Detente OR How I learned to stop worrying and love Labatt 8

This week, I received an email from Labatt. They’re launching three new beers. Usually, they’ll put one beer out at a time and get some marketing behind it as an individual property. In this case, they’ve launched a platoon. There’s Blue Dry, a 6.1% version of Blue with a dry finish. There’s Blue Lime which is Blue with a real lime flavour added. They want me to tell you that it’s only available until September 30th. Finally, there’s Blue 55, which, as you may have guessed, is a version of Blue with 55 calories.

Now, It’s fairly obvious to anyone who has been following Canadian macro brewing in even a cursory way, that we’ve reached a state in the industry where MolsonCoors and AB-InBev are pretty much unwilling to let each other take a unique step forward. For two of those beers, it’s pretty clear that Labatt is shoring up their lineup to compete with Molson. Blue 55 is clearly a response to Molson Canadian 67. Blue Lime is pretty clearly a response to Molson Canadian 67 Sublime. I’m sure that Blue Dry is an answer to something, although I’m not sure what. Maybe Coldshots.

I’ve been trying to find something to compare this to, and the only thing I could think of is nuclear detente. Each company seems to be unwilling to allow the other an edge. Development of products is frequently retaliatory, and sometimes the launches are so close together that you realize there must be some corporate espionage going on.

Look at the launches, which occurred within a month of each other, of Rickard’s Blonde and Keith’s Ambrosia Blonde. Some detractors will point out that Rickard’s is a lager and Keith’s is an ale. It seems like a major detail, but in truth what you’ve got is two huge multinational companies with faux-craft subsidiaries launching similarly named products into the same market within four weeks of each other.

The details are meaningless beyond that point for the sake of my argument. I am not, as you will notice, pointing out anything about the quality of the beverages, which for all I know might be quite high.

I suppose that the train of thought must be “We cannot afford a trend gap. If we allow the other company to have a brand that we don’t have, they will develop an edge on us in the market. Their German-trained brewers might be better than our German-trained brewers.” In some ways, it’s a miracle that neither company has launched a dog into space for publicity.

Judging by that set of behaviour, it follows logically that they actually believe that a single brand from the other company making it big with the public could be the turning point that will lead to decreased market share, decreased revenue and eventual collapse.

I disagree. The problem with an arms race is that you’re in an arms race. The structure of the problem is the real issue. Think for a moment about the amount of money that the US and the USSR sank into their respective militaries and think about the cost of developing 7500 megatons of nuclear weaponry. You’ve got to keep it somewhere, after all. There’s so much funding invested in R&D and prolonging the stalemate that it eventually becomes untenable. Not only that, but you’re eventually committed to upkeep.

Between them, Molson and Labatt have enough brands to get us all really drunk several times over. And they’re locked in a stalemate because they seem to think that the best way to succeed is to thwart the movements of the opposition. The problem is that the stalemate is untenable as a corporate strategy for the reason that these are consumer products and not impersonal weapons.

Bob from Bala, Ontario has no preference about nuclear weapons other than that they not go off anywhere near Bala, Ontario. You can’t market various kinds of warheads as being “explodier” than others. There’s no, although there may be a run by either neo-cons or alternative energy lobbyists.

Bob might have a preference for a kind of beer, though. Let’s say that Bob started drinking Labatt Wildcat in 1994 or whenever it came out. He’s been drinking it for 17 years and it’s now the only thing that Bob will drink, since Bob’s a creature of habit who mows the lawn Friday afternoon and goes to church on Sunday and never puts the lid back on the toothpaste.

If Labatt were to discontinue Wildcat, they might really piss off Bob. And the same goes for all the other people out there like Bob who enjoy that beer. The really bad part is that for each company there is a similar base of customers for each brand. So, while each company can continue to increase the number of beers that they offer, they can’t really remove any without annoying the consumer base. This may go some way to explaining why we still have ice beers 15 years later. New brands don’t actually bring in new customers. They spread out the customer base that already exists. There are not magically more people just because you’ve got a marketing campaign.

If you think I’m exaggerating, I’ve actually done the research. Here’s a spreadsheet including many of the brands that each company has in The Beer Store. I’ve lined each product from each company up with what I feel is the opposite brand from the other company. You may not agree with some of them, but part of my decision making process in this case was to look at price structure. I have listed the prices for 12 bottles and 24 bottles where applicable. I have left out the European Imports that each company represents. I think you’ll be astonished by how little wiggle room there is between companies.

Here’s the thing, though, and it is pretty obvious. Molson’s Six Pints division under Creemore is a quanitity that doesnt exist at Labatt, and it’s Molson’s best chance at gaining an insurmountable advantage. If Labatt doesn’t acquire some craft brands in a desperate bid for Perestroika, the detente will be over within a matter of years. It will not have much immediate effect on the craft beer market, since the brands chosen will be unobjectionable to the majority of consumers and therefore of little interest to craft beer drinkers.

I hope that they acquire some craft properties. The detente is great for craft brewers. While Molson and Labatt fight over turf that no one really wants (55 calorie, 2.3% “beer” vs 67 calorie, 3.0% “beer”) we get to run amok with innovation and educate people who are starting to realize that flavour might be more important than advertising. It would be cynical to suggest that it’s important that Labatt holds a market share similar to that which Molson holds for as long as possible so that the overall market share of both companies can be chipped away at by the craft industry. It would also be pretty objectively accurate.

Something to ponder, anyway.

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8 thoughts on “Detente OR How I learned to stop worrying and love Labatt

    • Jordan St.John Post author

      We should care about them because they convince people to drink craft beer by making, as you say, “crappy adjunct-laden tasteless swill.” Also, if they didn’t have to compete against each other constantly, they might turn their attention to craft brewers.

      • Ian Watson

        No they don’t convince anyone to drink craft beer, because the people who drink that crap don’t have ANY idea what real beer is. And “if they didn’t have to compete against each other constantly”,they would certainly not turn their ineffective attention to craft brewers and craft beer drinkers, because, as I think is quite obvious, craft beer drinkers have a vastly improved palate and would never be swayed by any multi-million dollar marketing scheme by them.

        • Jordan St.John Post author

          I feel like maybe you’re not getting the point, and it’s a subtle one, so that’s probably understandable since this post doesn’t contain much of my usual bombast.

          The craft beer market continues to expand. Those aren’t people who never drank beer before. They’re mostly people who used to drink macro products and who have switched to craft beer. Part of the reason for this is that the macro companies are engaged in making lime beers and low calorie beers in order to compete for a limited amount of market share. They’re so caught up in that business model that they’re not competing for craft beer drinkers. They don’t really see craft as competition in the same way that they see each other as competition. This is a good thing.

          It means that the overall market share they fight for reduces slightly as people switch away from their beers. You seem to think that craft beer drinkers are born with innate qualities. They aren’t. They’re made. And one of the things that pushes them towards craft products is that both Molson and Labatt are offering lime beers and 55 calorie beers. They may eventually develop vastly improved palates and become inured to marketing, but very few people start out that way.

          I’m willing to bet your first beer was a macro. Look at you now.

  • Chris Storey

    As a homebrewer, I quit trying to get Coors Light drinkers to try “real beer”. They are beyond hope. These are usually the older crowd. I do see more and more younger people drinking Craft Beer. Give it time.

  • Peter

    Hey Jordan, it’s Peter Nowlan here from Molson Coors. A bit late with a comment but wanted to respond to your argument here. Kudos on the thorough analysis. From our point of view, we’re focused on bringing beers to market that drinkers are asking for. If you look at our latest introductions, from Molson Canadian 67 Sublime to Molson M, the common thread is that beer drinkers have led us to these ideas through research and insights. We’ve invested heavily in understanding the Canadian beer drinker, from their emotional needs to the styles of beer they prefer in different settings/occasions. We’re doing our best to respond to their interests and tastes and deliver a quality beer each time out. We’re less interested in what the competition is or isn’t doing to keep pace, but it’s clear who’s playing ‘follow the leader.’ Your point about Six Pints is a valid one. The craft segment is exploding and we feel that Creemore and Granville will help pave the way for more discovery and interest in the world of beer. And that’s good for everyone. Ultimately we’re looking to turn more people onto beer – any brands, all styles, etc. Getting folks to experiment is a smart way to build interest and excitement in the category. All brewers, from any shape or size, should benefit from this approach. Hope to carry on this conversation over a beer sometime this summer if schedule’s work to get you out to the brewery.

    Cheers, Peter

  • Chris Storey

    Creemore and Granville will help pave the way for more discovery? We are way beyond that now. I discovered flavourful beer over 20 years ago. I had to brew it myself. Now there are breweries in Ontario and beyond that brew fantastic and flavourful beer. Ontario Craft Brewers are doing a great job of getting the word out about great beer. Molson Coors can tag along if they want.

  • Josh & Aaron (@adventures_alc)

    Aaron from Adventures In Alcohol here:

    First off– Jordan, I am new to your blog but I love it already. Keep it up and best of luck at school. I want to drink your beer!

    Second — good analysis + use of the standoff metaphor. It’s helps explain why the big guys would rather buy up a handful of craft breweries than examine any of their own practices. They are locked into each other’s moves and not getting a good read on the overall picture.

    The problem with their research is that that it has to justify a product that ought to be as successful as already established brands/sub-brands, on a level of millions of dollars. We will never see a departure from the cheap ingredients + big marketing spend formula–only slight variations like nitro-lager and lime flavouring.

    The move to buy craft brewers follows the same tactics as the buck-a-beer market (except they hopefully won’t shut them down). They want a piece of that pie to protect their main line of business. They don’t want to move into that business in earnest.

    1) brands become absurd when they get lime-ified, de-carbified, low-calorified, etc. If Blue or Canadian is so great why does it need lime in it like some other guy’s beer? Call it something else.

    2) I suspect that big beer companies don’t care about making me happy. If they did, their engines of innovation would center around trying to make unhappy people thirsty for their products. That doesn’t necessarily mean me specifically. Bottom line: The size of the market unhappy with mainstream beer is as least as big as the market for craft beer.

    I don’t have a hatred for Molson’s or Labatt’s despite their apparent lack of interest in me, save for my money. I have little to no interest in their products because I don’t get bowled over by the flavours. I will never rant and rave about their beers because I can stick a lime in my beer or make my beer “taste cold” all by myself (hint: put it in the fridge).

    Peter: you can get more of my money by buying craft breweries and giving them a ride on your distribution system in Ontario called The Beer Store. Another method would be to use your fantastic equipment, personnel, and distribution systems to launch a nationally distributed beer that has some ballsy flavours. Malt and hops would be my suggestion for a starting point.

    I think the big guys could make a damn fine beer if the bureaucracy, MBAs, and marketers would only let them. But I bet a lot of people don’t think you could do it to save your life. Prove them wrong. It would be interesting.