- MillerCoors is ending production of Two Hats, a light beer brand aimed at millennial drinkers, just six months after launching the brew, according to a company blog post.
- The beer giant partnered with social media-savvy media brands including College Humor, Snapchat and YouTube to market the brew, which was meant to draw younger consumers away from wine and spirits.
- In the blog post, MillerCoors executives Bryan Ferschinger and Kevin Doyle said the company will instead focus on improving Coors Light sales, which have floundered as consumer tastes shift. "We believe industry growth requires healthy brands across all segments, and we won't stop trying to be part of the solution to grow beer," Ferschinger and Doyle wrote. "At the same time, right now we simply cannot get to profitable growth without significant improvement in Coors Light and without gaining a bigger piece of (the) above premium (segment.)"
The shifting beverage preferences of millennial consumers has become a stumbling block for major beer manufacturers. The demographic's health-conscious consumption habits and preference for low-to-no alcohol beers, as well as lower-calorie wine, spirits and cocktails, are increasingly luring them away from the brands that were once mainstays for their parents and grandparents.
According to Nielsen data, beer consumption for drinkers aged 21 to 24 has slipped about 3% year-over-year for the past 15 years, according to MillerCoors' blog. Meanwhile, market penetration of wine and spirits is holding steady — IWSR Research reported that global alcohol consumption's 0.01% rise last year was buoyed by increased sales of wine and cider.
MillerCoors hoped Two Hats — a cheap, light beer with hints of fruit flavor — would be the key to cementing this consumer segment's loyalty.
"There haven't been any new mainstream light beer launches for this group at this price point … so it's no surprise they think of beer as dusty and old and migrate to wine and spirits," Justine Stauffer, the MillerCoors brand manager who led the Two Hats launch, told the company's blog. "With Two Hats, our goal is to build the next generation of beer drinkers."
So what went wrong? It's possible the beer giant didn't do enough to differentiate the value proposition of its Two Hats brand from industry rivals, which are pouring a growing amount of marketing and R&D spending into light and low-alcohol beers.
AB InBev, the world's largest brewer, has continued to benefit from growth in its Michelob Ultra brand, a pricier, low-calorie beer that has boosted sales annually since 2011. With a 21% increase a year ago, it's the fastest-growing beer in the country during the last few years — showing if the product meets the needs of the consumer, sales will follow. AB InBev recently expanded the brand by adding 7-ounce bottles to attract more weeknight consumption and introduced Michelob Ultra Pure Gold, which is made with organic grains and has slightly fewer calories and carbs than the original.
Last year, Heineken launched its 0.0% MAXX brand to compete with products such as Diageo's Open Gate Pure Brew and and Carslberg's nonalcoholic offerings.
According to a worldwide report from IRI, the three top-selling beers in the U.S. are Bud Light, Coors Light and Miller Lite — all reduced calorie lagers. But even these brews have run into their share of problems. Total beer shipments declined 1.3% in 2017, led by sharp drops among flagship products including Budweiser (-6.8%), Coors Light (-4.1%), Miller Lite (-2.8%) and the most popular U.S. brand, Bud Light (-5.7%).
It's unclear how MillerCoors intends to revamp its Coors Light brand, but the company may consider rolling out specialty varieties of the product to entice younger drinkers. Millennials in particular are especially enamored with sweeter drinks that perform well on social media, such as rosé. The pink wine's popularity with the demographic has spurred a wave of hybrid beverages such as rosé hard cider. It's possible that Two Hats' fruit-forward flavor profile was meant to capture some of this consumer hype.
It will be a challenge for MillerCoors to turn Coors Light around. Molson Coors, which owns MillerCoors, said last week that it is "aggressively addressing" volume declines in its important North American market. U.S. brand volume decreased 4.8% during its most recent quarter, primarily driven by lower volume in the Premium Light segment.
The beer company could focus more on Coors Lights' formula or marketing to turn sales around. But when it comes to Two Hats, MillerCoors was wise to pull the plug on an experiment that clearly wasn't working. Its demise, however, doesn't mean it should give up on finding new ways to tap into the millennial market.