AB InBev and MillerCoors battle heats up, but who will win?
It's too early to say who's winning the two-week-old marketing war between Anheuser-Busch InBev and MillerCoors over beer ingredients. But the ultimate victor will probably be the spirits industry.
With three Bud Light Super Bowl ads, AB InBev put MillerCoors on the defensive over its use of corn syrup in Miller Lite and Coors Light. MillerCoors clawed back by lining up support from the farm industry while accusing its larger competitor of hypocrisy, citing its use of corn syrup in some of its other products. The battle, dubbed "Corngate," has drawn national headlines. But it's doubtful the back-and-forth will do much to change the long-term sales trajectory of either brewer as they continue to lose market share to the liquor brands, say industry observers.
"You're in a segment that's undergoing rapid decline," says an ad industry executive who has worked for both brewers. "And there are no new drinkers to grab share. It's a race to the bottom."
Robert Ottenstein, who covers the brewers for investment banking advisory firm Evercore ISI, says, "We're not crazy about negative advertising—we don't think it's great for the category. But when things aren't working I guess you try anything."
Both brewers have reasons for desperation. Bud Light remains the nation's most popular beer with a nearly 15 percent market share, but shipment volume has fallen 27 percent since 2008, according to Beer Marketer's Insights. Coors Light (7 percent share) and Miller Lite (6 percent) are also in decline, with shipments down 13 percent and 29 percent, respectively, since 2008. In the meantime, the spirits industry last year marked its ninth consecutive year of alcohol market-share gains, the Distilled Spirits Council reported last week.
Miller Lite and Coors Light both use corn syrup (not the often-demonized high-fructose corn syrup) during the fermenting process, but MillerCoors says none of it ends up in the final product. In a video shared on its social channels last week, MillerCoors accused AB InBev of hypocrisy because it uses corn syrup to brew brands including Busch, Natural Light and Stella Artois Cidre, while using high-fructose corn syrup in some varieties of Shock Top ale.
"What Anheuser-Busch is doing is a weak and desperate attempt that risks setting the beer category back a few years," Pete Marino, MillerCoors chief public affairs officer, says. "Attacking an ingredient commonly used in many beers, including many of their own, is crazy."
It appears, though, that Bud Light is counting on consumers presuming there's high-fructose corn syrup in rival beers and staying away.
Beer Business Daily recently reported that Bud Light marketing VP Andy Goeler has been visiting distributors, telling them consumers don't make a distinction between high-fructose corn syrup and corn syrup, and "that it's a major triggering point in choosing brands to purchase, particularly among women," according to its summary of Goeler's comments, which it attributed to sources.
Asked about that, Goeler says, "There are a lot of other people talking about high-fructose corn syrup, regular corn syrup. We are not talking about it. We are just saying, 'Look, here is what is in our beer, and here is what is not in our beer.' It's all based in ingredient transparency and it's nothing beyond that."
On an earnings call last week, MillerCoors CEO Gavin Hattersley said, "Anheuser-Busch could not have handed us a better gift if they tried," suggesting the attack is energizing distributors. On Feb. 15 MillerCoors sought to rally agriculture industry support with an event called "ToastToFarmers" that included distributors buying rounds of Coors Lights for the "hardworking men and women who grow our ingredients."
But for general consumers not familiar with the intricacies of brewing, MillerCoors has "a much more difficult argument to say, 'Yes, we are brewed with corn syrup, but...that is not such a bad thing,'" says Northwestern University marketing professor Tim Calkins. "The brewing purist might find Bud Light's approach frustrating, but I don't think the brewing purists are who they are going after."
Indeed, some craft brewers are seizing the higher ground. Jim Koch, CEO of Samuel Adams owner Boston Beer, argues that the processes MillerCoors and AB InBev use are pretty much the same, with Bud Light using rice as a so-called brewing adjunct and Miller Lite and Coors Light using corn. "Those adjuncts have their advantages, starting with being cheaper," he wrote in a corporate blog post, pointing out that Samuel Adams uses "100% malted barley" instead of adjuncts.
"To American craft brewers," he wrote, "this corn vs. rice vs. corn syrup debate is as silly as Dilly Dilly."
The ultimate victor in the great corn syrup war will probably be the spirits industry.