Pabst could lift some spirits with move from beer into bourbon

By Sandy Skrovan
Dive Brief:

Privately owned Pabst Brewing ó the maker of Pabst Blue Ribbon, Schlitz and Old Milwaukee, as well as Not Your Fatherís Root Beer ó is getting into the spirits business, according to a company release. The beer maker has introduced a whiskey brand called Not Your Fatherís Bourbon, currently for sale in Wisconsin and Illinois. A nationwide rollout is planned for 2018.
The distilled bourbon features a unique flavor profile with a ďtouch of Madagascar vanilla.Ē According to the release, adding vanilla is ďan exciting spin on the centuries-old spirit for a new generation of whiskey drinkers and cocktail connoisseurs.Ē
Pabst, which currently contract brews its beers, plans to do the same with the new whiskey, according to industry publication Brewbound. Wisconsin-based private label manufacturer Minhas Distillery reportedly is producing the new product for Pabst.

Dive Insight:

The people who brought us Pabst Blue Ribbon and Not Your Fatherís hard sodas are getting into the spirits business. This is somewhat of a rarity in the beer industry. Beer makers usually stick to beer and donít sway too far from their roots, according to a post on MillerCoorsí blog. A shift in drinking preferences among younger consumers, however, is driving changes in alcohol penetration and consumption trends, challenging beer makers.

According to statistics from the U.S. Treasury Department, Americans' thirst for beer has dropped and U.S. production along with it, from 191.1 million barrels produced in 2013 to 189.2 million barrels in 2016. The decline in beer sales accelerated in 2016, dropping 1.8% ó compared with a five-year decline rate of 0.6%, according to IWSR, which tracks the alcohol industry.

At the same time, a growing number of drinkers are turning to spirits and mixed drinks in place of beer. Sales of hard alcohol ó such as gin, tequila and whiskey ó crept up 0.04% in 2016. Mixed drinks, like pre-made cocktails, surged 1.6%. IRI data indicates the 85-plus-proof bourbon sector recorded 12% growth in the 13 weeks ending Oct. 1, reports Beverage Industry. As millennials come of age and their disposable incomes rise, their penchant for premium drinks and wine is only likely to increase, much to the dismay of beer manufacturers.

Pabst is simply going where the growth is and trying to diversify a product portfolio thatís currently heavily reliant on the challenging beer category. Nielsen data shows the beer makerís case volume is down 2.1% and sales down 1.3% year-to-date through November 4, according to the MillersCoors post. Performance of the Not Your Fatherís hard soda brand has been substantially worse, with sales off 55% and volume down 53.7% during the same period.

Consequently, the new bourbon introduction could be a welcome change. Its launch could carry momentum because of familiarity with the Not Your Fatherís and PBR brands. Should the companyís beer/malt beverage-to-spirits journey prove successful, it could prompt other breweries to look this direction as well. MillersCoors' blog indicates a handful are already experimenting with distilled spirits, including Michiganís New Holland, Delawareís Dogfish Head, Oregonís Rogue Ales & Spirits and Indianaís Three Floyds.

Itís also not out of the realm of possibility for the big breweries, like AB InBev, for example, to consider branching out from beer as well. After all, the beer maker has a history of continually looking for ways to increase sales. Anheuser-Busch has tasked new CEO and North American president Michel Doukeris with driving top-line growth. Opportunities in the growing spirits category could be one way of putting his stamp on the business.