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Why Lager Is the Future of Craft Beer

Stocks in this article: BUD TAP SAM BREW

PORTLAND, Ore. (TheStreet) -- Small craft brewers and the craft divisions of huge international breweries can talk about wheat beers, shandies and even IPA all they'd like: This is still lager country.

Despite recent gains by craft beer and recent shifts by Anheuser-Busch InBev, MolsonCoors and SABMiller toward brands including Blue Moon, Shock Top, Goose Island and Leinenkugel's, the overwhelming majority of beer sold in this country is lager or some derivative thereof. It's been so relentless and pervasive that even hard-line craft beer advocates have begun embracing it in its light, familiar form.


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Consider that MolsonCoors/SABMiller's MillerCoors and Anheuser-Busch InBev still sell about 74% of the beer this nation drinks. Consider further that Corona and Heineken make up roughly another 10% of that market. Throw Pabst, Modelo and newly "craft" brewer Yuengling into the equation and 18 of the 20 best-selling beers in the U.S. are some form of either lager or pilsner.

You can argue that most are losing sales -- and many including Budweiser, Bud Light, Miller Lite and Busch are. But import brands including Heinkeken, Corona and Modelo saw sales rise even during the recession. The same holds true for Coors Light, Pabst Blue Ribbon and Yuengling, with each posting double-digit percentage point gains in 2012 alone, according to Beer Marketer's Insights.

Also see: Session IPA Is Taking Over Summer Beer

The problem isn't lager, but the overall beer market. The Treasury Department's Alcohol and Tobacco Tax and Trade Bureau reported a 1.5% decrease in overall beer sales and a 2.6-million barrel loss in beer production. That's basically akin to shutting down Boston Beer's Samuel Adams brand (which produced 2.7 million barrels in 2012) for an entire year. Beer consumption overall has fallen in four of the past five years, with many of the slumping mainstream brands responsible for the damage. That has reduced reduced beer's share of the overall alcohol market from 55% in 2000 to 49% in 2012. Meanwhile, craft beer volume increased by an estimated 15% last year, with imports putting up roughly 5% growth.

The Beer Institute, a beer industry organization based in Washington, points out that craft's gains came at the cost of overall industry losses. The Beer Institute compared unemployment rates with average monthly beer shipments during the same period and found that overall shipments began decreasing steadily in 2009 and continued through June 2012 in direct correspondence with job numbers. MillerCoors' success with its Blue Moon and Leinenkugel's brands and A-B InBev's acquisition of craft brewers Goose Island and Blue Point could be considered a shift in strategy, but A-B just made a point of pumping more cash into its core brands after years of peddling Bud Light Platinum and Black Crown.

So what gives? There's money and power in lager, and even craft brewers know it. This year, the Brewers Association craft beer industry group changed its definition of a craft brewer to include Pottsville, Pa.-based D.G. Yuengling & Son (the oldest brewer in the U.S., founded in 1829); St. Marys, Pa.-based Straub Brewing (1872); New Ulm, Minn.-based August Schell Brewing (1860); Monroe, Wis.-based Minhas Craft Brewery (1845 as Blumer Brewing). All were previously kept out under rules restricting use of corn -- which was a common pre-Prohibition ingredient European-born brewers used to counteract inferior U.S grain. All produce lagers as their flagship beers and most have become known for their light lagers in particular.

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