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TheStreet Open House

What Is Blue Moon Doing in the Holiday Beer Section?

Stock quotes in this article: SAM, TAP, BUD, BREW

PORTLAND, Ore. (TheStreet) -- Of all the holiday beer shoppers will see in the beer aisles this year, perhaps the most surprising is a 12-pack of a brand that, until just recently, boasted only one beer.

Blue Moon is throwing a 12-pack of winter seasonal beers into this year's holiday mix to take on the holiday samplers offered by Boston Beer Company's (SAM) Samuel Adams, the Craft Brew Alliance (BREW), New Belgium and other smaller brewers. The big difference is that Blue Moon has the spending power of multinational brewing conglomerates SABMiller and MolsonCoors (TAP) behind it in the form of their North American joint venture MillerCoors.

We usually don't like to call out Blue Moon on this type of thing, as it typically serves as a gateway beer from light lagers such as Coors Light and Miller Lite to small "craft"-style brewers and more complex styles. But the rhetoric being tossed around between the Brewers Association small brewers' industry group and MillerCoors subsidiary Tenth and Blake -- which routinely refers to its beers as "craft" -- makes this holiday faceoff worth noting.

The Brewers Association made its opinion of Blue Moon clear earlier this year when it threw the brand in the "crafty" category and suggesting it was hiding its ties to MolsonCoors in its labeling and committing other, similar lies of omission in its ads. Tom Cardella, head of 10th and Blake fired back at a Beer Marketer's Insights spring conference, saying that craft beer isn't about size, it's really not about the ownership," but rather "the art and science of beer coming together."

That resulted in a rebuke from Boston Beer founder Jim Koch, who reminded Cardella that his brewery has access to brewers, ingredients and a huge and influential distribution system at a far lower cost than small brewers precisely because they have big money backing them up. Also, Koch noted that the use of "craft" by Blue Moon and other brands produced by large brewers eats away at the premium pricing that makes those brands so valuable to begin with.

According to market research firm Symphony IRI, craft beer usually fetches an average of $33 a case. That trumps the $29 brought in by imports and the $20 a case for premium domestic beers such as Anheuser-Busch InBev's (BUD) Budweiser and MolsonCoors' Coors Light. Water it down or chip away at it with temporary pricing schemes, and you take money out of everybody's pocket.

Koch comes from an old Cincinnati brewing family and doesn't defend his brewery and the niche he helped build with just some kind words and reason. That friendly, smiling, beer drinking face masks a hammer he's more than willing to bludgeon his big beer adversaries with when they step too close. As Blue Moon offers a variety pack that throws and Abbey Ale and Gingerbread Spiced Ale in with its standard Belgian White, Samuel Adams has bolstered its Chocolate Cherry Bock and Old Fezziwig Winter Ale with a little something called White Chrismas -- a spiced witbier that isn't dissimilar to Blue Moon's original-recipe Belgian White.

Boston Beer is also using its Alchemy & Science wing in Burlington, Vt., to produce a line of beer-and-soda shandies to combat those used by Tenth & Blake holding Jacob Leinenkugel. That brand, meanwhile, is throwing a Vanilla Porter in with its Orange Shandy and Big Eddy Imperial Stout for its own holiday pack.

MillerCoors is as big as its fizzy lagers suggest, accounting for 28% of all beers shipped in the U.S., but its flattening sales are making it a bit more aggressive toward burgeoning small brewers than usual. Shipments dropped 1.1% in 2012 and have been declining steadily since the start of the recent recession. Shipments plummeted another 5% during the first half of 2013 and profits dropped 4%. Marketing spending trickled off for the rest of the year, even as it launched brands including Redd's Strawberry and Smith & Forge cider -- the male-focused answer to its apparently girly Crispin brand.

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