Category Report: Beer Buyers Thirst for Local, Value

As Americans watched the stock market shrink and unemployment rates grow, more consumers started seeking value, entertaining at home and buying locally. This trend includes beer, and industry giants and craft brewers responded with targeted point-of-sale displays, new packaging and increased promotions that allowed overall industry sales to see a slight 0.6% increase in 2008."There are so many different styles and types of beer today and that has been beneficial in keeping the volumes up because you can provide the consumer a lot of different price points and you can get some bleed from wine and liquor," says Jeff Becker, president of the Beer Institute, Washington, D.C.Of course, the category still largely fits into the hands of two -- Bud and Miller. Recent numbers from Advertising Age showed the two combined for nearly 80% of the market share in shipped barrels. Anheuser-Busch InBev sits at 49% and MillerCoors at 29%. Despite the Miller Brewing and Coors merger, the company didn't see a share increase from '07 to '08. But going forward, with value beer on the brain, the companies could see that share grow.Sales of economy beers, such as Keystone Light, Miller High Life and Busch, have picked up market share as more shoppers aim to spend less. Roman Shuster, a research analyst at Chicago-based Euromonitor, says the boost in sales also followed increased promotion from these brands. "In the past, manufacturers didn't promote economy beer because they want people to buy the higher-priced beer. We've seen a shift away from that," Shuster says.Crafts Still FloatIncreased promotions from economy beers haven't -- and won't -- hurt craft sales, which saw a 6% increase last year. "Realistically, somebody who was drinking a lot of our products isn't going to jump down to an economy beer," says Patrick Domonkos, Northeast Ohio area sales manager for Great Lakes Brewing Co., Cleveland.Paul Gatza, director of the Brewers Association, Boulder, Colo., explains that as the economy worsened, people moved toward their local products. That trend has held true for Craft Brewers Alliance, Portland, Ore. "Our business in the Northwest is booming," says Trent Tokos, director of field marketing for Craft Brewers Alliance, which produces Widmer Brothers and Redhook Ale. "Where we're hurting is further away from home, and I think it may be because in those markets, the local crafts are reaching out more."Todd McGowan, partner at the McGowan Crain marketing and communications agency, says even large brands are getting more regional with their P-O-S. "The category leaders become more personal and not so faceless when they modify national campaigns for specific cities or niche demos," he says. McGowan Crain, St. Louis, has created campaigns for Corona Extra and Corona Light.Sign manufacturer Zeon Corp., Louisville, Colo., used Colorado beetle kill pine to build signs for a Coors "Tap the Rockies" campaign. Trees killed by the pine beetle normally are harvested and either burned or chipped, so incorporating the wood into the display gave the piece a green element with a local tie.Alan Bloom, president of Zeon, says craft brewers in particular are looking for unique displays that project their identity. Zeon also worked with New Belgium, Fort Collins, Colo., to create an energy-efficient bamboo sign that helped communicate the brand's commitment to sustainability initiatives. New Belgium has 1,000 bamboo signs in the field, and they're still being produced.Deschutes Brewery in Bend, Ore., uses bamboo tap handles and display signs made from reclaimed wood. Environmental issues are important to the local community and the reclaimed wood can promote the company's wood-aged beers, says Colby Nightingale, point-of-sale coordinator. Deschutes is also recycling barrels by cutting the ends off, engraving the company logo and using them as signage.Although small brewers like to get creative, they aren't always able to secure the same types of displays as large companies. "They don't have the resources," Gatza says.Domonkos agrees that craft brewers shy away from mass merchandise pieces. "We try to focus with our distributors on getting the displays up in a good, visible location and making sure the price and packaging look nice," he says.Technology BoostMany crafts are tapping into social media to promote brands on a grassroots level. "Craft brewers are pretty savvy with electronic marketing. You're not going to see many craft brewers on television, but you will see them sending out a note on a Friday afternoon promoting a local event," Gatza says.Not only are promotions via sites like Facebook and Twitter a low-cost opportunity, they also allow brewers to connect directly with consumers. "We get a lot of feedback on our Twitter page, especially when we have a new beer out," Nightingale says.Craft Brewers Alliance also uses Twitter and Facebook to communicate new beer releases and events. The company is looking to include Twitter information on coasters, P-O-S materials and packaging in 2010.In addition to social networking, McGowan expects the use of mobile phone technology to grow as brands look to reach a specific audience. "Imagine receiving a text alert, for which you opted-in, that tells you when your favorite bar is running a special on your favorite brand. Now imagine that you receive that alert on the night that you normally go out and only when you are within a certain radius of that account," he says.To better communicate with its current customers, Tecate and Tecate Light, White Plains, N.Y., completed quantitative and qualitative consumer research in 2003 to gain a greater understanding of its target market. Carlos Boughton, Tecate's brand director, says, "At that time probably we only had one definition -- Hispanic. Today we consider our consumer as either born in Mexico or lives in a household with Mexican immigrants."That information helped Tecate narrow its focus. "Someone born in Mexico is more interested in soccer or boxing, and someone born in the U.S. is more interested in the NBA or the NFL," Boughton says.As consumers have become more aware of the variety of beers on the market, more ads are addressing quality and taste. "There has been an emergence of awareness in beer styles," Gatza says. "Consumers know more about the ingredients and the process."Shuster says that has led to more quality-based ads. "Three or four years ago, beer ads were all about fun, but now brands are striving to be unique," he explains.While MillerCoors has placed new emphasis on its ads, industry giant Anheuser-Busch has cut back on ads in niche categories since merging with InBev. "We're seeing a pullback on those and they're focusing on national ads," Shuster says.John Dunleavy, executive vice president of G2 Promotional Marketing, New York, says brands have moved from brand-centric promotions to consumer-focused messaging. He also sees more beer companies engaging with retailers, particularly as shoppers become more price conscious.Cross Promotion, Packaging"For the past nine months to a year, we had seen a shift away from convenience stores back to grocery stores and the big box retailers," Gatza says. "With money tighter, people are driving a little bit more and then loading up.""Brewers understand people have less money to spend, but ideally they do want them to buy their more expensive products," Euromonitor's Shuster says. As a result, they are doing more in-store promotions and cross promoting with food."In grocery, we're providing cross-merchandise offers on party essentials such as premium cuts of fresh beef, marinades and premium cheeses paired with unique tips to create a memorable party," says Steve Ward, vice president of national accounts at Heineken USA, White Plains, N.Y.Craft Brewers Alliance has focused on P-O-S materials that will bring the retailer a higher ring. "We have a program called 'Brother Nature for Widmer Brothers' that has coupons on everything you would take if you were going camping. For Redhook, we have 'Cook with Hook.' We're doing displays where we'll have coupons and recipe ideas on how to cook with beer," Tokos says.Crown Imports, Chicago, has released larger 18 packs of Corona Extra, Corona Light and Modelo Especial 12 oz. cans, giving retailers "the opportunity to trade up domestic beer consumers and current Modelo Especial 12-pack can consumers, generating incremental revenue and profit per transaction," says Bruce Jacobson, executive vice president of sales for Crown Imports.Packaging is also changing as brands try to make their products stand out on the store shelf. "You've seen everything from keg cans, clear graphics, new kinds of graphics, tall cans and slim cans," Becker of the Beer Institute says.Heineken has launched multiple packaging innovations, including the 5-liter draught keg, Heineken Light slim can fridge packs and 16-ounce cans, which rolled out this summer at c-stores. "Packaging is very important for premium brands, as it establishes a brand's quality and premium appeal relative to the competitive set," Ward says.In the U.S., about 56% of beer is packaged in cans and 42% in glass bottles (the other 2% is plastic). Cans are gaining ground with craft beers. "For example, New Belgium started using cans because they are outdoor-friendly, light for transport and 100% recyclable. Plus they provide a lighter carbon footprint by saving fuel during transport by lightening the weight of the trucks," says Jennifer Hoover, manager of marketing communications for packaging provider Ball Corp., Broomfield, Colo.New Belgium's cans for Fat Tire and Sunshine Wheat use Ball's Eyeris printing process, which helps maintain the quality of the watercolor artwork used on the labels. In April, Coors rolled out cold-activated cans that feature mountains that turn blue when beer is at the optimal drinking temperature.Consolidation and PriceConsolidation among wholesalers is leaving two or three wholesalers in the market compared to four or five in the past, Gatza says. That consolidation can make it harder for smaller brands to get their products on the shelf.Anheuser-Busch wholesalers have been carrying more craft beers since merging with InBev. "In the past, we've been the high-end answer in the Anheuser-Busch network, and now those wholesalers have a lot of different options. I think the wholesalers are also looking at the fact that crafts are growing and they want to diversify," Tokos says. To stay competitive, Craft Brewers Alliance is producing more turnkey programs. "If we can keep it simple and easy to execute, it has a better chance of happening," he says.Stevens Point Brewery, Stevens Point, Wis., works closely with its wholesalers to help ensure placement. "We get in front of their sales staff two weeks after they've picked up a load of beer and we make sure the sales staff is very clear with where we are in the market," says Julie Birrenkott, director of marketing for the company.Some in the beer industry anticipate a price war in the coming months, but Shuster says it is still too early to tell. Deschutes utilizes price-tracking software and tries to stay current with pricing trends. "It could be at a grocery store and someone's six pack is $8.99 and drops to $6.95. You have to track that," Nightingale says.G2's Dunleavy warns, "Dropping your price in a knee-jerk reaction isn't a smart thing to do because it is hard to go back after that. The smart thing to do is to try to add value for the shopper."Although shoppers are looking to spend less, the price of ingredients has increased, resulting in a 4.3% average price increase for craft brewers and 4% for all brewers, Gatza says. Great Lakes Brewing Co. increased its prices last year, but shipments are still up 16%, Domonkos says.Birrenkott predicts craft beers will continue to attract shoppers. "We have seen that people are willing to spend more money on brands that are good or that are their favorite styles," she says.

Category Report: Beer Buyers Thirst for Local, Value

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