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Beer Sales Cool as Costs Rise


Big brewers lose ground to craft brews.

Why today isn't a national holiday is anybody's guess -- beer drinkers, you now have another reason to hoist a cold one tonight: It's the 75th anniversary of the beer can.

During the Great Depression, breweries needed to cut costs. On January 24, 1935, the Gottfried Krueger Brewing Company introduced its Special Beer and Cream Ale in cans developed by the Ball Corporation (BLL). Cans were far lighter than glass bottles and much less expensive to transport.

Today, Americans drink an average of 22 gallons of beer annually, most of it in cans. While that may sound like an impressive number, the major brewers are under pressure as domestic consumption decreases.

US beer sales fell 2.2% in 2009, the highest rate of decline since the 1950s and the industry's first drop since 2003. According to analysts, price increases in the neighborhood of 5% by Anheuser-Busch InBev (BUD) and MillerCoors (TAP) are largely to blame.

Naturally, the brewing companies would like to increase profits, especially in light of InBev NV's $52 billion purchase of Anheuser-Busch in 2008 and SABMiller PLC and Molson Coors Brewing's decision to combine US operations. But raising prices in a soft economic environment hasn't been well-received by consumers or the retailers that depend on them.

"When you raise prices that much, there are going to be consequences," Marc Greenberg, an analyst with Deutsche Bank, told the Wall Street Journal.

"We need cost decreases or we think there will be declines in domestic beer purchases in total," a 7-Eleven spokeswoman also told the Wall Street Journal.

Anheuser-Busch InBev shipments dropped 2.1% last year, the biggest decline since 1976. MillerCoors shipments dropped 1.9%. Crown Imports, which distributes Corona domestically, saw shipments drop 5%. Heineken, which just this month completed a $7.64 billion takeover of Latin American brewer Femsa Cerveza, has seen its volume decline 6.6% in the States, but attempted to offset that by increasing prices by 6.2%.

7-Eleven, which was unable to secure lower wholesale pricing from the big breweries is "exploring alternate strategies," such as adding more craft beers.

Sure enough, sales of craft beers were on the rise, with the Boston Beer Co. (SAM) shipping 1.7% more product year-over-year.

Not everyone is bearish on domestic beer sales, however. Burger King (BKC) is actually betting on it.

The Home of the Whopper is about to start selling beer.

Next month, Burger King is set to open a Whopper Bar in Miami, which will be serving Anheuser-Busch InBev and MillerCoors brands along with, well, Whoppers, obviously.

Plans to open other Whopper Bars in Las Vegas, Los Angeles, New York City, and Malaga, Spain, are in the works.

Whopper Bars will be open 24 hours a day, seven days a week. Customers will be provided with both counter and delivery service.

"No, I don't want fries with that -- gimme a sixer of Bud."

Has a hell of a ring to it, no?
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