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MillerCoors Crafts Small Beer Strategy

Monday, 31 Oct 2011 | 2:50 PM ET

MillerCoors likely spills more beer every year than a lot of craft brewers produce, but deep in the heart of this brewing giant beats an independent spirit reminiscent of the tiniest craft brewer.

Blue Moon
Blue Moon

It’s there you’ll find Tenth and Blake, the division started by MillerCoors in August 2010 to handle the company’s growing portfolio of craft and import brands, which include the company’s flagship, Blue Moon, as well as the Chippewa Falls, Wisc.-based Leinenkugel and imports Peroni, Pilsner Urquell and Grolsch.

While Tenth and Blake is a recent creation, Blue Moon's origins go back to the mid-1990’s.

"People don’t understand how Blue Moon was born," says Tom Cardella, president and CEO of Tenth and Blake. "It had a similar beginning as many of the craft brands on the market today."

Blue Moon traces its roots to 1994 when Peter Coors sent brewer Keith Villa to Belgium to get his doctorate in brewing science. Villa fell in love with Belgium-style beer and on his return impressed his boss with his desire to craft his own Belgium brew. Peter Coors gave Villa his blessing — and a shoestring budget — to start Blue Moon Brewing.

Today Blue Moon, the beer, is nearly ubiquitous, joining rival craft brew Sam Adams alongside domestic lagers as typical tap beer offerings in bars and restaurants. For many consumers, these beers serve as entry points for those looking for something beyond mass-produced lagers.

And with this stature, Tenth and Blake thinks it can help other small brewers to continue its growth both by bringing new people into the category as well as by providing financial assistance to entrepreneurs trying to build their brands.

"Blue Moon will finish the year well up over 20 percent in volume growth and when you look at where we are sourcing that growth, it's bringing in consumers who were weren’t beer drinkers before," says Cardella. "It’s definitely a gateway beer and I think when you talk to a lot of other craft brewers, they recognize the value and the importance of that gateway."

But many beer aficionados still take issue with Tenth and Blake using the term "craft." Their issue? Size.

Blue Moon’s Belgian White is the single largest "craft" brand in the country.

(Sam Adams , the largest craft brewer, sells more when all of its brands are counted together, and it brewed about 2.3 million barrels a beer last year. But contrast, MillerCoors, the creation of two global beer companies, Molson Coors Brewing and SABMiller, brews more than 67 million barrels of beer.)

But the Brewers Association defines a craft brewer as brewing less than six million barrels per year and being less than 25 percent owned or controlled by another economic interest. For Cardella, being considered "craft" is less about size than spirit.

"Coors has never tried to hide the fact Tenth and Blake or Blue Moon were part of MillerCoors," says Cardella. "There’s no doubt many consumers look at large brewers as corporations and not entrepreneurs. With Tenth and Blake, we're proud that we’re with MillerCoors."

With more than 1,700 breweries operating in the U.S., Cardella sees the beer business at an inflection point and Tenth and Blake uniquely positioned to help the craft boom continue.

"I’m a big believer. The craft business has a long future of good growth,” Cardella told CNBC. “But while there is a lot of room for growth, I think it will be more difficult for new players to keep coming in and for the existing players to fund their individual growth."

Tenth and Blake Beer Company
Source: Tenth and Blake
Tenth and Blake Beer Company

One solution Cardella sees is equity partnerships between Tenth and Blake and smaller regional breweries. For example, Tenth and Blake recently acquired a minority stake in Georgia-based Terrapin Beer. The less than 25 percent stake will allow Terrapin to remain independent, according to the Craft Brewers Association's standards but give Terrapin access to capital to expand their brewing capacity.

"If we can allow them to maintain who they are, but get them access to our resources we can help entrepreneurs with their growth," he says. "In order to grow, a lot of these brewers will need an infusion of capital to keep going forward."

The key in moving forward for Cardella is finding an alignment of style and goals rather than a one-size-fits-all approach.

"We’re taking it slow and it's not 'big guy' buying 'little guy,' but it's recognizing the little guy has limited resources, and enhancing our own growth while helping them to get where they want to go."

Questions? Comments? Email us at consumernation@cnbc.com.

Follow Tom Rotunno on Twitter @tomrotunno.

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