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Craft beers boost market share
ST. LOUIS POST-DISPATCH

From its perch beside Interstate 55, Anheuser-Busch has dominated the St. Louis beer market for decades. A few miles away, St. Louis Brewery Inc. — better known as Schlafly — has carved out a living as the feisty local alternative to Bud.

Now, it's the giant that appears to be slipping a little bit in its hometown. As drinkers reduce their overall beer purchases, Schlafly and its craft brewing brethren appear to be taking market share from Anheuser-Busch. So does Chicago-based MillerCoors.

That's a notable change. When trade publication Beer Marketer's Insights checked back in April — as Anheuser-Busch was dealing with a sweeping round of job cuts, public relations missteps and turmoil after InBev's takeover — A-B was essentially holding its market share steady in St. Louis.

Not anymore.


Anheuser-Busch is doing worse than the overall industry in St. Louis. The company's dollar sales in area supermarkets is down 6.4 percent for the 13-week period ending Nov. 1, according to Insights, which parsed data from Information Resources Inc.

That slide is three times as severe as the overall industry's in St. Louis.

Anheuser-Busch still accounts for nearly two of every three beers sold in Missouri, according to the Missouri Beer Wholesalers Association. But the company has lost 2.7 percentage points of market share in St. Louis in the past four months, according to Information Resources Inc.

"That's pretty steep," Insights said.

Anheuser-Busch declined to comment on the recent sales data, or on any plans to bolster its local performance.

Meanwhile, Chicago-based MillerCoors boosted its dollar sales in St. Louis by 2.7 percent in the 13 weeks leading to Nov. 1, according to IRI. MillerCoors is saddled with a sliding Miller Lite, but the growth of beers such as Coors Light, Blue Moon and Keystone Light compensated.

Craft beers were even bigger winners, with dollar sales up nearly 17 percent in area stores excluding Walmart, according to IRI.

Across the country, craft beers are making inroads. The number of craft beers per store has risen, as has the support from retailers. Craft beer sales rose five percent to 4.2 million barrels in the first half of this year, according to the Colorado-based Brewers Association. Thanks to price increases, the sales increase when measured in dollars was even more dramatic, at 9 percent.

Craft brewers' ability to increase sales in a tough economy is impressive, said Dan Wandel, who leads the beer, wine, and spirits team at Information Resources.

"It's remarkable how the craft segment has been able to sustain this," he said in August. "Not only doing well, but accelerating."

Until recently, it seemed that Anheuser-Busch was equally resilient in St. Louis, one of the company's most secure strongholds in the U.S. The Post-Dispatch's Lager Heads blog reported in March that consumer backlash against Anheuser-Busch after InBev's buyout last year did not have much lasting effect. The company ended 2008 with the same market share as in 2007.

A-B still has an impressive market share lead in St. Louis. Its closest competition, MillerCoors, has only about one-third of A-B's local market share, at 19 percent.

But now it seems that area sentiment is flowing against A-B in St. Louis, Beer Marketer's Insights mused.

Meanwhile, Schlafly is headed in the opposite direction, riding a big wave of demand and pondering ways to keep up.

Sales are up about 30 percent this year, and the company is in the middle of a big project at its Bottleworks brewery in Maplewood that will push annual beer-making capacity there to 45,000 barrels.

It's fair to point out that, in about 24 hours, Anheuser-Busch's flagship brewery in St. Louis could match Schlafly's annual production.

"There's an ocean between us," said Dan Kopman, Schlafly's chief operating officer. "You can't lose sight of that."

Still, Schlafly's growth is striking. Kopman said he did not believe it was only from local angst at the sale of Anheuser-Busch and the subsequent cuts. There are other trends at work: drinkers looking for more variety and flavor in their beer, as well as those hoping to support small local businesses.

For years, Anheuser-Busch's strong presence in St. Louis may have blunted the rise of craft beer here. Craft beers typically had a noticeably smaller foothold in St. Louis than in other big beer markets such as Chicago, Portland, Ore., and Denver. This market was awash in American-style light lagers, under different names and price points, Kopman said. Maybe, he said, the sale of Anheuser-Busch spurred drinkers to give more craft beers a try.

In response, stores seem to be offering more variety on the beer aisle.

"Now, the St. Louis beer consumer is interested in other beer style," said Kopman.

"What the sale (of Anheuser-Busch) here does is say to the consumer, 'You can explore a little more.'"

Now, Schlafly is exploring ways to not run out of beer. At the current growth rates, its beer-making capacity is not going be enough to outrun area drinkers' taste for Pale Ale, Hefeweizen and Oak Aged Barleywine.

Pretty soon, the company will be out of space. "Right now and through the summer, we have been full," said Kopman. "At the same growth rate … we'd run out of capacity next year" even after building up to 45,000 barrels of annual capacity, he said.

The company is looking into several possibilities, including a smallish expansion tacked onto the Bottleworks or the Tap Room in downtown St. Louis. Another would be accessing or purchasing current beer-making capacity outside the St. Louis area.

The company is not actively looking into building a third location, Kopman said. That's because of the expense (as much as $20 million) and time (perhaps 3-5 years). "To go out and get a whole new site, without knowing how much beer people will drink, there's too much uncertainty," Kopman said. "And these projects are expensive."

Chief among the unanswered questions for Schlafly are, how much beer it should make, and where it should sell it. About 80 percent of the company's sales are within 50 miles of the St. Louis metro area. The extent of Schlafly's potential outside a 300-mile radius of St. Louis is a large unknown.

"The consumer will determine how much beer we should make," Kopman said. His question for consumers: "Can you tell me how much beer you're going to buy? Because I'll make that much."

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