Import overview: duscussions with America's beer importers.
Structural change was accompanied by the now-familiar sluggishness plaguing the imported beer segment. At the close of 1990, however, importers benefited from a burst of purchasing in anticipation of the Federal Income Tax. This strong finish ehlped make 1990 a positive year, with an import sales increase of 1.4 percent.
This incremental growth was welcome after the 7.9-percent drop of 1989. Despite the climb, however, yesteryear's bright predictions for a 10-0percent market share are rarely heard today, and most import executives agree that the segment will hover around five percent of the market for the forseeable future.
Importers point to several factors conspiring against significant growth. First, they note the import segment is constrained by a recession-plagued economy, as consumers discretionary income is reduced. "The recession has affected us," points out John Barnett, president of Molson Breweries, U.S.A., "because that's an event that cuts across all economic strata."
In addition, there has been a continued erosion of on-premise consumption, as valid concerns about alcohol abuse are hyped by the media and neo-prohibitionist. Fewer Americans are drinking on-premise, a damaging trend for imported beer sales.
The segment has also taken hits from the large domestic brewers, as the giants continue to churn out new brands in every conceivable category. This proliferation has been coupled with strong marketing efforts. "The domestic brewers are getting very good at launching new products," observes John Lennon, vice president of marketing for Wisdom Importing Co., "and they are getting people to give these products a trial. In the past, imports were the only new and different brands on the market."
In light of these factors, importers are redoubling their efforts in the battle for share of mind and market. "Those imports that have a good distribution network and strong marketing will grow," John Barnett states, "and although changes in the exchange rate may occasionally force margins to shrink, importers can't turn marketing on and off in response. You don't build brands that way," he says, "you have to keep putting oil on the fire."
Although the salad days of the import segment amy be past, importers are pragmatic--and optimistic. "There is no doubt the market climate is changing and importers have to adapt to that," says Leo Begleiter, president of Associated Importers. "but I am convinced that imports will remain an important factor in the U.S. beer market."
On that note, importers are noting the increasing appeal of their brands for consumers moderating their consumption. The maxim "drink less, but better," seems to have taken hold among sizeable numbers of consumers, and importers are the chief benificiaries. "People are leaning towards drinking one or two beers with a meal," says George Saxon, president of Phoenix Importers, "and the appeal of imports to those drinkers will continue to grow."
Importers also note the enduring attraction of imported brands to many consumers, for a broad variety of reasons. "There will always be a market for specialty and niche brands," says Rich Vassos, marketing director for Labatt's U.S.A., "and many of these will continue to come from overseas. Consumers like choices and there are also questions of flavor and image."
In the pages that follow, executives from a cross-section of import companies discuss the portfolio changes and marketing strategies that are helping them meet the challenges of a rapidly evolving beer market.
Molson Breweries U.S.A.
With Century Importers under the Molson Breweries U.S.A. banner, the company holds a substantial share of the import segment. The company's portfolio is studded with strong brands, several of which are among the top 25 imported brands. Among these is Steinlager, a brand that is the fastest growing in the top tier.
According to president John Barnett, 1991 is shaping up well. "We're quite pleased with our volume through March," he says, "although April and May were a bit disappointing. I think these low months may reflect incentives that expired at the end of March, before other programs kicked in. We prefer to look at a rolling 12-month totaly anyway, rather than month by month. I'm making a guess," he says, "but I think at the end of the year we'll have done better than some of the competition."
Barnett noted high and low points in the Molson Breweries portfolio. "Most of our brands are doing well," he says, "but of course we've got some winners and some losers."
Barnett says several brands in the
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portfolio have resurged. "Fosters is doing extremely well," Barnett relates, "particularly through the territorial expansion of Foster's Draft. Fosters has always done well on-premise, and the draft gives it much broader distribution. Foster's Lager is also holding up quite well. Altogether," he concludes, "Fosters is giving us substantially added volume.
Barnett also noted the launch of a Molson non-alcoholic brew in Canada. "We launched an NAB there two weeks ago," he says, "and once we get a read on volume required in Canada, we intend to launch it here as well. The timing of its launch in the U.S. will be determined by our production capacity, but we're commited to launching the brand in the U.S., it's just a question of when."
Beyond its parochial concerns, Barnett says Molson is examining some of the broader issues that face the industry. "In our home market," he says, "and in markets where we are a major force, we have been very active in opposing neo-prohibitionism. In the U.S. market we are part of the import segment, which at the end of the day is still quite small. Nonetheless, we are conscious of the need to become pro-active.
"We have appointed a vice president of government and public affairs to help us keep an eye on legislation," Barnett says. "We want to get a pulse and see where the future is going."
Barnett reports that Molson has watched the formation of the Century Council with interest--although he indicates the company has its doubts. "We were approached bythe Century Council," Barnett notes, "but we want to get a better understanding of how they'll operate before we would consider signing on.
"We had some questions about the organization that have yet to be resolved," Barnett says. "For example, the Century Council apparently wants to be a voice for American brewers, and they don't have Anheuser-Busch, Miller and Coors aboard.
"In addition," he points out, "there are some issues where distillers and brewers are on opposite sides of the fence.
"At tax time," Barnett says, "distillers are prone to talking about absolute alcohol content, and 'a drink is a drink.' We don't believe that's constructive."
Barnett says the strong differentiation between beer and spirits remains a problem. "When you compare volume and mass with alcohol content," he observes, "it's clear why beer is considered the beverage of moderation. When spirits are served on-premise, there is an absence of control. It's very difficult to gauge what you're getting. With beer," he says, "People have a clearer perception of their limits. They can police themselves better."
According to Barnett, this aspect of beer should increase its appeal in coming years, and, by extension, bolster sales, domestic and imported alike. "The market will grow," he says, "and there will continue to be a large niche for imports. The domestic producers will not match the style of products and the imagery associated with them.
"Some of our competition are cutting staff and brand support," Barnett notes, "and contrast, we are adding people and putting more dollars into brand promotions. That's because we intend to grow our brands."
Wisdom Importing Co., Inc.
Wisdom Importing Co. has a broad portfolio that includes a mix of Mexican and European labels, several of which are among the top 25 imported brands. "We had a great year in 1990," says John Lennon, vice president of marketing, "but we are down somewhat this year, which seems to be true for the segment as a whole.
"We had a very good December," Lennon relates, "due to inventory build-up by wholesalers in anticipation of the excise tax. Since then, we have had some strong competition from domestics.
"We have a higher price premium than domestics," he says, "and many domestics are investing a lot on price promotion. Our feeling is that we don't want to promote heavily against price--we'd only have a problem next year." Lennon also notes the increasing diversity of packaging from domestics. "Domestic brands are heavily promoting 12- and 24-can suitcase packs," Lennon says, "and in the past we haven't had packaging to compete. However, now we're introducing suitcase packs of Tecate to remedy that."
Lennon also points to broader societal factors. "The economy has been fairly soft," he says, "and there have also been effects from the Persian Gulf. We rely heavily on sales in California, and there are so many military bases here that I think people's attention was focused strongly on the war. No one was interested in going out and drinking beer."
According to Lennon, however, trends are becoming more favorable. "May depletions are up," he says, "and we believed things are starting to turn around.
"Down the road," Lennon says, "there will be continued growth for the import segment, although it might be slower than in the past. There will always be a segment for imports," he says, "because people are willing to pay a premium for flavor, value and image."
Lennon also sees encouraging trends for the beer market at large. "The country has an aging population," he notes, "and there is increased vigilance about drunken driving. These trends should point to declining beer consumption--but that's not happening.
"On the contrary," Lennon continues, "consumption is going up. I think that what's happening is that wine and spirits drinkers are moving to beer as the beverage of moderation," he says, "and that will benefit all of us."
Japanese brands are rising in the ranks, and Sapporo U.S.A. has placed its flagship brand in the top 25. "We showed good performance in 1990," says Junichi Kitayama, vice president of Sapporo U.S.A., "and this year we will maintain our upward trend.
"The first quarter was disappointing," he says, "but other importers also experienced that. However, we have recovered strongly in April and May, and we are projecting a first half that will meet or exceed last year."
Kitayama reports that Sapporo has strong positioning on and off-premise. "We are not dependent on our on-premise trade," he says, "because we have developed a nice segment mix, not too much on-premise and not too much off. That is a stabilizing influence for us, since if one area is in decline, we build on other segments."
Sapporo has introduced a pair of characterful products into the U.S. market, the all-malt Yebisu and Sapporo Black Beer. "We see the specialty import category increasing," Kitayama says, "although just now the category is not too big. However, recent consuemr purchasing patterns show consumers looking for better products. For that reason," he says, "we believe the market is growing."
"As for dry beer, Kitayama is not as optimistic. "We do not feel that dry beer will play a significant role in the U.S. market," he say. "We think of dry beer as a fashion. In Japan two years ago, dry beer was 40 percent of the market, today it is 23 or 24 percent, and it is shrinking monthly. It may already be an old-fashioned item."
For the general future of imports in the U.S. market, Kitayama is cautiously confident. "The next three to five years will be very tough for imported brands," he says. "There will be competition from other imports and overlap with domestic brands, particularly since the domestic are
U.S. Imports of Malt Beverages 31Gal. % % of U.S. Gallons Barrels Growth Market 1968 24,006,105 774,390 12.14% 0.69% 1969 24,602,445 793,627 2.48% 0.68% 1970 27,581,738 889,733 12.11% 0.72% 1971 28,519,166 919,973 3.40% 0.72% 1972 28,824,755 929,831 1.07% 0.70% 1973 35,097,012 1,132,162 21.76% 0.81% 1974 42,957,641 1,385,730 22.40% 0.94% 1975 52,043,400 1,678,819 21.15% 1.12% 1976 73,949,562 2,385,470 42.09% 1.56% 1977 78,960,467 2,547,112 6.78% 1.60% 1978 107,276,400 3,460,529 35.86% 2.08% 1979 137,729,639 4,442,892 28.39% 2.57% 1980 141,588,869 4,567,383 2.80% 2.57% 1981 161,848,240 5,220,911 14.31% 2.87% 1982 178,987,634 5,754,440 10.22% 3.16% 1983 195,721,502 6,313,597 9.72% 3.43% 1984 223,301,653 7,203,279 14.09% 3.94% 1985 245,404,105 7,916,261 9.90% 4.32% 1986 273,978,070 8,838,002 11.64% 4.71% 1987 290,257,045 9,363,130 5.94% 5.00% 1988 291,338,001 9,398,000 0.37% 5.01% 1989 268,469,807 8,660,316 -7.85% 4.61% 1990 272,281,171 8,783,254 1.42% 4.50% Modern Brewery Age
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renovating their packaging and refining their marketing.
"Beer importers are in a survival game," he says, "and a company will need a good product portfolio, excellent distributor network, solid organization and strong marketing budget. Only very solid and marketing-oriented comapanies will survive in this market.
"Sapporo's target is to enter the top ten imported bvrand group within three or four years," Kitayama says, "and we think we are in good shape to do that."
Associated Importers, Inc.
"Last year was a tough year," says Leo Begleiter, president of Associated Importers, "and, although as a general trend imports slowed, we have adapted the way we do business to the new market.
"It was definitely a shakeout year," Begleiter continues, "and there's no doubt a number of importers were grievously hurt. All of us had to consider the advent of coming taxes, and adjust ourselves for 1991. Every importer had to rethink things in the changing market climate."
According Begleiter, 1991 may hold more of the same. "Certainly in the first few months of 1991 we've seen some shakeout," he says, " and it's been necessary to adjust prices to allow importers to support brands to the same extent. The dollar is strengthening as well, and that will be reflected in the marketing of imports."
Continued erosion of on-premise sales does not surprise Beleiter. "Based on the feed-back we're getting from the field," he says, "it looks like things are continuing to slow down on-premise. It's happening for familiar reasons--people are concerned about drinking on-premise. But," he says, "if anything, wine and spirits are being hurt more than beer."
One response from Associated is a strong entry into the NAB category. "We've introduced St. Pauli Non-Alcoholic Brew," Begleiter says. "It has tested very well, so we decided the time was right to roll it out. I think the fact that we made our NAB a line extension of our St. Pauli brand indicates how strongly we feel about this category.
"It is not fully evident that retailers are aware that this might be an important trend," Begleiter continues, "but I think it will become clear to them as the category continues to grow. There will be many more entries," he says, "both domestic and imported."
Despite the strength of the domestic NABs, Begleiter is confident. "I'm not too worried about the important share of the category," he says, "because every time there's been a taste test the
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imported NABs generally rate at the top. There are always consumers with a more discerning palate.
"Our basic business will remain strong for the same reasons," Begleiter concludes, "imports are in this market to stay."
Warsteiner Import Co.
"Last year was great," says Diane Fall, president of Warsteiner Import Co., "and we saw a 56-percent increase in our draft business.
"I think I can attribute part of that to being in the market for eight years now. At the same time," Fall says, "the fact that we are a relative newcomer gives us something of an advantage. As older brands are declining, people are looking for something new. And people like the taste of our beer.
"I think our on-premise success is also a result of the way we present our product," Fall says. "We present our beer as a premium pilsener, and that's something people are looking for. There's a lot of the market that we haven't touched yet.
"I think that the strongest threat that is facing us is neo-prohibitionism," Fall says. "There is a strong faction out there trying to control everything--what people drink and eat, how people live. That is a big threat to everyong in this industry.
Despite that, Fall is optimistic about market prospects. "Although there is just a certain number of people who will continue to be import drinkers," she says, "growth of the segment will continue. Competition will always make things difficult, but we are confident. We have been putting all our efforts on our one beer, and it's paying off."
Labatt's has broadened its American portfolio in recent years to include brands from Europe and one domestic brand. According to Rich Vassos, vice president-marketing for Labatt's U.S.A., 1990 was a strong year for the company. "Labatt's was up six percent for the calendar year," he says, "and we are up through May 1991 as well."
Vassos believes that importers have to strengthen marketing efforts to hold and expand market share. "I have felt that importers have been losing the marketing and advertising battle," Vassos says, "and although there has been some improvement of late, I still think we are too prone to compete in the price category. There are just too many import price promotions.
"Importers have put more dollars behind marketing and consumer promotions," Vassos asserts, "I think we're all guilty of alloting too little money to advertising."
Vassos reports that Labatt's will put more money into some of its flagship brands. "We are switching to new graphics on our entire line," he says. "It's costing us a lot of money, but we think it will be worthwhile in image terms. We want to more away from pricing by upgrading the package.
"Labatt's has always performed very well off-premise," Vassos says, "and we've even seen some draft increase--up 15 percent. That is one of the things that has helped us, and I think the same thing has helped the other Canadian drafts. People are trading down in terms of pricing, and Canadian draft is a natural choice."
In another response to the changing import climate, Vassos notes the formation of a new arm of Labatt's U.S.A. "In October we formed a specialty import division," he says, "intended to give attention to our brands that are under the 500,000-case level. We felt that we needed an incubator-type company in which everyone would concentrate on a limited agenda. We have separate marketing and sales people for our specialty import division," he notes, "and they focus exclusively on their own brands."
At the moment, Vassas says, the Moretti and Clausthaler brands are being handled by the division. "It's worked very well," he remarks, "and we would consider adding to the specialty portfolio if the right brand came along."
Phoenix Importers is a small specialty import house handling products as diverse as English old ale and Belgian Frambozenbier. "Phoenix has shown gains," reports company president George Saxon, "and considering the state of the economy, we are pleased by that.
"I think that as speciatly importers we were less affected by broader trends," Saxon continues, "because the category we're in is fairly recession proof. However, the market at large seems flat."
Saxon notes the importance of the wholesaler connection. "We're working very closely with our distributors," he says, "and where we have the accessibility we're trying to expand their beer selections.
"Judging from the reaction we're getting from consumers," Saxon says, "I think there continues to be a market for the kind of products we're offering."
Saxon notes that the company has sponsored a number of beer dinners recently, in which quality beers are matched with complimentary foods. "We recently had a dinner that focused on the beers of Belgium," he reports, "and it was fantastic. We got a good mix of people who knew beer, together with people just starting to explore the possibilities.
"When we got into the specialty import business, there weren't too many people doing it," Saxon recalls, "but we saw a good opportunity there for beers with a different taste and characteristics.
"Today the American beer market is pretty diverse," he continues, "and consumers are willing to pay a little more. We've got good distribution patterns in every market we're in. Instead of drinking six ordinary beers, people will drink two or three more expensive."
Saxon believes that the specialty import niche may well expand. "If our sales are any indication," he says, "more and more people are interested in learning about beer. MOre bars and restaurants are expanding their beer lists. Slowly but surely, people are rediscovering the merits of good beer."
Merchant Du Vin
Seattle-based Merchant Du Vin is a specialty import house that concentrates on gourmet beer. Company president Charles Finkel reports that this category seems more than secure. "We chalked up a record year in 1990," he says, "and we have great expectations for 1991.
"We have a fundamentally different philosophy than other import companies," Finkel explains, "because we have based our business on quality rather than competitiveness. That insulates us from the rest of the segment."
Finkel says his company is benefiting from the rising consumer consciousness about beer. "There is a growing demand for specialty imports," he continues. "As an example, our holiday offering last year was Samuel Smith's Winter Warmer. Within a month of its arrival, we were completely sold out. With minimal marketing we were able to sell everything we had, and people were calling for more.
"There's a finite amount of four-dollar bottles of beer that can be sold," Finkel observes, "but it's far more volume than we have to sell. We see tremendous growth in the highest quality products, as more distinctive beers win favor from consumers."
According to Finkel, many distributors are somewhat behind the curve on specialty products. "I'm afraid that wholesale distributors have been slow to recognize this trend," Finkel says. "I think they've been too conditioned to view beer as a mass-market commodity.
"I think that viewing beer as a mass-market item is actually dangerous," Finkel asserts, "particularly when the industry is under attack. Brewing has thousands of years of tradition behind it, and it's been viewed very favorably by people down through the ages. When we reduce beer to a mass-market product, we lose that."
According to Finkel, a more sophisticated view of beer will benefit the industry as a whole. "When beer is viewed as a traditional food product and as something that can enhance the quality of life," he says, "it changes the perspective on beer entirely."
Finkel says this kind of sensibility is on the rise. "We're working with restaurants to elevate the staus of beer," he says, "working to show them how to present beer properly, and emphasizing the benefits of offering consumers a balance of products. Too many restaurants will have a half-dozen mass-market lagers on tap," he says. "I,m trying to convince people to go from known brands to a point where every fine restaurant has a wheat or a stout or a porter."
Finkel says the market may be headed that way. "I think that the beer market will parallel the wine market," he says. "There was a time when there were no chardonnays available, because there was no consumer awareness. As more and more wineries opened, that has changed significantly. Today I can walk into Safeway and there are fifty chardonnays on the shelves."
According to Finkel, the trend towards more characterful beer can exist side-by-side with the trend towards lighter products. "I believe that two trends can occur simultaneously," he says. "As an exa mple, we are seeing a growing interest in fine dining, making food a part of your life--but fast food restaurants continue to open all over the country. By the same token, the trend towards all-malt beer can accompany a trend towards innocuous light and dry beers."
Finkel says specialty beers are a growth market. "This category will be one to be reckoned with," he says, "and a few years down the line people will be drinking better beers. I see it all over the country, in Illinois, Indiana, Arizona, wherever.
"The trend is here to stay," he says, "and it's going to pull the imported beer business right alon with it."
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|Publication:||Modern Brewery Age|
|Date:||Jul 15, 1991|
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