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When less is more.

One of the most common statements heard from professionals who analyze trends in the beer and wine industries is that people are drinking less, but they are drinking better. On the surface, any hint of reduced consumption would be bad news for the beer and wine industries. But, in the case of supermarkets, the change in people's drinking habits may actually open up new opportunities for profit from the sale of beer, wine and wine coolers.

A Different Perspecive

The aging of America has been well documented. Yesterday's young adult baby boomer has passed 40 and his preferences in alcohol are changing due to the prevailing social mores connected with responsible drinking and the maturity that comes with age. Consumers are doing more entertaining at home and fewer social activities are taking place in bars and restaurants, according to industry professionals. This trend has direct implications for supermarket sales of beer and wine.

Joe McDonald, vice president, sales of Canandaigua Wine Company believes, "Consumers are changing and the stores have to react. We see a continued downturn in on-premises [restaurant/bar] business. Consumers are doing their drinking at home and turning to supermarkets to make their purchases. This should lead to an upturn in supermarket sales."

The consumer trends evident today are a continuation of changes begun in the '80s. During the previous decade, Americans became more health conscious and looked for products that complemented a more active lifestyle. Some of the products that found favor with the alcohol-drinking public such as wine coolers and imported beer and wine have slipped heading into the 90s, but show promise of an ability to recapture at least a percentage of previously high sales. The Cooler, the Better

The Cooler, the Better

During the mid-'80s wine coolers grew in popularity, but have recently fallen on difficult times. Yet, while the category as a whole did not perform up to expectations, manufacturers see a light at the end of the tunnel.

Mark Taxel, executive vice president of marketing for Seagrams reports, "Sales for the period May 89 through February '90 were up about 10% from the same period of the previous year. We've received a major contribution from the new product introduction of our Black Cherry wine cooler. We've sold over four million cases of the product."

Many manufacturers are looking to new product introductions to fuel growth in the category. Sun Country is debuting its Melonberry cooler with a promotion run in conjunction with Voit, tying into the sport of volleyball. There will be a major refund program, with escalating rebates of up to $6 per case to the consumer. Seagrams is introducing a new Black Raspberry cooler and supporting it with national TV advertising kicking off around the Memorial Day holiday.

Many industry watchers are continuing to predict soft sales for wine coolers. Even with this, total cooler sales account for 96.7 million gallons, more than 17% of the total number of wine gallons sold in the U.S. Retailers can take advantage of proven movement producers by using secondary stocking areas to cross merchandise coolers with related food and non-food items, and by utilizing manufacturer-provided displays.

Lite or Light

Regardless of how you spell it, it is clear that "light" products had a dramatic impact on supermarket sales in the 80s. Many have referred to the last 10 years as the "light" decade and nowhere was this more true than in the beer industry. Light products account for one out of every four beer purchases and many believe the market share will climb higher.

Richard Riggs, national off-premises sales manager for Coors believes, "The most significant trend is going to be in the light beer area. The nation continues to get older, and the greying of America has become a hot topic. Light beers provide a drink of moderation while still providing the sociability aspect associated with beer. These traits appeal to the older consumer."

There is a general consensus among industry experts concerning the continued success of light beers. "The light beers or low-calorie products should continue as the fastest growing part of the category well into the 90s," agrees Rod Blucher, vice president national retail sales for Miller Brewing.

Lighter Than Light

A logical alternative for consumers who enjoy the taste of beer but do not want the effects associated with alcohol, is the nonalcoholic beers. Although the segment accounts for less than 1% of the category, it provides an alternative to traditional beer.

"Although the current segment, represents a small base compared to the entire beer category, we believe it will continue to grow," reports Mike Beckman, director national account sales for Anheuser-Busch.

Philip Van Munching, director of corporate communications for Van Munching Importers believes, "Non-alcoholic products are a really big growth area. They are picking up steam and we expect them to do very well in supermarkets."

Because non-alcoholic beer has distinct qualities, retailers can promote these products by grouping them in a clearly defined area separate from traditional beers-in either the refrigerated beer case or as part of the non-alcoholic beverage aisle. The Dry Alternative

The Dry Alternative

A great deal of attention has been paid to the introduction of dry beer. This type of beer is being viewed by producers and retailers as a way to expand the overall market by attracting infrequent beer drinkers as well as new beer drinkers. Dry beers attract the customer interested in a light, drinkable beer.

Producers of dry beers have been pleased with the initial reactions. Beckman says, "Dry beer is becoming very well established and represents viable line extensions to premium beers. Early study results are very positive with Bud Dry. Sixty to 70% of consumers tested will try the dry product and half of those will repurchase. We have found that 25% of Bud Dry drinkers are new or infrequent drinkers." Early indications point to dry beers having established themselves in a niche that appeals to a consumer who has not been a traditional beer drinker. If this trend holds up, supermarkets stand to be a major beneficiary of these new customers. Putting a Premium on Profits

Although the sales of premium beers have suffered because of the consumer move to other beer and beverage choices, they still constitute the largest share of the overall beer category. Premium beers account for roughly 40% of all beer sales.

Miller Genuine Draft has continued to buck the trends by consistently turning in strong sales numbers. Buchler says, "We feel we're positioned correctly with our cold-filtered Genuine Draft. Although premium sales are leveling off, we expect to have continued strong sales."

Other producers continue to have their premium lines make major contributions to the supermarket bottom line. Sales of Coors' latest premium roll-out, Keystone have been strong, while Anheuser-Busch remains a major force in the marketplace with Budweiser, Michelob and Busch beers. The International Story

The International Story

The hardest hit of all segments of the beer industry has been the imports. Estimated shipments of imported beer dropped nearly 9% in 1989 from 9.4 million barrels to 8.6 million. Industry projections forecast flat or further declines in these numbers over 1990.

Despite these expectations, there are signs that some brands will be making a strong comeback. Van Munching believes, "The trend over the last year has been back to basics. There were a lot of people who got burned by stocking every brand under the sun. Now they are looking for brands that have established reputations for taste and quality. I think we will see the established imports begin to assert themselves." A new import entry from Japan, Suntory Beer, is looking to make an impressive debut in America. The beer will be brewed at a new facility in Vancouver, Canada built in a joint production venture with Labatt's. A strong national print campaign has been developed under the banner, "A Taste of Another Culture." The campaign marks the largest investment by any japanese beer producer to attract the American consumer.

Hot Fun in the Summertime

The summer months are traditionally a big selling season for beer. This summer, producers are pulling out all the stops to generate customer traffic in supermarkets. Coors is bringing back its successful Beer-B-Que promotion for the Fourth of july holiday. The promotion will be built around Coors Light and will include frequent radio and TV spots. In addition, Coors has a full range of displays and POS materials to maximize in-store visibility. This promotion will be followed by a Labor Day promotion that the Colorado brewer claims is the first of its kind in the beer industry. The event, themed "Pure Water 2000" will involve a per case contribution to an environmental group headed up by Robert Redford. Miller will be launching its, "Dreams Take Time" promotion with a tie-in to the Olympic Training Center for the july period. It will be followed by a Labor Day promotion and football theme promotions later in the year. Anheuser-Busch will build its summer marketing efforts with a continuous campaign around the "Nobody Beats a Bud" theme. The program will include targeted messages to cover the major summer holiday periods and will involve a give-away of 100 Budweiser in-ground pools. During the summer months, consumers will be able to purchase Bud branded beach towels, barbecue aprons, and pool rafts for designated holiday periods.

The imports will be doing their part to win back customers this summer. Van Munching will launch a combined Heineken and Amstel Light promotion called, "Relax and Refresh." It will involve a special holiday display designed to promote cross merchandising of summer foods with these two beer brands.

Increased advertising and promotion will generate heavy traffic this summer. Retailers can take advantage of this opportunity by paying close attention to shelf and display strategies.

Beer does well when cross merchandised with related summer and snack items. Supermarkets can maximize beer profits by utilizing producer displays that encourage cross merchandising or by setting up in-aisle or end-aisle displays in conjunction with items such as hot dogs, potato chips, etc.

Proper space management also builds department profits by reducing the number of out-of-stocks and by finding the right mix of products to meet local customer demands. Many of the major producers have space management programs that have been developed for use by retailers in building beer sales.

The Place for Wine

Wine sales have been just as inconsistent as those in the beer category. Still, there are several areas of optimisim that indicate supermarkets may be able to build profits from the category. Premium California wines continue to be a strong seller at the retail level. The varietals, including chardonnay, cabernet sauvignon and the white zinfandels continue to be in demand. Sales of premium California wines rose 18% in 1989.

Sam Folsom, spokesperson for the California Wine Institute believes this trend has occurred because, "as Americans become more wine knowledgeable, they have focused on higher quality products and the varietals meet that demand." Although imports have suffered through a particularly bad period, there is room for optimisim. jeffrey L. Napoleon, vice president national sales for Banfi Vintners claims, We've had a great deal of success and are expanding with wines from Chile. We currently market the top two Chilean wines, Concha y Toro and Walnut Crest, to compete with the varietals. Since the introduction of Walnut Crest, we've had to revise our projections upward four times."

Wine Goes Best With Food

Wine is the alcoholic drink most closely associated with eating. Because of this, wine is particularly prone to impulse purchases when cross merchandised with other foods. Many producers claim that stores are decreasing the size of their wine sections and that this strategy might be short sighted. McDonald observes, "As the consumer becomes more sophisticated about wine, it will be increasingly necessary for supermarkets to provide a greater variety. They can't accomplish that by having just the number one and two selling brands in a category. Supermarkets should take a page from better package good stores and provide ambiance and information. Not just lighting and sheiving, but hand-written POS signs that provide information and show that the store cares about the customer and is trying to steer them to the best values."

What's Next

Supermarket retailers have an increasing number of choices to make. Even with less than robust increases, the beer and wine categories contribute heavily to supermarket sales and profits. Beer sales account for nearly 25% of sales and 35% of the profits of the entire beverage category. Wine and coolers play an important role in the supermarket profit picture and compare favorably with other beverages such as bottled water. Retailers who look past the national averages and make decisions based on localized demands will find that beer, wine and coolers continue to be an important element in the success of their stores. -G.J.A.
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Title Annotation:Advertising Supplement; how supermarkets can benefit from changes in beer and wine consumption habits
Publication:Progressive Grocer
Date:Jun 1, 1990
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