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Damir Kaletovic

Damir Kaletovic

Writer, Safehaven.com

Damir Kaletovic is a veteran investigative journalist covering Europe and the Middle East, and a senior consultant for Divergente Research.

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Beer Giants Are Striking Out With Millennials

Beer

MillerCoors thought it was building the next generation of beer drinkers. It thought it was cornering the millennial market. It thought its novel ‘Two Hats’ brew would be the enchantress that lured them away from wine and spirts. It was wrong.

Six months into production, fruit-flavored ‘Two Hats’ lager is being pulled from the portfolio and production is being shuttered. By next year, it will no longer be sold.

When David Kroll, MillerCoors’ chief marketing officer, unveiled the new beer last September, he said it was intended as an easy entry point into beer (for younger generations)—the brew that would create our next generation of beer lovers and introduce them to the rest of the company's beverage line-up.

Now, talk at MillerCoors is that money will be freed up to invest in other new brands, including Arnold Palmer Spiked and Sol, a Mexican import it recently took over from Heineken.

"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," Bryan Ferschinger, VP of national craft and innovation, and Kevin Doyle, president of sales and distributor operations, said in a note to employees and distributors. Related: Google In Talks With Tencent Over Cloud Business

So what went wrong, exactly?

On the surface, the plan sounded good. ‘Two Hats’ would have exciting new flavors including lime and pineapple and would come in at a very modest $5 for a six-pack.

While plenty of die-hard beer drinkers will shun all these flavors that don’t seem to belong in a beer, recent market research shows that flavors are in. According to research firm Mintel, flavored beer was a big part of the overall beer market in 2015, capturing an impressive 27 percent—that’s 80 percent more than it could boast in 2010.

Yet, after only six months in the market, MillerCoors has decided that it’s not going to succeed in conquering millennials (aged 22-37).

Its lime and pineapple flavors brought in less than $1 million in revenue, according to retail sales figures provided by Chicago-based market research firm IRI, which do not include sales at Costco or liquor stores.

But the answer may be much more simple than millennial market data or market-driving trends. Maybe it just didn’t taste good to any palate.

Beer judge and ‘The Takeout’ associate editor Kate Bernot would agree:

"First, it didn’t taste very good (despite its highly inspired “good, cheap beer” tagline). Second, I anecdotally didn’t see a huge marketing push behind it. Were you aware of the existence of Two Hats? I don’t think many beer-drinkers were. But third and perhaps most importantly, there’s just a lot of competition out there for these precious young-millennial dollars. As the wine cooler craze, hard lemonade craze, and hard root beer craze demonstrate, barely-21-drinkers do tend to gravitate toward sweeter, flavored malt beverages...."

Related: The Last Frontier For Artificial Intelligence

The company’s Coors Light brand earned $1.2 billion in revenues, and while that makes ‘Two Hats’ profit looks like change you find under the couch cushion, it also represents a decline of 4.2 percent from the same period a year ago.

Taste aside, beer just isn’t doing that well overall this year, even during the summer season, when beer usually performs best. According to the Beer Institute--a trade group representing the largest beer companies in the U.S.--"domestic beer shipments are down 3.7 percent through June compared to last year".

There are also tariffs to consider. Trump’s 10-percent aluminum tariffs could end up costing the American beer industry more than $340 million a year, according to the institute.

By Damir Kaletovic for Safehaven.com

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