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Uncapping a trend.

America's largest brewers are brewing up a new category, as "specialty" brands eclipse the old super-premiums.

There is a movement afoot in the U.S. beer market. As the mass of the market has continued its shift toward lighter beers (or even non-beers) there has been a distinct under-current towards more flavorful brands in traditional styles.

Many of these new "specialty" brands are contract- or microbrewed, others are imported. And, increasingly, these brands are coming from the brewhouses of America's largest breweries, often at a price-point a notch below the micro and import competition.

The trend has been fueled by growing consumer interest in "different" beers. "Broadly, beer drinkers are going in two polar directions," says Jerry Schmutte, category director for the Miller Brewing Co.'s Allied Brands division. "We are seeing growth in the low-calorie, low-alcohol area, but there is also growth for beer with more taste."

The trend towards taste has been one factor in the reordering of the brand caste system, as traditional super-premium brands have endured a long slide in volume. As the hierarchy reorders itself, a new class of brands is stepping into the breach at the high end of the spectrum. For lack of a better name, this has been dubbed the "specialty" category.

Quality & Differentiation

Brands qualify for this new specialty category, not through packaging or advertising, but based on more substantive criteria. "It's a category based on product quality and product differentiation," says Mark Holdren, assistant vice-president of marketing (promotion) for the Genesee Brewing Co. "It's not just a battle with promotional dollars--it's the beer business the way it's supposed to be."

"Consumers are out there looking for different products," concurs Vinny Prattico, marketing manager for Coors' Unibev, Ltd. (a specialty marketing branch of the company), "and they're coming back to true value and real substance."

These changing consumer expectations have helped drive the specialty beer trend. Mass-market goods, which took the American consumer market by storm in the post-war years, began to lose some of the their appeal in the '80s, as consumers began to search for products with greater perceived "quality and differentiation."

That trend has gathered steam in the '90s. "There is something fundamental happening," Miller's Schmutte notes. "Today, if a consumer is going to pay higher than premium price, they want more than image. They want real value. The same thing that happened with varietal wines in the '70s and '80s is now happening with beer."

Schmutte also cites the growth of the gourmet coffee industry. "The trend is evident in a lot of product categories," he says. "Maybe it has something to do with consumers who have grown up in the television age. They tend to get bored quickly and want to try new things."

Victor Dzenowagis, brand director for Stroh's Augsburger line, also points to a changing consumer ethic. "People are paying more attention to the products they buy," he says. "There is a lot more information available to them, and they can't help but get educated about products. They are more interested in the way their food is processed and how their car is made."

Microbrewery revolution, import invasion

When this educated consumer started to turn up at bars and package stores in the early 1980s, the specialty beer niche began to develop. Numerous microbreweries began to open and imports flooded the market.

In this environment, traditional domestic super-premium brands began to slip. "If people were going to pay that kind of money for a beer, they would buy an import," says Coors' Vinny Prattico. "As the super-premiums dropped in price, they lost their image of high quality. There was no distinct taste difference, just fancier packaging, so people chose other products."

The super-premiums also began to feel pressure from lower-tier brands, says Stroh's Dzenowagis. "The mainstream super-premium brands had real trouble because they lost their reason for being," he hypothesizes. "The idea of a mass-produced 'super-premium' began to lose its rationale, because the value wasn't there. Why buy Michelob, if a Bud was just as good?"

Ahead of the trend

The Coors Brewing Co., of Golden, CO, was a specialty pioneer, with the entry of Killian's Red and Coors Winterfest in the early to mid-'80s.

In point of fact, Coors found itself a little ahead of the trend. When Coors first fielded Killian's in 1981, it was an ale, and mainstream consumers were leery of the full-flavored product. As a result, Killian's underwent a few subtle changes, and emerged as a slightly lighter-tasting Killian's Red Lager.

"Killian's Ale was first positioned as a super-premium, and advertised as a mainstream product," says Coors' Vinny Prattico. "It didn't do too well. As we did more research and taste tests, we found that people loved the product, but thought it was a little too heavy. So we made it into a lager, positioned it as an up-scale import, put it in the market, and it worked. It's been showing double-digit growth for the last five years."

According to Prattico, the price-point for the brand has been crucial. "With the increased excise tax," he says, "imports were getting high in price again. That low-end import price range is a good level to be at."

Coors was also notable as the first major brewer to put a seasonal beer back into the market. Although seasonal brands have always been a part of the world brewing tradition, the large U.S. brewers had seen them as a nuisance (and distributors concurred). Coors bucked the establishment with the launch of Winterfest. "Up-scale consumers like to have a special beer sometimes, a beer that is a conversation piece," Prattico says. "Seasonals serve that function."

Coors has now expanded the season for Winterfest due to consumer demand, Prattico says. "The season was too short," he notes, "and consumers seemed to want to drink it longer. In particular, ski resorts wanted to serve it throughout the full ski season, which in Colorado can last until Easter."

Prattico reports that Coors may add other seasonal brands to its portfolio in the future. "Microbrewers have shown it can work," he says, and we're looking at new ones, although we haven't made any determination as of yet."

A rising category

The Miller Brewing Co. has been testing the specialty waters for many years. The brewer's Plank Road brand was one of the progenitors of the category a decade ago. Today, the Milwaukee brewer has fielded an entire brand "family" of specialty brews--Miller Reserve Lager, Miller Reserve Light and Miller Reserve Ale.

Miller has also fielded a line of specialty brands through its subsidiary regional brewery, the Jacob Leinenfugel Brewing Co. of Chippewa Falls, WI. Leinenkugel specialty brands include Leinenkugel Limited, Leinenkugel Bock and Leinenkugel's Red Lager.

"The category is growing," Miller's Schmutte says simply, "and we want to participate. In some markets, Portland, OR, for example, brands that weren't around five years ago now hold five share points, and in focus groups |micro brands~ are all that consumers will talk about."

Specialty franchise

The Stroh Brewery Co. of Detroit, MI, began exploring the specialty category when it acquired the Augsburger brands from the Jos. Huber Brewing Co. in 1989. "We've had some difficult times as a company in the years after that," says brand director Dzenowagis, "and we lost focus on Augsburger. Now our numbers are up, and all the elements are in place for a comeback."

The Augsburger line currently includes Augsburger Golden, Dark and Bock. The company added a Weiss (wheat) summer seasonal beer to the line last month, and additional seasonal extensions are planned. "The customers that buy super-premium beers are looking for something unique and distinctive," Dzenowagis says, "something customized for them. So it was an easy decision to brew seasonals. Customer's life-styles change as the seasons change, so it made sense to have different beers."

According to Dzenowagis, the next step was building acceptance in the distribution and retail arena. "Wholesalers have been negative about seasonals in the past," he says, "because brands that are in for just three months make life more difficult for them."

With the consumer acceptance of seasonal brands, Dzenowagis says, "that reluctance has gone away." He reports that wholesalers have been impressed by the success of rotating microbrewery products, and are more willing to experiment. "Now wholesalers are telling me, 'This is great, can you get me more Weiss?' It's an easy sell for our field guys."

"We can do that"

The Genesee Brewing Co. of Rochester, NY, is not one of the "Big Five," but it holds a position as the nation's largest regional brewer. Although the company has always brewed beers that might be classified as "specialties" (12 Horse Ale and Genessee Bock) the company targeted the new category with the debut of Michael Shea's Amber in February 1992. "We looked at the success of the micro category," says v.p. Mark Holdren, "and we said, 'Hey, we can do that."

Holdren says he has been surprised at the broad demographic profile of the specialty drinker. "Until recently I would have said that we were looking at an up-scale drinker," he says, "but it's much broader than that. We're seeing people ages 21-80, from all walks of life. It's not just a youth thing, or an up-scale thing."

These new drinkers have helped make Michael Shea's a hot brand for the old-line company. "The brand has been a towering home run for us," Holdren says. "It's growing nicely in our established markets, and booming in some of our newer markets."

Holdren confirms that Genesee is likely to make further entries beyond O'Shea. "Although the category will probably remain small," he says, "there's really no telling."

A-B takes it slow

Anheuser-Busch has been a notable no-show in the specialty category, although the company has tested specialty brands under the "Anheuser" name (The company sold Anheuser Maerzen, an interpretation of a German seasonal brew, in several test markets for a time). Otherwise, the company is sticking to its guns with Michelob (which was a draught-only, all-malt brand in the not too distant past).

There have been rumors that A-B would seek to purchase an existing specialty brand franchise, and there have been reports that the company now has another specialty brand in test. In addition, if the company's efforts to purchase an interest in Czechoslovakia's Budvar brewery ever bear fruit, A-B could add a "world classic" import to its portfolio.

Meanwhile, other brewers are finding that the new specialty brands are boosting more than sales. "I think that there was a perception that Coors only brewed light beers," says marketing manager Prattico, "and these beers have improved our image as a company. A beer like Winterfest shows that Coors could brew more than light beers, we could also produce hardy, traditional products."

A similar motivation exists at Miller. "|Miller Reserve~ is a demonstration that Miller Brewing can make a unique and extremely high quality beer--equal to or better than a microbrewery beer," company president Jack MacDonough recently said, "We use Reserve as a quality statement about what Miller Brewing can achieve."

Legitimizing the category

It remains to be seen how large the new specialty category will become, but brewers and importers are betting that it will comprise a small, but profitable part of the beer business in the coming decade. "It depends on how we and the other big brewers respond," says Stroh's Dzenowagis. "When Sharp's and O'Doul's were introduced, it legitimized the non-alcoholic category. Now that category is doing two million barrels a year."

Miller's Schmutte is reluctant to make speculate on the ultimate size of the specialty niche, noting that "it would take a crystal ball that nobody has," to project its future share. "Still," he says, "back when light beer came in, who would have guessed that it would grab half the market?"
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Title Annotation:brewers introduce new beer brands
Publication:Modern Brewery Age
Date:Jul 12, 1993
Words:1969
Previous Article:The second stage.
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