BEER DISCOUNTING DROVE LABOR DAY SALES, REPORT SAYS

Lucia Moses

NEW YORK -- Labor Day weekend produced strong beer sales, but gains likely were driven by discounting, which cuts into profits, a recently released survey suggested.

In a survey of beer wholesalers by Citigroup beverage research here, 65% reported sales exceeded their expectations. Eighty-nine percent said discounting was heavier this Labor Day weekend over last year's.

Citigroup surveyed about 40 wholesalers representing more than 30,000 retailers.

"We remain concerned that volume growth is being achieved via aggressive price discounting ... and wonder how sustainable these volume gains are for the brewers," the report, by Bonnie Herzog, stated.

The report also expressed concern that Miller Brewing's emphasis on economy brands, coupled with the aftermath of Hurricane Katrina, could lead to more growth in the budget beer segment.

Beer volumes rose about 4.1% this holiday weekend vs. the same period a year earlier on discounting as well as solid weather, according to the wholesalers surveyed.

Miller had the greatest volume growth (5.4%), followed by Anheuser-Busch (4%) and Molson Coors (3.4%), according to the survey. Wholesalers were divided over which brewers led the discounting, with 38% saying discounting was even among the biggest brewers, 32% thinking Anheuser-Busch did more and 24% fingering Miller.

The continued emphasis on discounting will only hurt the beer industry, whose image has suffered as wine and spirits have surged in popularity, stated the report, which called on brewers to focus on reviving the category in other ways.

In other findings, gas prices and Hurricane Katrina appeared to have had minimal effect on beer sales. Twenty-two percent of wholesalers said gas prices had a major impact on holiday sales, while 79% said Katrina had no effect.

Light beer has been driving growth in the beer category, and the holiday weekend was no exception, according to the survey. More than half of wholesalers said Bud Light, Miller Lite and Coors Light generated the strongest sales for their parent companies.