The American beer industry is beginning to resemble the auto industry, with growing import sales driving domestic brewers to come up with new products to keep from losing sales in an otherwise stagnant market.
Masters beer, a domestic product with imported overtones, is one of those new products developed by the big American breweries in response to imports. And Masters soon will be joined by new "European-style" beers being developed by Heileman Brewing Co. in still another attempt to stem the erosion in sales created by imported beers.
Another approach is being adopted by Anheuser-Busch, which will fight imports with its own imports.
Adolph Coors Co. joined with Molson Breweries of Canada and Kaltenberg Castle Brewery of West Germany to form Masters Brewing Co., which has headquarters in Alexandria.
Masters, which is being test-marketed here, is seeking a share of the beer market in the United States that last year was valued by industry analysts at $37 billion, with imported beers accounting for $577 million of that total.
In recent years, imported beers have been growing at the expense of domestic brews. In 1984, domestic brewery sales were down 1.1 percent while sales of imports rose 14 percent. Even though that increase has been on a relatively small base, the growth in imports has been sufficient to get the attention of domestic brewers.
Imports accounted for 3.9 percent of the total market in 1984, and they are expected to grow by between 13 and 14 percent this year, according to Joe Doyle, an analyst with Smith Barney. Domestic sales are expected to grow barely at all in the same period.
In the next five years, he foresees "the imports growing at a good rate," perhaps 10 percent annually, and "maybe 1 percent for the domestics, if that much." Through June, imports are up 15.5 percent, Modern Brewery Age reported.
Domestic beer production has been relatively static since 1981, the U.S. Brewers Association said. Last year, the only major U.S. brewery whose production grew by more than 1 percent was the No. 1 brewer, Anheuser-Busch. From 1983 to 1984, only two of the top 25 breweries, Anheuser-Busch and No. 2 Miller -- gained volume, according to Modern Brewery Age estimates. Anheuser-Busch's production increased 5.8 percent, and Miller's rose 0.1 percent.
"If you are a domestic brewer and selling super-premium beer, imports have cut into your market," said R. S. Weinberg, an industry consultant. "You will see American specialty beers created to attack the imports," Weinberg predicted.
"Obviously, if the trend is toward specialty beers, we want to lead that trend," said Coors President Jeffrey H. Coors. "Masters is our attempt to be in the forefront of that trend.
"Our hope is that Masters is more than a boutique brand. Our objective is to have volumes above what the major import companies provide," he said.
Next summer in Milwaukee, another major brewer, fourth-ranked Heileman, will open a $6 million facility to produce European-style beers, initially brewing 50,000 barrels yearly. European or import-style beers are generally considered more flavorful and are thought to have more body than standard American beers.
"We can bring our expertise to the party," said Russ Cleary, chairman of the board of Heileman. "This is absolutely a goof-proof plan, if you follow sanitation and the recipe."
He noted that "the imports have been a very profitable segment of the market . . . good margins, that's been our experience." Last summer, Heileman became sole U.S. importers of Hacker-Pschorr beers from West Germany.
The idea behind the new Milwaukee plant is "to offer these varieties of beers at a better price -- and fresh," Cleary said. Unlike imported cars, beer suffers from long transit times. Other experts agree that fresher beer tastes better, and Heileman hopes to exploit that advantage.
"Beer is not a stable product," said Klaus Zastrow, vice president of brewing technical services at Anheuser-Busch. "Beer, in contrast to a good wine, doesn't get better in the bottle."
At the Coors brewery in Golden, Colo., for example, the freshest-tasting beer comes out of the "pigtail," a curled, metal spigot that dispenses Coors beer just after it is filtered and before it's been pumped for packaging. The taste and aroma are heightened, much as they are for bread right out of the oven.
Anheuser-Busch also is responding to increasing imports, but it will take another approach. The maker of the top-selling domestic brand, Budweiser, recently announced it will begin importing and distributing Carlsberg beer, which will be brewed and packaged in Denmark.
Anheuser-Busch, citing the agreement as "a timely move," said "the continued upward sales trends for imports in the U.S. was an important factor . . . " Carlsberg previously was imported by another company.
"We're looking for other imports as well -- a family of imports from different parts of the world," said Joe Martino, vice president of sales at Anheuser-Busch. But the company has not ruled out producing "import-style" beers domestically. "Our planning group has virtually any type of beer at various stages of development," Martino said. "We are prepared to address market needs if we see a market segment opening."
He noted that the growth of imports "is primarily due to the strength of the dollar -- effectively reducing the price spread between domestics and imports."
Although the growth has been rapid enough to produce a response from domestic brewers, in terms of the overall U.S. market, imports still account for a relatively small share of the beer consumed in the United States. "You have to realize that, while growing like gang busters, they're growing from a very small base," said consultant Weinberg. About 10 percent of the total market is high-priced beer, both super premiums and imports, he said.
Last year, of the total 182.5 million barrels of beer consumed nationally, Americans drank 7.2 million barrels of imports and 35 million barrels of light beer -- five times more light beer than imports. A barrel is 31 gallons.
Fred Eckhardt, a beer columnist for the Portland Oregonian in Portland, said, "The imports are making the big American brewers think twice . . . The trend leaders are trying it, and it will have an effect on how beer is marketed -- something beyond a six-pack at a ballgame. But you're not going to overturn Budweiser."
One long-range impact of the imports may be to increase the varieties of beer produced in the United States. At last summer's Great American Beer Festival in Denver, 94 beers from 49 U.S. breweries were available -- up from 45 beers and 24 breweries in 1982, the festival's first year. Most of the major American breweries have been represented, as well as small breweries.
Another influence on the U.S. beer market repeatedly cited by industry analysts is the response to drunk driving, which also may tempt beer makers to produce new, more flavorful beers.
With new drunk-driving laws, "The beer drinker is forced to drink less -- either more of less alcohol, or less of higher-alcohol beer," Eckhardt said. If they're drinking less, many are trying beers with greater taste, he said.
Some of these drinkers are buying imports for the perceived quality, but "the quality of big American breweries is superb," he said. "American brewers can brew anything they want -- and do a better job. I'd like a good American beer with taste that grabs you -- that's fresh."
"It takes more skill to brew American lighter-flavored beers consistently than to brew European heavier beers," said Finn Knudsen, director of brewing research and development for Coors, who has 23 years of brewing experience, including 10 years in Europe.
Heileman's director of brewing, Hans Reuther, who was born in West Germany and who has worked in German and Swiss breweries, noted, "The quality control in our brewery, I can honestly say, is unmatched in Europe."
"The beer business, like all businesses, is becoming more international," said Coors President Jeffrey Coors. "More and more, we are thinking of ourselves as an international company."
Masters Brewing Co. is not the only deal involving Coors and Molson. Molson will be brewing Coors under license in Canada, according to Bob Rechholtz, executive vice president of sales and marketing at Coors, the nation's fifth-largest brewery. However, "There's no plan to produce Molson here at this time," he added.
Coors and Molson began their joint venture to produce Masters beer three and a half years ago, said H. Hollis Brace, president of Masters. Kaltenberg was added to the venture 14 months ago "because the concept required the participation of a German brewer," he said.
Brace said a German brewery was selected "for the sense of what they could bring technically" as well as for "what consumers perceive." Their perception is "Germany, the home of beer," he added.
During the $2.5 million research and development of the Masters business concept, American consumers were asked where the best beers came from, and they said Europe, and, "When asked where in Europe, they say Germany," Brace said.
With the beer industry responding to the same competition from imports that the auto industry faced, "the GM-Toyota analogy" applies to the Masters beer venture, Coors said.
A recent commercial calls Nova, the U.S.-built GM-Toyota product, "The best of both worlds."
In contrast to beer imports, imported automobiles have captured a greater portion of sales.
Whether new specialty beers such as Masters can stem the rising tide of imported beer remains to be seen.
Brewing consultant Joseph Owades said, "I don't know how well it will do. I don't think it takes three countries to supply the expertise to make Masters."
"It's worth trying," said Doyle of Smith Barney, because "Masters could take from Michelob and from the imports -- there's enough volume now to be worth trying."
Charles Finkel, president of Merchant du Vin, which imports beers, said "it's a great idea," noting that Masters and the Heileman plant, for example, will contribute "to the sophistication of the consumer -- and the better served we will all be."
With Masters, "What we're saying is we're setting a new standard in American beer, and it may be its own category," Brace said.
Considering the latest projects, Owades said, "Now the big boys are in the specialty-beer market -- and see the light. It took 10 years for Detroit to see it."