real, more relatable. They’re very good ads, they just haven’t seemed to translate to consumers in the same way.”

Even though the Department of Justice forced AB InBev to cede U.S. market control of Corona and the other top-performing Mexican brands before allowing the Grupo Modelo deal to proceed, the world’s biggest beer producer is not out of the Mexican import game in the States. Last year AB InBev introduced to U.S. consumers Mexico’s Estrella Jalisco brand, which IRI currently ranks as the 16th largest import in the U.S., accounting for 645,392 cases and $20.7 million in off-premise sales. It’s likely to climb a bit further, but it’s still too early to tell whether it will put a dent in Corona’s, Pacifico’s and Modelo Especial’s sales.

EUROPEAN INFLUENCE

Mexican brands may continue to be the big story in the U.S. import beer segment, but they’re certainly not the only story. Europe is home to quite a few brands that have been gaining major traction stateside.

Take Peroni, for instance. The Italian brand was one of many divestments that international regulatory agencies demanded before the largest beer merger in history – 2016’s AB InBev-SABMiller “Megabrew” deal – was permitted to proceed. Japan’s Asahi Breweries bought the former SABMiller brand last fall. And the transition appears to have been a smooth one, as Peroni’s case volume increased by 12.2 percent, while revenue grew 11 percent, according to IRI, ranking 18th among U.S. beer imports.

It’s also been a top performer for Atlas.

“Peroni is having a pretty good year with us,” Salois says. “That’s a brand that seems to have been able to find new consumers, as well as re-engage with some older ones.”

The recent introduction of Peroni’s slim can has helped considerably, he notes.

Another of Asahi’s SABMiller pickups was Pilsner Urquell, which also has been performing strongly. “It’s off a small base,” Salois says, “but it’s growing.”

Pilsner Urquell could be benefiting from renewed interest in classic, Czech-style pilsners, which have become popular among American craft brewers. In the early days of craft brewing, most producers had shied away from pilsner-style lagers, focusing more on ales – partly because ales took less time to ferment than lagers, but also because pilsner was too closely associated with mass-produced macro lagers. But now even the most craft-exclusive drinkers are rediscovering the style.

PARALLEL SEGMENTS

That phenomenon also speaks to the relationship between the craft and import segments – one that’s a lot more symbiotic than some might think.

United States Beverage, which imports a number of smaller, specialty brands, has seen a great deal of overlap between craft drinkers and consumers of its products, which include Czechvar and Krusovice from the Czech Republic, Canada’s Moosehead, Portugal’s Super Bock, Jamaica’s Dragon Stout and Scotland’s Innis & Gunn.

“The consumer’s mind has been opened, to a large extent, through their experience with craft beer,” says Joseph Fisch, president and CEO of U.S. Beverage. “The breadth of the beer consumer’s experience today is far greater than it was five, 10 years ago.”

Fisch identifies a direct link between craft growth and the U.S. success of one brand in particular: Innis & Gunn.

“Some look at it as being an import and others as a craft,” he says. “We look at it as an import craft. It really is filling a void in the marketplace. Without the consumers in craft I don’t think there would be a space open for Innis & Gunn.”

And now that both segments are growing at roughly the same rate, their fates are likely to be intertwined for some time. But expect imports to grab more of its rightful share of the spotlight, which craft has hogged for most of the 21st century’s first two decades.