AB InBev’s shares slid 1% to 75.71 euros at 3:48 p.m. in Brussels trading, giving the company a market value of about 122 billion euros. MillerCoors co-owner SABMiller’s shares slid 1.6% to 2,991 pence in London, and Molson Coors Brewing’s shares fell 1% in New York to $54.75.
As the popularity of these beers cuts into sales of the biggest brands, it’s fostering a new crop of mid-sized labels, according to Trevor Stirling, an analyst at Sanford C. Bernstein. Moreover, craft brews are wooing drinkers back from wine and spirits. While craft beer currently has only about 6% of the market, that share could more than triple in the next five years, Canadean predicts.
“There’s a new generation choosing a much broader repertoire of drinks,” Stirling said. “It’s virtually inevitable that the larger brands will lose market share to craft.”
That’s not to say that the big brands are going to give up on their mass market brews anytime soon. With about 21% of the beer market by volume, Bud Light alone is about triple the size of the entire craft sector, Symphony IRI data show.
“I don’t see the era of big brands being over, but more that there’ll be a bigger mix of beers,” said Lawrence Hutter, who heads the European corporate solutions unit at consultant Alvarez & Marsal. “Don’t forget people still like those lighter, lager-style beers; They’re very drinkable”
The U.S. Brewers Association defines “craft” as beers with annual sales below 6 million barrels and ownership by a big player of no more than 25%. Despite the industry’s homespun image, 60% of drinkers don’t give much thought to what company owns the brand of beer they drink, according to a survey by AB InBev.
“It’s kind of a disconnect for me that being bigger is necessarily bad,” said Paul Chibe, head of U.S. marketing at AB InBev. “What’s important is that if a beer gets bigger, it has to stay true to what it is.”
Even as the giant brewers lose share with their leading brands, the shift could shore up their profits since their craft-like beers enjoy higher margins, analysts and the companies say. Goose Island retails for an average of about $33.10 per case versus $20.17 for Bud Light, according to Symphony IRI. Some offshoots can be far pricier. Goose Island sells a brew called Bourbon County Stout one day a year, the Friday after Thanksgiving, at about $25 for a four-pack of 12-ounce bottles.
The higher prices help offset the added costs the industry’s giants face in producing more small brands. They are typically more labor-intensive, use a wider range of ingredients, and have more elaborate packaging and marketing.
The big companies also gain an edge over smaller rivals by producing the craft-like brands in their industrial-scale breweries. Blue Moon is brewed at MillerCoors’ facilities across the U.S. And some Goose Island beers are made by AB InBev in Fort Collins, Colorado, and Baldwinsville, New York, in addition to the brand’s original brewery in Chicago.
“We’ve been a great home for craft brands like Goose Island,” helping out with additional production capacity as their popularity grows, said AB InBev marketing boss Chibe, who plans to leave his job in February. “They have their own leadership team, their own innovation group, the brewers do their own things. We primarily behave as the rich uncle. When they need resources, we give it to them.”
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