Michelob Ultra is Crazy Popular; What Does This Tell Us?

Michelob Ultra remains the largest share gainer in the US, now for seven consecutive quarters...

That growth trend follows a three-year block in which the brand increased 27% in sales. Ultra's not getting a bonus from the novelty curve--it's been around for 15 years. It's certainly not selling because of its sensory qualities; it's so close to flavorless that the first suggestion from Google when you enter the name is "What is Michelob Ultra made of?" Even its drinkers wonder if it's really a beer.

On one end of the market, flavor is driving sales. Leaders in the craft segment may be suffering, but as Bud (down 5.6% this year) and Bud Light (-3.6%)  both continue a slow death spiral, mass market craft like Goose Island are flying off shelves. So how does a flavorless, blandly corporate beer becoming one of the few success stories in the domestic mass market sector? Branding is the only answer anyone can identify.

When Michelob Ultra made its debut in 2002, it was during the Atkins diet, low-carb craze. Its tagline at the time? “Lose the carbs. Not the taste.” Its current tagline, “Brewed for those who go the extra mile,” along with its other marketing efforts, represent a strong and simple focus on fitting into consumers’ lives. Those who want good stuff without sacrificing taste. Those who work as hard as they play, who push boundaries.

Branding, however, is effective only within certain constraints. It can build upon consumer trends, but it can't create them. There's no brand strategy on the planet that will make mild ale sell in America. Rather, Michelob Ultra looks to me like a data point in an emerging picture. Alone, it doesn't make a lot of sense, but combine it with these: (1) sales in the craft segment are slowing, and distinctive winners and losers are emerging; (2) large, independent brands not committed to deep cost-cutting are suffering, while corporate-owned craft brands are selling briskly; (3) small craft beer producers are still posting big growth gains; but (4) legacy mass market brands are collapsing; finally (5) mass market Mexican imports are killing it, especially (yay!) Pacifico (though that brand's success mystifies everyone).

We're at a transition point in beer, just the second in my lifetime. The first happened in a long period starting in the late 1980s in certain cities and finally seeped into every corner of the country twenty years later. In that transition, a majority of Americans became aware of the existence of styles beyond mass market lager and that local breweries can make credible, tasty examples of these beers. That was a massive, watershed transition and irrevocably changed the way beer is understood and sold in America. It market the beginning of the end of the wholesale dominance of the beer market by a single style.

We could call this latest transition the "normalization" of craft. The first transition happened as a collective mental paradigm collapsed and was replaced by a new one. The most excited evangelists for the new paradigm (let's call it "craft beer" for the ease of discussion) were confident that a lot of the values they held were shared by the wider population--that craft beer was objectively higher quality, that these little breweries, because they were local, weresomehow morally superior, that the movement was animated by values and ethics and was not merely the evolution of a consumer category.

The truth is that for some people, craft beer does hold those values. A lot of people do want to support smaller, local companies and eschew larger companies. A lot of people understand and delight in the unusual practices little breweries are able to pursue. That's why craft beer as a category is healthy and growing, and why many small breweries continue to grow like weeds.

But a lot of people--probably the majority--don't really care about that stuff. It makes a great story, and if they like a brewery already it certainly strengthens their interest and loyalty. They are also happy, however, to buy the cheapest craft beer they can find, don't care a fig about "local," and are as easily influenced by the preferences of their peer groups--who may like Coronas served with a lime wedge or their Michelob Ultra with the guys in front of the game. This is hard for a lot of beer geeks to imagine--but it's hard for foodies to understand why anyone would go to Appleby's or Chilis.

For a long time, craft beer insiders have told themselves people chose local IPAs as a statement of purpose and values, with all it entailed. It turned out many just wanted an IPA and they didn't really care overmuch who made it. For a long time, the only breweries making IPAs fit that description, so the theory seemed sound. But now big companies make and sell IPAs, and they sell a lot of it. For many consumers, Goose Island's cheaper than Sierra Nevada, so that's that.

We have the continuing evolution of the beer categories. On the one hand, Michelob Ultra is popular because the category--light beer--is still the most popular within mass market lagers and it is the trendy choice. As a category, it will continue to shrink and diminish, though there will of course always be winners in any segment as large as that one. (Michelob, of course, is owned by AB InBev.) Within the craft segment, the evolution looks like any other product category. You have a bunch of different flavors and a bunch of different qualities and prices, and consumers sort themselves accordingly. The paradigm shift here is to thinking not of "craft beer" but "beer." The difference between this transition and the last is our collective definition of beer. (And in this way "craft" won the war.)

It's (another) brave new world out there.