What's the World Coming To?

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    NEWSLETTERS

    Getty Images/David McNew
    A homeless man drinks beer on the streets of Los Angeles.

    MILWAUKEE -- Even the brewing industry is starting to go flat in the worldwide economic slump.

    SABMiller PLC, the London-based brewer of Grolsch, Miller Genuine Draft and Peroni Nastro Azzurro lagers, said on Thursday its beer shipments fell unexpectedly in the third quarter as consumers pulled back on their demand.

    Carlsberg A/S, the Copenhagen-based maker of Carlsberg beer, said it was cutting 274 jobs to save on costs due to a future "where we face more uncertainties and risks," the company said in a statement.

    Beer usually holds up better than other categories during tough economic times, said Benj Steinman, editor of trade publication Beer Marketer's Insights, and that trend had been holding true during this recession for some segments of the industry. But the latest figures show the market is trending downward, perhaps accelerating as global economies continue to sputter, and relief seems uncertain.

    Beer is "recession-resistant, not recession-proof," Steinman said.

    SABMiller said lager volumes fell 1 percent in the three-month period that ended Dec. 31, compared with the same period a year earlier, because of the economy.

    "Consumer demand has been affected by the current global economic slowdown, and has continued to weaken in many of the group's markets," the company said in releasing its quarterly trading update, which does not provide financials.

    The company said, however, that its financial performance remained in line with expectations "notwithstanding the relative strength of the U.S. dollar against the group's major currencies."

    The rise in the U.S. dollar also has hurt businesses with overseas interests.

    SABMiller is the world's second-largest brewer by volume after losing the top spot to Anheuser-Busch Inbev NV after InBev's $52 billion acquisition of Anheuser-Busch last year. In November, SABMiller said it was scaling back investment in the face of continued cost pressures and slowing demand for beer worldwide.

    With the latest numbers, it appears demand has been hit hardest in the U.S. and Europe.

    In the U.S., SABMiller and rival Molson Coors Brewing Co. saved costs last summer with a domestic joint venture called MillerCoors.
    But MillerCoors sales are falling too. Domestic sales to retailers fell 2.3 percent over the third quarter, with flagship Miller Lite's sales falling 7.5 percent. Coors Light continued its momentum, posting a 1 percent sales increase, according to the company. But that was slower than in previous quarters, Steinman noted.

    He said the Miller Lite number should be cause for concern about the brand. The fact that Coors Light's 1 percent growth was slower than in previous quarters could signal that the overall beer market is getting weaker, he said.

    The U.S. beer market typically grows about 1 percent a year, over a ten-year average. In the past few years it had been growing ahead of that. But in 2008 sales rose about half a percentage point, he said.

    MillerCoors said its premium light brand volumes were down 2.4 percent, with particular softness in restaurants and bars, where consumers are cutting back as they try to stretch their budgets. But MGD 64, a 64-calorie version of Miller Genuine Draft, kept growing after its launch last year, SABMiller said, and craft and imports rose 1.6 percent, led by a double-digit performance from Blue Moon.

    In Europe, where consumers are also hurting, lager volume fell 1 percent, including a 22 percent drop in Russia. But MillerCoors volume grew 2 percent in Poland, where the company gained market share. In Romania, the volume growth rate slowed to 11 percent, while the Czech Republic's domestic volumes dropped 1 percent.

    SABMiller also said volume in developing countries, which produce around 80 percent of its profits, is slowing as the credit crunch deepens.

    Third-quarter shipments rose 2 percent in Latin America, stymied by a 6 percent decline in Colombia, the company's biggest market in the region. In Africa and Asia, organic lager volumes increased 2 percent, with growth in China flat.

    Carlsberg, citing an uncertain future, said in its news release Thursday that it was accelerating its restructuring plan to improve on efficiencies. In Denmark, the company said it was starting Thursday to negotiate with unions to cut 150 jobs.

    Carlsberg Baltic started restructuring its business in late 2008 and will now accelerate that by cutting 124 jobs, in addition to the 80 layoffs announced in November.