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Import overview.

Long before the days of the clipper ships, imported beer was a vital part of the American experience. The first English colonists were well-provisioned with beer brewed in far-off England, and this first for the taste of the Old World has been a hallmark of the American beer tradition ever since.

In the last century, bottles of English ale and Czechoslovakian pilsner made their way to these shores in the holds of windjammers, and served to inspire the brewers of their day. And, just as the beers of Budweis captured the imagination of Adolphus Busch, imports continue to evoke the world's brewing traditions for today's American consumers.

Although competitive pressures and unfavorable economic trends have battled the segment, there is no doubt that centuries of tradition will maintain a place for imported beer on American bars and tables for generations to come.

The imports suffered another difficult year in 1991, a repeat performance of a trend that has become familiar in recent years. "Since the mid-'80s, import trends have been worsening," Phil Katz, interim president of the Beer Institute, recently noted, "with the exception of 1990, which may be related to the excise tax change.

"Last year," Katz continued, "the key beer exporting countries to the U.S. had this type of record. Canada was off one percent, Mexico and the Netherlands around 14 percent, and Germany over 20."

In 1991, at least, importers could clearly identify the factors that impacted their business - and these factors were numerous. For starters, the import segment was exposed to the same trials and tribulations that affected the domestic beer market, including the Federal Excise Tax (F.E.T) increase, the Gulf War and the ongoing recession. "The F.E.T. was a bad way to start the year," says Tom McNichols, Barton Beers vice president of marketing, "and the recession has also taken a bite out of the import market, by keeping on-premise sales down."

Price promotions - by domestic brewers and importers alike - were another villain cited by many of the importers. "There is heavy discounting in the market," observes Klaus Von Mueller of the Holsten Import Co., "and it's a trend we don't like. Eventually, those practices could damage the reputation of imports."

Importers also faced a renewed onslaught by confident domestic players. "Speaking as someone who worked with Miller for 10 years," says Paul Block, Guinness Import Co. vice president of marketing, "I can't recall domestics being this active at any time in the past. They have flooded the market with intros, and not only at the low end. They are getting into the high end as well."

The high end of the market also hosts America's microbrewers, now over 200 strong. The microbrewers are making themselves felt, both negatively and positively. "Micros are clearly a competitive threat," says John Barnett, president of Molson Breweries U.S.A., "but the interest and variety they bring to the market is good for everyone in the beer business. Importers can counter the microbreweries by offering different styles of beer."

That is the strategy followed by Charles Finkel of specialty importer Merchant Du Vin. In his view, it all boils down to quality. "Here in the Pacific Northwest," he says, "we often hear that micros are brewing the |best beer in the world.' Although they are brewing some very good beer, you can't compare breweries that are a few years old with breweries that have been producing beer for centuries.

"Although the micros are catching up," he says, "imported beer still provides a greater variety of tastes than domestics."

As if there weren't enough domestic factors affecting the imported beer segment, a series of General Agreement on Tariffs and Trade complaints rocked the U.S.-Canadian beer trade.

The tiff began with a complaint by Stroh and Heileman about Canadian beer distribution policies, and soon escalated as Canada turned its own GATT guns on the American beer industry.

Although some have feared that GATT could drastically alter the North American beer industry landscape, the consensus seems to be that these problems will be resolved to the benefit of both parties. "In my judgement," says Rich Fogarty, president of Labatt's U.S.A., "this is a temporary situation. and I think a solution will be arrived at. The U.S. and Canada each want a level playing field.

Facing the future

In light of the serious problems facing the import segment, executives could be forgiven for looking ahead with some trepidation. That, however, is not the case, and importers cite improving '92 sales to back up their optimism. "On a depletion basis," says Junichi Kitayama, vice president of Sapporo U.S.A., "performance has been improving since March, month by month. The industry seems to be getting its confidence back, and I believe we are seeing signs of recovery."

Paul Block of Guinness concurs, but with some reservation. "I don't foresee further big drops for the imports," he says, "but I don't see large gains either. Importers will have to fight hard to maintain their share of the consumer menu and marketplace."

To get an impression of importer experiences in the marketplace, Modern Brewery Age recently spoke with executives from import houses large and small alike.

Poul Block

Guinness Import Co.

Paul Block is the vice president of marketing for the Guinness Import Co. Backed by the global resources of Guinness PLC, the Guinness Import Co. has built a formidable portfolio of brands, and holds a 13.9 percent share of the import market.

Despite its strong position, however, Guinness endured a tough year. "The combination of the excise tax, recession and the Gulf war made it tough for everyone," Block says. "On top of that, there was a lot of domestic beer excitement. The imports are now getting tremendous competition from domestics."

Block also points to dissension in importer ranks about price promoting. "Imports are really becoming more price oriented," he says, "and less focused on value. That emphasis is continuing, and we don't see it as constructive.

"It won't help the imports," Block says, "and we see it as a short-term reaction to a very competitive environment. There are capital pressures on a lot of importers, and they're looking for short-term gain.

"We won't follow suit," Block states, "because we feel it is counter-productive for the import segment as a whole. Our focus is on adding value, and we won't reduce price to add value. "

According to Block, Guinness is adding value in two ways. "First, we are increasing our presence in the marketplace," Block says, "with promotion activity, through work with wholesalers, and turning those facings on the shelf.

"The second way," he continues, "is to add value by uniquely positioning products. Every one is positioned as a premium imported malt beverage, and all of them have a unique identity.

According to Block, the beer market is moving in more than one direction. "There is a dichotomy in the market," he says, "on the one hand, there is a skew towards lighter and popular-priced beers, and on the other, towards more expensive |discerning' beers."

The Guinness Import Co. has several brands that are competing in that higher end of the market, head to head with microbrewers. "Bass Ale has been phenomenol," Block says, "up 20 percent year-to-date. Every element has been working; the packaging, advertising and the price point."

In some areas, Block notes, Bass has gone head-to-head with the microbrewers. "I've got to give the micros credit," he says, "they are doing very well. But they can't compete with us in terms of history and heritage, and they don't have our consistent product quality. That's where we beat them."

Guinness Import Co. has also taken advantage of Czechoslovakia's "Velvet Revolution" to build its relationship with the Pilsener Urquell brewery. Guinness will soon introduce a larger bottle for the product in the U.S., and begin the importation of draught Pilsener Urquell. "We're doing very well with Pilsener Urquell," he says, "and we're seeing strong growth, although we're not where we want to be. The brand is up 20 percent, although that's from a very small base."

According to Block, Guinness will continue to build equity in its specialty brands. "We are seeking a niche as imported |market makers'," Block says. "We have a premium import beer position, and we're going to solidify that. This segment is wide open, and we are going to make it our own. We've got the brands and the equity to do it."

Despite his optimism, Block foresees a beer market that will remain relatively static in the near future. "The industry will remain highly competitive over the next five years," he says, "and there will be continued consolidation at all levels, importer, distributor and retailer. It will be slowing down, but it will continue. I see import share fluctuating between four and five percent."

Tom McNichols

Barton Beers

Barton Beers handles importation of Corona Extra into 25 Western states. The brand's meteoric rise has been followed by a long decline, although it does remain strong in some markets.

According to Tom McNichols, vice president of marketing for Barton Beers, the brand is settling down. "The indications look favorable," he says. "and I think we'll be levelling out. From time to time, we remind our wholesalers, that, although we've seen volume declines, Corona is still the number-one import in much of the West. It might not be the box it once was, but it's still a strong brand."

McNichols says that domestic price promotions are making life difficult. "We saw some pretty aggressive domestic price promotions last year," he says, "and that put a hurt on all the imports, Corona included.

"Pricing that competitive makes it very tough for us," McNichols says. "When the consumer can get a six-pack of Coors for a couple of bucks, he'll have to be a pretty loyal Corona drinker to pay $5.99 for a six-pack."

In response, McNichols reports that some importers turned to discounting. "Some were heavily discounting," he says, "and some of the lesser brands did some heavy-duty refunding, although that's not necessarily new.

"We wanted to avoid gettting into that," McNichols continues, "so we didn't go any deeper than we had originally planned. We think that discounting is a mistake when you are selling a premium product with a premium image," he continues. "And, although you can slash price and move a few boxes in the short term, it will come back to haunt you."

Although Barton has avoided deep discounting, McNichols says, the company has tried to keep prices in line. "We have been absorbing the increased California excise tax," he says, "and that has helped us narrow the gap between us and the domestics. We also refrained from taking a price increase in January, although many other companies, including some of the domestics, took one."

For the future, McNichols sees more of the same. "We will just work to maintain our image," he says, "and keep our price point as competitive as we can. We hope that the discounting by the domestics won't be as aggressive as it was last summer."

According to McNichols, despite competive pressures, imports bring a lot to the American beer market. "Although no import can compete with domestics when the consumer is picking up three or four cases for a barbecue," he says, "imports are distinct products that are perfect for certain situations. When consumers are having good friends over, or dining in a Mexican restaurant, you still can't beat an import. "

Junichi Kitayama

Sapporo U.S.A.

Junichi Kitayama is vice president of Sapporo U.S.A., a growing player in the U.S. market. Kitayama reports that Sapporo took an aggressive approach to counteract negative market trends during 1991. "Last year some of the major importers were seeing double-digit declines," he says, "and to keep our position we pitched several new products, including Yebisu and Ginjikomi. We also developed several new packages and line extensions."

According to Kitayama, Sapporo has branched out well beyond Japanese restaurant accounts. "We are developing a strong presence off-premise in Asian ethnic markets," he says.

To expand its off-premise market into other areas, Kitayama says the company has developed a unique package, an aluminum two-liter "minikeg". "It's a very distinctive package," he says, "and we think it is the perfect package for summer picnics and trips to the beach."

Kitayama points out that the "minikeg" is designed to be environmentally friendly. "Unlike similar packages," he says, "ours is 100 percent recyclable. That makes sense in light of emerging environmental issues."

Kitayama also says that Sapporo is going after on-premise bar accounts. "We are in-loading in bars that are popular with people in their 20s," he says. "you won't find Sapporo in any Irish bars, but in those places that have a more international feel, we think Sapporo can do well."

Kitayama says that Sapporo carefully gauges its price in the marketplace. "Some importers raised their price after the enactment of the F.E.T.," he says, "and some price points went too high. Those companies aren't reaching out for former consumers."

Kitayama says that Sapporo is keeping a weather eye on pricing trends. "In each area of the U.S.," he says, "we check pricing county by county. We check domestic and import prices, and we make a decision on our target price to the consumer."

According to Kitayama, Sapporo is working to win over consumers with a combination of reasonable price and high quality. "My philosophy is that there is no border for good taste," he says, "and American consumers are looking for products with a more international flavor."

For the future, Kitayama says Sapporo will continue to emphasize distribution and product development, and he envisions Sapporo as one of the top import brands down the line. "I think we are in a good position," he says. "I am very optimistic."

Klaus Von Mueller

Holsten Import Corp.

The Holsten Import Corp., the German importing arm of one of Germany's largest breweries, has been active in recent months. The company has widened its American portfolio with two new brands, and is working to promote them in selected markets.

So far, Klaus Von Mueller reports, 1992 has been a good year. "The first three months of the year have been excellent," he says, "and we've had good response on our two new packages. Consumer confidence in the economy seems to be increasing, and that should benefit the market."

According to Von Mueller, confident, curious customers will give the industry a boost. "People are still looking for specialty beers," he says. "The number of microbreweries is still increasing, and we can tell from our own experience that people are looking for new beers and packages. "

As a relatively small importer, however, Holsten has to work hard for its slice of the market. "We're getting a lot of shelf space," he says, "but there is a lack of awareness about Holsten. We're still not known on the level we'd like to be."

To get noticed, Holsten has begun some small-scale sponsorships. "For a brand that is not supported with a lot of advertising," he says, "sponsorships are a way to approach the market."

Since the newly-introduced Holsten Pils is the largest selling lager in Great Britain, Holsten has targeted emigres from the U.K. in New York and Boston. "We are sponsoring darts competitions in bars," he says, "and many people in those areas know the brand and the package."

In addition to the darts competitions, Holsten sponsors a Rugby team in California and a lacrosse team in Boston, and is kicking off a rebate program. "We do a lot of small things," he says, "but what we need on top of that is classical media advertising. In the current market, the brands just need a little push.

Charles Finkel

Merchant Du Vin

Merchant Du Vin of Seattle, WA, is a specialty importer, with a broad portfolio heavy in world classic beers from small European breweries. Of late, the company has been working to promote on-premise awareness with "beer lists."

"We want to put beer in a realm it hasn't been in since Prohibition," says company president Charles Finkel. "We want to emphasize that it is a quality-crafted food product. It is accepted now that a good retailer will have a good wine list, but the same retailers will often carry just four or five lager beers that taste very similar.

"There has been a proliferation of new brands and beer styles in the market," Finkel says, "and the essence of what we're trying to do is give retailers some direction in regard to the way these beers should be merchandised. We want to take beer out of the era when it was considered a generic product."

According to Finkel, a basic question should be taste. "When a retailer draws up a wine list," he says, "he considers wine by style and variety. He doesn't just offer red wine. He'll offer reds with different characteristics, and an equal number of whites.

"Restaurants didn't develop wine lists because God said, |Let there be wine lists'," Finkel says, "the practice evolved with wider availability of wine and the gradual education of consumers, restauranteurs and wholesalers."

Finkel believes that beer, like wine, should be marketed according to style. "I believe that you can sell beer at a more profitable level if you offer a beer list based on style," he says. "Each account should have a proper selection of beer, including top- and bottom-fermented styles."

On Finkel's beer lists, ales and lagers are listed with brief explanations of each style. "In the ale category," he says, "a restaurant might offer a pale ale, a porter and a stout. In the lager category, there would be a pilsener, but also a dark, and a bock or double-bock."

According to Finkel, this approach provides myriad benefits. "When a consumer goes into a restaurant and they see more care taken with presenting beer," Finkel says, "it makes sense to them that they won't pay the same for a double-bock that they would for a lager."

Finkel also notes the educational benefits of the approach. "It will allow people to experience the greatness of beer," he says, "and the wonderful tastes of each particular style."

Lastly, Finkel believes that a more careful presentation of beer will allow importers, brewers and wholesalers to do what they most want to do - sell more beer. "If every wholesaler said to their restaurant accounts, |Do a beer list'," Finkel says, "it would serve everyone's interests. Our main competition in restaurants isn't other beers, but wine or even a glass of water."

The availability of water on the table is particularly galling to Finkel. "The one benefit of the water shortages here in the West is that restaurants aren't automatically putting water glasses on the tables," he says. "That gives us a chance to sell people some beer."

Finkel has taken note of current consumption trends, however. "There is a grim fact," he says, "and that is that the trend is towards lower consumption in total volume.

"However," Finkel observes, "that can work both ways. If a restaurant heretofore sold a consumer several bottles of a nondescript lager, that same consumer might now consider having one bottle of interesting, quality beer."

Jeffrey House

Thames America Trading Co.

Jeffrey House came to America flushed with the successes of the U.K.'s Campaign for Real Ale (CAMRA), a movement that foreshadowed the microbrewery movement here in the U.S. He realized that the U.S. market would be fertile ground for imported specialty beers.

It is a niche that House sees growing. "I have a very positive outlook for our part of the market," he says. "On the one hand you have some of the larger import brands down in double digits, but there is growing interest in the beers that we're bringing in.

"People are starting to drink different products," House continues, "and the trend will continue. The beers that our company and others are bringing in have helped inspire the microbreweries, and the micros have been marvelous in educating consumers."

House sees the two areas, microbrewing and specialty importing, as essentially compatible. "As the microbreweries experiment with these beer styles," he says, "some will achieve it and some won't. There are some great brewers coming out of the University of California at Davis.

"But," House notes, "there are things that they are missing, and that is where we fit in. The European breweries that we represent have a long tradition that is evident in their beer. They have their own yeast strains and hops, and they also have mastered the art, and the science, of brewing."

House says that people will seek out established European examples of beer styles as their interest grows. "The micros are producing copies of originals," he says, "and once people have tried the copies, they'll want to sample an original. You can't drink anything better than some of these products."

According to House, however, the specialty imports must offer value in adddition to taste. "We try to be sensitive to price points in the market," he says, "and we price them to appeal to the growing number of students and educated beer drinkers in the market."

Without the deep pockets of larger players, House admits some difficulties in being noticed. "If we had one or two million dollars," he says, "it would be pretty easy to spread the word. As it is, we're a very small company, and we don't have big dollars to advertise. We have to live by our wits, and try and be creative."

House reports that the company has hired a full-time public relations representative, and has done some radio advertising in the San Francisco Bay area. Thames has also produced sundry P.O.S. items and has done limited advertising in some of the Western beer enthusiast newspapers. "We are selective with what we do," he says, "but it's clear that there is a lot of growth potential in the specialty category. We see specialty wholesalers starting up, and we are interested in growing with them. We would much rather be a big player in a small house than vice versa."

House believes that bigger wholesalers would benefit from starting up "specialty" units to focus on specialty beers. "The established wholesalers are locked into their major brands," he says, "and so it's very difficult for them to give small importers any time or attention. However, it would seem profitable for them to put together teams of aggressive young salesmen to attack the specialty niche. I think everyone would benefit."

House is optimistic about the future, however. "We're in a new age," he says, "and the world is changing in a lot of ways. One of those ways is that people are starting to drink better beer."

 1991-YEAR END
 1990 1991 %
Netherlands 82,366,407 70,137,417 -14.8%
Canada 65,274,150 64,643,760 -1.0%
Mexico 49,704,478 42,548,609 -14.4%
F.R. Germany 34,440,092 26,752,745 -22.3%
U. K. 9,905,361 10,194,611 2.9%
Ireland 7,365,929 7,897,116 7.2%
Australia 6,718,991 6,702,484 -0.2%
Japan 4,513,056 5,016,431 11.2%
China 2,124,442 2,259,977 6.4%
New Zealand 1,561,464 1,565,371 0.3%
Denmark 1,652,118 1,540,306 -6.8%
Italy 601,488 704,370 17.1%
Jamaica 1,067,569 684,936 -35.8%
Czechoslovakia 596,050 639,267 7.3%
France 586,003 504,243 -14.0%
Thailand 485,580 499,393 2.8%
Korea 355,849 414,073 16.4%
Dom. Rep. 162,077 413,135 154.9%
Venezuela 428,797 344,823 -19.6%
Philippines 649,863 303,556 -53.3%
Portugal 128,115 182,315 42.3%
Belgium 227,116 175,832 -22.6%
India 175,032 162,991 -6.9%
Norway 148,537 150,848 1.6%
Sweden 44,638 150,246 236.6%
Yugoslavia 99,280 119,163 20.0%
Trinidad 123,123 116,806 -5.1%
Peru 133,743 109,187 -18.4%
Austria 150,200 104,112 -30.7%
Guatemala 13,633 90,583 564.4%
Ivory Coast 73,170 81,606 11.5%
Brazil 84,787 71,848 -15.3%
Singapore 80,830 60,613 -25.0%
Poland 39,253 50,992 29.9%
El Salvador 77,810 49,575 -36.3%
Greece 65,450 48,585 -25.8%
Switzerland 295,225 32,936 -88.8%
Spain 8,962 29,831 232.9%
USSR 47,319 18,453 -61.0%
Hong Kong 83,314 9,885 -88.1%
East Germany 110,003 0 -100.0%
Bulgaria 56,717 0 -100.0%
TOTAL 272,826,021 245,583,030 -10.0%

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Title Annotation:beer imports
Publication:Modern Brewery Age
Article Type:Industry Overview
Date:Jul 13, 1992
Previous Article:Computer systems in the 1990s.
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