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Beer Companies Looking Beyond Beer for Growth

It appears the fastest way to growth for many beer companies is to look beyond beer.

The latest example came Tuesday when Molson Coors Brewing announced it is launching Coors Light Iced Tea in Canada next month, with a possible U.S rollout at a later date. The drink is being billed as “Coors Light with a refreshing taste of Iced Tea” and will be 4 percent alcohol.

“Coors Light Iced Tea addresses some of the occasions that currently beer doesn't go into. It's a great proposition” Molson Coors CEO Peter Swinburn told CNBC Wednesday. “We've got the world's most refreshing alcoholic beer sort of meeting up with the most refreshing nonalcoholic drink in the world. Those two things go really well together.”

Molson executives say the move is designed to make beer more attractive to people who have moved on to wine or cocktails. According to the Distilled Spirits Council of the United States, the volume of spirits sold in the U.S. rose 2.7 percent last year while beer sales saw an overall decline of one percent, the third consecutive yearly decline.

“The reality is although the beer market's been challenged in some of our markets, the overall alcohol market is actually growing. Consumers are actually finding occasions where beer doesn't satisfy them” said Swinburn. “We need to understand what those occasions are and develop beers that actually satisfy those occasions. By and large, beer is still very much the alcohol drink of choice.”

Molson Coors is not alone in turning to other products to spur growth. According to Ad Age, Anheuser Busch Inbev will also be entering the hard tea category with an extension of its Michelob Ultra line, called Michelob Ultra 19th Hole Light Tea and Lemonade. Anheuser Busch is also expected to introduce Michelob Ultra Light Cider in May.

Meanwhile, Miller Coors, the U.S. joint venture of Molson Coors and SABMiller, announced in February its craft division, Tenth and Blake, was buying Minneapolis-based Crispin Cider. Both moves are looking to cash in on growth in the cider category, sales of which grew 26 percent in 2011.

Beyond consumers turning away from beer, another problem for the larger brewers is that when people are turning to beer they are turning away from the mass-produced products and turning to craft. According to the latest statistics from the Craft Brewer Association, sales of craft beer were up 15 percent in the first half of 2011.

While craft brewers ride that momentum, even the biggest craft brewer, Boston Beer, has found success in branching beyond beer. Boston Beer’s Twisted Tea brand was a key driver of company growth in 2011. Now the company is looking to capitalize on that momentum, completing a nationwide rollout of the brand by the end of this year by bringing Twisted Tea to market in 15 new states, while improving distribution in established markets. Boston Beer said it will also take its Angry Orchard Cider brand nationwide in 2012.

But unlike the bigger brewers, the moves into other alcoholic beverages isn’t designed to make up for sagging sales of their flagship beers. To the contrary, Boston Beer said both moves are a means of enhancing and building its growing portfolio of beers.

“The gross profits from these brands have helped us increase our investment in Samuel Adams and have built a stronger Boston Beer brand portfolio with wholesalers and retailers” said Boston Beer President and CEO Martin Roper. “We will continue to look for complementary opportunities to leverage our capabilities, provided that they do not distract us from our primary focus on our Samuel Adams brand."

Questions? Comments? Email us at consumernation@cnbc.com. Follow Tom Rotunno on Twitter @tomrotunno.

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