While interest in mainstream beers like Miller Lite and Coors Light remains cool, brand owner MillerCoors is seeing strong trends from its specialty craft and import division. In fact, some of the market’s hottest beers are now handled by MillerCoors’ Tenth and Blake subsidiary, positioning the group as one of the most important forces in the craft beer segment.
Volume sales at Tenth and Blake were trending up in the strong double digits at the end of 2017, according to division president Pete Marino. “Each of our four craft priority brands is growing at a double-digit rate, well ahead of the overall craft beer category,” he says, noting that sales growth for Italian import Peroni has been outpacing Anheuser-Busch InBev’s Stella Artois from Belgium. Peroni is the biggest brand by volume within Chicago-based Tenth and Blake’s portfolio, with import and craft volume pretty evenly split at the division.
MillerCoors created Tenth and Blake—named for Leinenkugel’s Tenth Street brewery in Milwaukee and Denver’s Blake Street, where the Sandlot Brewery at Coors Field is located—in 2010 as a sales and marketing group for beers competing in the craft and specialty import space. The division has evolved over the years, and in 2016, the Blue Moon and Leinenkugel lines were moved from Tenth and Blake to the parent organization. “Tenth and Blake’s role is to nurture brands, and once they get to a certain scale, they’re handed off to the broader MillerCoors organization,” says Marino. The transfer of Blue Moon and Leinenkugel also coincided with the company’s acquisition of four craft breweries, Marino notes. “Integrating those companies into Tenth and Blake and MillerCoors was going to be a lot of work, and we didn’t want to lose any momentum on Blue Moon and Leinenkugel,” he says. Today, the division employs approximately 300 people.
MillerCoors acquired Hop Valley Brewing of Springfield, Oregon and a majority stake in Terrapin Beer Co. in Athens, Georgia in July 2016 (the company had previously held a minority stake in Terrapin). The following month, MillerCoors obtained Revolver Brewing of Granbury, Texas and in September 2016, it added Saint Archer Brewing Co. of San Diego to the stable.
Terrapin is the most widely distributed brewery of the group, with its beers available in 17 states and Washington, D.C, and Puerto Rico. Broad distribution into Michigan and Wisconsin is planned for this year. Hop Valley, meanwhile, distributes in nine western states and northern California, with expansion into southern California slated for later this year. Saint Archer brews are available in eight western states, while Revolver only distributes in Texas and New Mexico. Many of the principals who founded the breweries remain active in the businesses.
“We like brands that know who they are,” Marino says of the acquisitions. “Our partners not only make great beer—that’s table stakes in craft today—but they’ve developed great brands as well. We believe that as the craft world continues to evolve, the brand is going to become more important.” As for the breweries, partnering with MillerCoors has provided opportunities to expand geographically and to leverage the sales and marketing clout of the company. “The breweries have been attracted to the notion that they can achieve their visions of growing beyond their local markets, to have access to new distribution partners, and to be able to sell into more chain accounts,” explains Paul Verdu, Tenth and Blake’s vice president of sales and marketing.
Peroni and Pilsner Urquell, the two import priority brands under the Tenth and Blake banner, are also positioned to benefit from the division’s focus. “European lagers have done a great job for decades of being special and aspirational, starting with Heineken and today with Stella Artois,” Marino says. “Peroni is suited to capture some of that specialness, as it’s all about Italian style and sophistication.”
Peroni’s priority markets include New York City, Los Angeles, Miami, and San Francisco. This year, distribution will be expanded to include Chicago, Denver, Tampa, and Phoenix, as well as New Jersey and the New York suburb of Westchester County. Support largely focuses on the “House of Peroni” effort, which last year included three experiential pop-up retail installations, and an on-premise glassware program.
The Italian brand launched an 11.2-ounce can package in 2017, and this year Peroni will employ brand ambassadors to hand-sell the beer into select accounts. Verdu says Peroni has an opportunity to attract consumers outside the beer space. “Its style is appealing to men and women,” he says. “It’s a highly sessionable beer that pairs well with all kinds of food. We think Peroni’s style and drinkability make it a good fit in those places where wine has traditionally played a role.”
Volume for Czech import Pilsner Urquell was “a little soft” in 2017, Marino says. But the company remains bullish about prospects for the classic 175-year-old pilsner. “It’s a beer that even the most critical hopheads appreciate and respect,” he says. “There’s no other beer with as much authenticity, and you can expect us to lean into that.”
Marino says that while the craft brands are supported with digital media, “we’re starting to broaden our horizons and see what other opportunities we can bring to life.” He points to the recent outdoor advertising for Revolver’s Blood & Honey American wheat ale in the Dallas-Fort Worth area, and says that while there are no immediate plans for TV advertising, “you’ll see the media plans evolve.”
Verdu says that the ability for the craft brands to tap into the MillerCoors network is also an advantage. “MillerCoors has a lot of alliances and partnerships,” he says. Sampling and tasting rooms at major sporting venues are among those opportunities. Hop Valley Hop Box bars, for example, are located at Seattle’s Safeco Field, San Francisco’s AT&T Park, Phoenix’s Chase Field, Denver’s Coors Field, and Anaheim’s LA Angels Stadium. A Saint Archer tasting room is also featured at Anaheim’s LA Angels Stadium, while Atlanta’s SunTrust Park has the Terrapin ATL Brew Lab and Taproom, and a Terrapin-branded bar has been unveiled at the Falcons’ Mercedes-Benz Stadium. Marino says the presence at ballparks “gives beer drinkers in those locations exposure to our great craft brands.”
Beyond athletics venues, the four craft brewers in the portfolio all operate on-site tasting rooms at their breweries. Saint Archer recently opened a satellite tasting room in Leucadia, California, and Revolver is slated to open a second brewery and tasting room by early 2019 as part of the Texas Live entertainment district in Arlington, Texas. Marino says the tasting rooms provide a “great opportunity for consumers to experience our brands and interact with the brewmasters.” But he concedes that the challenge is operating tasting rooms without competing with other retailers, adding that Tenth and Blake looks to partner with area retailers, rather than rival them. “Most retailers appreciate that consumers can learn about beer at craft breweries,” he notes.
Matter of Distinction
Marino says the craft beer industry is currently going through a period of disruption and shakeout. “There are thousands of great beers in this country today,” he says. “The bar has been raised. The distinguishing factor moving forward will be marketing. Retailers are starting to come back to the idea of velocity. Due to the finite amount of space at retail, brewers must have something really interesting to say about their beer to get it on the shelves and have it stay there.”
With MillerCoors’ recent expansion in the craft beer category and its marketing capabilities, Marino and Verdu see blue sky ahead. A collaboration brew by the company’s craft partners, for example, was brewed at Blue Moon’s Denver brewery last fall and sampled with employees earlier this spring. Verdu adds that while none of the craft brews are currently exported, the company is considering “opportunities to take one or more of these brands outside of U.S. borders.” And Marino says MillerCoors will remain active in craft acquisitions, focusing on geographical and stylistic complements. “We don’t have a partner in the Great Lakes or the Northeast,” he explains. “We don’t have a dedicated sour beer partner.” But the valuation of any acquisition would have to be “realistic,” Marino adds, and any new partner would need to enhance Tenth and Blake’s culture.
Whatever the future makeup of Tenth and Blake’s portfolio, Marino says, “We bought these brands to build them for the long term. It took Blue Moon 22 years to get to 2 million barrels. We’ll have the patience to grow these brands the right way.”