Beer in transition: beer's slump may be reversed with savvy image marketing and innovative products.
Everyone's talking about a recent Gallup poll that asked Americans for their favorite drink. For the first time, more respondents answered, "wine" than "beer"--39 percent vs. 36 percent. The Gallup people said that it was a statistical dead heat, with the difference being inside their margin of error--so beer beat the spread--but there's no doubt which side of the dead heat the beer industry would rather be on.
What happened? There's some Sideways factor, of course. Wine had the uncredited leading role in this Oscar-nominated film that set pinot noir sales on fire and put wine right in front of millions of people--largely legal drinking age people--across the country. Wine looked good even when the people drinking it didn't always look their best, and it was on everyone's minds. Did you get a beer after the movie? No, you did not; you got a bottle of wine and thought about splitting it with Virginia Madsen or Thomas Haden Church.
While wine's image was burnished by long loving shots of vineyards and big glasses of anything but merlot, big beer's ad campaigns continued to churn out more images that made beer drinkers look like a pack of sex-crazed morons. Talking animals, flatulent animals, and plenty of gyrating near-naked bodies: beer ads were all about the name of the product and not about the beer, a trend that had been going on for years. Over these years, wine overcame beer's lead in the hearts and minds of American drinkers. Beer's image has lost its way, it has become disassociated from its roots, so no wonder it has wilted.
Is it just a blip, or does beer really have a serious image problem?
BLIP, SLUMP OR COLLAPSE?
"I think it's a blip," says Bump Williams, executive vice president with Information Resources, Inc. (IRI), "but it's a dangerous blip we are in. Momentum is a very fickle thing. It is imperative for brewers and distributors to work each and every day with their retail partners reinforcing the size of beer, the turns of the category, the margins, the investment in the future, their innovation, their advertising, the tradition and heritage of beer. If they don't get on the same page, then the momentum that wine and spirits have today will continue."
The strange thing about the Gallup poll's findings is that while 39 percent of the people said that wine was their favorite drink, beer still outsells wine by 6 to 1. So either the Gallup poll is seriously flawed in its sampling, the American people have a deep capacity for self-delusion, or there are a lot of people buying small amounts of wine while smaller numbers of people buy a whole lot of beer.
Williams points out the nub of the findings for the brewing industry and its associated retailers. "This is huge P.R. for the wine category and I think they are doing a fantastic job of marketing this success to their consumers and to their retailer partners," he said. "They continue to get positive press and make the most of it. There isn't one winery in the country that hasn't seen this news. But I doubt if retailers have been told that beer outsells wine six to one yet, and that is an issue on my mind."
Sales engines are revving up at the major brewers in reaction to the poll. Anheuser-Busch has reacted in Pattonesque style, emulating the general's dictum that a good plan violently executed now is better than a perfect plan executed next week. New ideas and products have issued from St. Louis in rapid succession: two stimulant-infused "energy beers" ([Be.sup.2], Tilt), a new light beer (Budweiser Select), aluminum bottles, and perhaps the oddest idea to come from a brewery since, well, since stimulant-infused energy beers, an assortment of 24 "beer-tails," recipes for cocktails based on Anheuser-Busch beers, with names like the Bud Light Orangutan, Hamptons Iced Tea, and the BEatch. Beer cocktails are an old idea, of course, but never have they been presented like this, in the true sense of high cocktail fashion.
"Anheuser-Busch has been an innovator for more than 100 years and we continue to deliver exciting new products to consumers that raise the sophistication of beer," said Don Meyer, director of Budweiser Select marketing. "We are meeting consumers' demands for variety, while providing a beer that will immediately be recognized as high quality because it's part of the Budweiser brand family."
Anheuser-Busch even got into the naturally flavored beer game recently on the launch of Jack's Pumpkin Spice Ale at the Great American Beer Festival. The first in a series of four seasonal draughts the brewer plans to introduce, Jack's Pumpkin Spice Ale is brewed with a pumpkin variety known as "Golden Delicious" from the Stahlbush Farm in Oregon, with a blend of spices including cinnamon, ginger, nutmeg and cloves. That all-malt beer will be available until mid-December, with a winter brew to follow in January, a spring brew in April and a summer brew in July.
There is no doubt that the Anheuser-Busch nameplate will give these products a guaranteed entry to the market. But do they have any staying power? Two years ago, Michelob Ultra looked like a new powerhouse, a category builder. Now, in the wake of the Atkins collapse, it looks like a poster child for beer brands' increasingly rapid boom/bust cycle, and retail analysts talk about an "Ultra gap" where the brand's sagging sales (along with all the other low-carb beers) have left a hole in light beer growth. Are there innovations with legs out there?
Williams sees strength in numbers. "A-B has some of the strongest distributors in the country," he points out, "and they are the masters at getting products on the shelf, getting displays and feature support from the retailers. A-B also has one of the strongest national account sales teams in place with great account penetration, strong industry relationships and thought leadership from their national retail sales team. If the marketing is right, and the products taste good and are of great quality like other A-B products, then there is plenty of traction to be had."
Budweiser Select represents a trend that will probably continue: an expansion of high-end light beers. Light beer is the biggest category, and it continues to grow. It represents the choices made by an increasingly health-conscious consumer to watch calories and alcohol intake without miserly sipping at an increasingly warm single beer. There is plenty of room for growth in the segment, and you'll see it. Miller Lite continues on its reborn rocket-ride; the brand was up 10 percent in 2004 and continued strong in 2005.
BEYOND THE LIGHT
But American consumers, bless them, want more than "just light beer." They want to pay more for their drinks, because they want to know they're drinking something better. That works well for the brewers of light beers, because they want to sell them light beer at a higher price. Light beer until recently has been locked into a price-point controlled by premium beer. "The biggest problem [for the bar owner] is light beer," said Boston Beer's founder and brewer, Jim Koch, "because it's almost all sold at domestic prices. It's just not as profitable pouring domestic light beer as it is pouring Sam Adams or an import. And trade-up is common with regular strength beer, but not with light beer."
Beers like Koch's Sam Adams Light, Amstel Light, and Corona Light have been trying to break open a new category of up-market light beers, but so far they have opened mostly niches for themselves.
They're getting plenty of help now. Beck's Premier Light has landed with the power of the world's biggest brewer, InBev, behind it. Budweiser Select is looking to establish itself, and test marketing is happening with a beer that consumers and retailers had always expected but have never seen: Heineken Light. If you thought Amstel Light was Heineken Light, well, you're right, it was. What the introduction of Heineken Light will do to Amstel is anyone's guess right now, it's one of the favorite topics of conversation among analysts.
It's open to debate as to whether Heineken will be able to spare enough attention from the tumultuous industry consolidation in Europe to properly launch Heineken Light in America. European breweries are desperately trying to either find the perfect acquisition targets or find the right buyer in an attempt to stay big enough to compete. The number of independent brewers in Europe is plummeting as brewing groups large and small shop like mad. The effect on the U.S. market will come when the new giants look west for high-margin markets for their sea of taste-alike pilsner. Expect more imports to come ashore over the next five years.
Speaking of imports, it looks like Corona's got its groove back, and other brands are starting to pick up steam as well, heralding a likely return to the go-go days of growth only five years ago. Newcastle Brown Ale continues to rack up some serious growth, and SAB/Miller's championing of its international flagship Pilsner Urquell is bearing fruit.
InBev is increasing its presence with Stella Artois, and plans a major U.S. push of its new Brazilian acquisition, Brahma, with a new curvy bottle (that's ridiculously fun to hold) and a new word: "Ginga." Ginga (say "jinga") is Brazil-speak for "effortless flair ... an optimistic and creative approach to life," and that is the embodiment of Brahma, says InBev. Brent Willis, InBev's chief commercial officer, says, "Consumers around the world may not be waiting for another beer, but we know that they all need a bit of Ginga!"
Meanwhile, flavored malt beverages (FMB), the Smirnoff Ices and Mike's Hard Lemonades, have become the whipping boys of the anti-alcohol crowd, even as the segment churns through new flavors and packages in an attempt to regain the strength it once showed.
Thanks to questionable formulation practices in the earliest days of these products, FMBs are vulnerable to anti-alcohol attempts to have them taxed as spirits, a move that would increase prices sharply. Making money in this segment will require careful management and a quick eye on micro-trends.
Beer has plenty of strength, and has not yet begun to fight. Wine and spirits are doing great things to sell themselves to consumers, and beer needs to get into that mode and sell on their products' merits, not baseless gags and giggles. Part of that will have to come from within, a change in beer's culture: Scotch whisky people don't talk about "moving units" of "the liquid"; they talk about "selling cases of whisky." SAB/Miller's U.S. head Norman Adami is bringing that kind of beer-centered culture back to Miller, and it shows in their sales figures, and in the look of their marketing.
"The big question is marketing," Williams stresses. "Will beer marketing have the legs to get their message across to the aging baby boomers who are drinking a lot of wine instead of beer, to the young baby boomers (40-49) who represent the single largest demographic group of beer drinkers, the Gen X (27-40) who need a different message, and the new LDA (legal drinking age) Echo Boomers (21-27) who need an entirely new and 'risky' message. The echo boomers will contribute 40 million new LDA shoppers into the industry over the next 10 years, so these folks are the farm team of future beer drinkers. Creative advertising and unique messages can get them on board."
And if beer's competition is wine, beer can learn from wine. Forty years ago, wine was mired in a swamp of low-margin jug sales. Drunks were called "winos." Now wine cleaned up, with a freshly shaved face and a fashionable suit of casual clothes, and is headed uptown fueled by constant improvement, innovation, better margins, and real variety. Beer is maybe the face-painted guy screaming at the football game. It's time to take a look at where wine went and think about a new image. In twenty years, beer could be looking at a whole new ball game ... while sitting comfortably in a skybox.
Lew Bryson is managing editor of Malt Advocate and author of numerous books on beer and American brewing.
RELATED ARTICLE: Craft Brewers Show Growth
America's craft brewers have succeeded by being pretty damned certain that consumers across the country were indeed waiting for another beer, and they proved it by becoming the hottest segment of the alcohol beverage market in 2004. The category grew at over 7 percent in 2004, and continued the same pace in the first half of 2005, according to figures released by the Brewers Association. "Many craft brewers reported shipments at an all time high this summer in addition to strong first-half results," said Paul Gatza, director of the Brewers Association.
"Craft brewers have developed consistent quality," Gatza explained, "and craft beers are seen as a local product with lots of flavor at a fair price. People are trading up in price and buying a beer that is special over quantity. One interesting thing about the craft beer consumer is the sense of brand exploration rather than purchasing the same brand over and over again. Craft beer consumers get [it] that different beers fit different occasions."
How big will craft beers have to be to become a significant part of the market? "Craft beers are already significant," says Bump Williams, executive vice president with Information Resources, Inc. (IRI). "Retailers think so, too. We are seeing new craft beers expanding into new markets, trying out TV advertising, expanding distribution, and getting more and more of retailer and distributor share of mind. There is plenty of room to grow and consumers do not mind paying full price."
Is Samuel Adams too big to be craft? Is Yuengling too big to grow? Not likely. Boston Beer continues to innovate with strong-selling high-priced bottles like the Chocolate Bock and Utopias, and their changing seasonal line-up. Yuengling has nothing but opportunity ahead of it as they continue to expand into new territory. They are one of the strongest small brewery success stories in brewing history, and with strong production support finally in place, they are poised for explosive growth with their combination of unbeatable heritage as America's oldest brewery, and darker-fuller-tastier--but not too much--appeal. If they can get sales support for their Light Lager, the sky's the limit.--LB
|Printer friendly Cite/link Email Feedback|
|Date:||Nov 1, 2005|
|Previous Article:||Great American Beer Festival gets record turnout.|
|Next Article:||Tapas on top: the small-plate revolution started with stylish, tasty tapas that are right at home at the bar.|