SAN DIEGO (CN) — In 2016, the company then known as MillerCoors was losing sales of its economy beer Keystone Light at twice the rate of its competitors. Bold action to stop the hemorrhage was required, a consultant group told the company.
So it rebranded Keystone Light. The marketing campaign sought to take back sales from its competitors in the economy beer market including Natural Light, which is sold by Anheuser-Busch.
“I was concerned we were going to lose shelf space because all our economy brands were, frankly, underperforming our competitors,” CEO Gavin Hattersley said during questioning Tuesday in the second day of a trademark trial.
Hattersley’s testimony deflates arguments made by San Diego-based craft brewer Stone Brewing in its trademark case claiming MillerCoors — now known as Molson Coors following a 2019 name change by its parent company — rebranded Keystone to steal its customers or would-be customers.
In its 2018 lawsuit, Stone Brewing claimed MillerCoors rebranded Keystone Light in April 2017, separating “key” from “stone” to emphasize the word “stone” and make it appear the light beer was associated with the IPA craft beer maker.
Stone Brewing claims it has lost hundreds of millions of dollars in sales in the five years since.
But during his opening arguments Tuesday morning, MillerCoors attorney John Bunge noted a “segmentation in the beer market” meant his client was not competing in the same arena as Stone Brewing.
“We’re not competing against an IPA from San Diego," Bunge said, adding: “They make a great beer, I’m not here to tell you otherwise, but those aren’t our competitors, our competitors are those who make economy beers like Anheuser-Busch.”
Bunge said documents shown during the trial would confirm MillerCoors’ strategy was to compete directly with Anheuser-Busch, not Stone Brewing.
He showed examples of how another economy beer — Bud Light — had changed its packaging over the years, as economy beers tried to differentiate themselves while in the “sea of sameness” due to their similar look.
Bunge also said graphs shown by Stone Brewing’s attorney Noah Hagey during his opening statement Monday showed Stone Brewing did not suffer immediate sales loses after MillerCoors rebranded Keystone.
Rather, a decline in sales started in 2019 and coincided with an industry-wide slowdown in the craft beer market which had become oversaturated after Stone Brewing first came on the scene in 1996, Bunge said.
Stone also closed several tasting rooms and facilities — including international businesses in Berlin, Germany, and Shanghai, China — as well as a tasting room in Napa. The company lost millions of dollars in the process, Bunge said.
“That’s too bad — and I’m not being facetious — but it’s [the losses] not the result of a budget beer changing its packaging from this to this,” Bunge said while holding up two Keystone Light cartons.
“We sell our beer in places like Oklahoma, not Berlin and not Shanghai," he added. "We weren’t competing in Napa Valley, you’re not going to find a tasting room for Keystone Light in Napa Valley."
The two beers are also sold in different markets with up to 40% of Stone’s beers sold in restaurants and bars and 98% of Keystone Light cartons sold in grocery and convenience stores.
Stone also sells nearly half its beers in California while Keystone “didn’t have much success” in the state and sold less than 1% of its beer in the Golden State, Bunge said.
When questioned by Hagey on Tuesday, Hattersley said “premium” and “above-premium” beers sold by MillerCoors were more affected by craft beer sales than economy beers like Keystone Light.
As part of its strategy to recover its share in the market, MillerCoors hired Boston Consulting Group which advised Hattersley: “It takes little imagination to envision a future with MillerCoors in a dramatically weaker competitive position unless bold action is taken.”
In response, MillerCoors embarked on what Hattersley called a “three-legged stool strategy” to plug lost sales and acquired four craft beer companies.
Additional witnesses are expected to take the stand Wednesday.