Why Mexican Beer Continues Winning, While U.S. Beer Production Continues to Slip
The U.S. Department of Commerce and Census Bureau released the monthly Import/Export data for September. After a slow growth month for imports in August, September imports have bounced back to robust growth rates, reporting 3,651,225 barrels, up 11.6% compared to September 2021. Year-to-date imports are up 4.6% compared to the same months last year.
As expected, notes the Beer Institute, Mexican imported beer was the biggest growth driver, up 18% in shipments compared to September 2021. Mexican imports' share of total imports continues to increase their footprint, with the segment now accounting for 82% of total imported beer in September 2022, up 4.4 share points compared to September last year. Other growth contributors for September include Ireland (+3.4%), Italy (+35.1%), and the United Kingdom (+30.1%).
The positive news about beer imports – and especially about Mexican beer – comes just days after the Beer Institute issued yet another sobering report on the U.S. brewing industry: In September, 14.4 million tax-paid barrels were shipped by U.S. brewers. That's down 0.9% from a year earlier. Year to day, U.S. production was down 3.9%.
Which raises the question: What's the problem with U.S. brewers? Why is beer from Mexico selling like hot cakes, while U.S.-brewed beer continuing to lose in the marketplace?
We have a theory, and it's all about focus. While Constellation Brands started as Canandaigua Wine Co., producing and selling New York State wines, it has evolved into a company that produces and sells primarily Mexican beer in the U.S. In fact, 75% of CBrands' revenue in the second quarter was Mexican beer, nearly all sold in the U.S., and 20.5% was U.S. wine and spirits. In fact, CBrands non-U.S. sales accounted for just 2.7% of total revenue.
The biggest U.S. brewer, Anheuser-Busch, is owned by Anheuser-Busch InBev. ABI is not focused; it's a worldwide brewer. It's market share in 2011 was 46.9%; 10 years later it had fallen to 38.6%. Molson Coors, which like AB InBev seeks to be a global player, had a 28.4% market share in 2011, according to the National Beer Wholesalers Association. In 2021, that share had shrunk to 19.6%. Meanwhile, CBrands, which in 2011 had a share of 5.7% saw its saw double to 11.4%, and Boston Beer Co., which is also focused on the U.S. market, saw its share more than triple to 4% from 1.2%.
The reason, we think, the U.S. beer market is shrinking is because the two biggest brewers aren't paying attention to the U.S. beer market. They're off chasing other things – seeking to claim the title of world's largest brewer, which can be done without being the largest in any country, for example, or getting into the U.S. spirits business.
J.P. Morgan had some advice for entrepreneurs back in his day: "Put all your eggs in one basket and watch the basket." That's what CBrands has done, as has Boston Beer. They will continue to gain share and profitability as long as the Big Two follow the yellow brick road to the land of Oz.