- Following several years of slumping beer sales, MillerCoors has announced it will cut 350 jobs as part of a new restructuring plan aimed at getting business “back on track.”
- This quarter alone, MillerCoors sales in the U.S. fell 3.1% to $2.073 billion as demand for its beers fell among American consumers. In conjunction with falling sales, the company ceased production of its Two Hats beer brand in August, just six months after it launched the new product line.
- In addition to cutting jobs, the company is searching for a new chief marketing officer and has appointed a new executive to oversee the conversion of its breweries to an integrated system.
In its last quarter, Molson Coors posted a U.S. brand volume decrease of 4.8%, primarily driven by lower volume in the Premium Light segment. Globally, worldwide brand volumes fell 2.4%.
Still, even with shrinking sales volumes, major beer manufacturers are raking in the cash. Last quarter Molson Coors’ net income soared 28.6% to $424.1 million as the company benefited from cost savings, lower marketing expenses and a lower tax rate. AB InBev and Constellation Brands also posted strong growth in net income this year.
Big Beer, however, knows that this silver lining is not enough to carry them in the long run, and companies are already buttoning up excesses. Last September, Anheuser-Busch InBev announced that it would eliminate up to 350 high-level, overlapping sales jobs as part of a reorganization. Even Constellation Brands, which leads the industry and posted robust volume growth of 8.9% in 2017, laid off dozens of employees tasked with selling the company's craft and specialty beers throughout the U.S. this August. This trend underscores the overarching expectation that sales are down for legacy brands for the long term. It may also indicate a reshuffling of investment, as top companies may be putting more funding toward either acquiring or developing a product that meets the needs of today's American consumer.
Manufacturers are not oblivious to the fact that for the industry — and their bottom lines — to rebound, they need to reinvent these beverages, giving consumers more reasons to drink them instead of their competitors.
Major beer producers are facing threats on several fronts as Americans move away from domestic lagers in favor of Mexican imports, craft beers and wine and spirits. A growing number of consumers are also turning to low-calorie and no- or low-alcohol brews as part of a broader health and wellness trend sweeping the food and beverage industry.
The shifting beverage preferences of millennial consumers have also become a stumbling block for major beer manufacturers. In February, MillerCoors launched Two Hats, a light beer which came in lime and pineapple flavors and was marketed as "good, cheap beer." The beverage was meant to entice younger consumers looking for light, inexpensive brews with dynamic flavors, but it failed to take off. The company pulled the brand after only six months on the market, but has since launched a very similar brand called Cape Line. It's unclear if there are any meaningful distinctions between the two brands, but if MillerCoors is able to get its value proposition right on the second try, the millennial-centered brew could boost sales in the long run.
In a world where consumers have an increasingly wide array of beverages to choose from — including thousands of beers ranging from craft to flagship products — companies need to clearly communicate their value to shoppers, whether that's through meaningful marketing or a unique formula. MillerCoors may consider funneling some of the money saved from these job cuts into new strategies to differentiate its brands, or risk fading into shelves of new, trendy craft upstarts.