Category Report: Beer Merchandising

Facing burgeoning competition from wines and spirits, as well as a shift in sales volume toward convenience stores, beer companies have needed to reformulate their P-O-P brew. Some say their new recipe remains a work in progress. "Beer companies have figured out that what they were doing wasn't working, but they don't know how to change," says Dave Wilkins, category manager in the Gulf Coast region for the Circle K chain of convenience stores. "The concept was, 'If it's bigger and glossier and brighter,'" in-store marketing will be more likely to succeed. "But the age group they're after doesn't really care for that approach. They're kind of struggling with how to get their message out."Figures provided by Rave Media, Hilton Head, SC, a P-O-P consultant for Miller Brewing Co. and numerous other beer and alcoholic beverage makers, show retail sales for beer nationwide at $88.5 billion in 2004, slightly more than half of the $156 billion total spent on alcoholic beverages. Rod Groetzinger, president of Rave Media, says beer consumption has remained flat for several years, despite growth among the 21- to 27-year-old population he says is responsible for about 70% of overall sales."One would think that [the expanding audience] would drive overall volume," he says. "But it hasn't because 27- to 35-year-olds are switching to spirits. They're doing it mainly in bars. They're out of college, they have a job, they may be married. When they go out to a bar, they're trading up to flavored vodkas," and other beverages.The battle for market share with other types of alcoholic beverages has inspired everything from cross-selling beer with food items grander than chips and pretzels, to on-premise taste samplings and tabletop pieces that go beyond coasters. These marketing cues come from wine and spirits brands, signalling a move toward more sophisticated marketing.Groetzinger has seen a "major increase" in expenditures on P-O-P, which hit $334 million in 2004, $213 million of which came from Miller, Anheuser-Busch and Coors Brewing Co. "You can't compete with junk," he says. "Beer companies need to create richer-looking P-O-P. ... They need to grab that consumer's attention, and they need to do it in a way that conveys quality."Get Food InvolvedCross-merchandising with food and other items, particularly in grocery, has been one way to class up beer. Anheuser-Busch, St. Louis, has partnered with brands like Kingsford, Johnsonville and Cheez-It for summer holiday displays, says Daniel Hoffman, vice president of brand creative services."For us, that's an opportunity to take beer outside the beer aisle to other parts of the store," like produce, seafood and deli, he says. "The retailers love it because it adds value for their consumers, and it delivers that beer occasion meal solution.Anheuser-Busch "did take some cues from the wine business," in that regard, although with a bit of a twist, Hoffman says. "Theirs is more 'suggest a sell,'" he says. "Ours is actually adding a program with partners [and] coupons. We feel like we've definitely one-upped what the wine business does."Similarly, Golden, CO-based Coors is partnering this summer with Weber in a national cross-promotion based on research showing that while women buy most grocery items, men buy most beer sold in grocery stores, says Ashley Selman, channel marketing manager. "Those grocery shoppers are primarily buying [beer] to have it on hand for occasions such as hosting barbecues," she says. The merchandising includes recipes and grilling tips as well as added value discounts, she adds.Imports are thinking similarly, and grocery chains are realizing they need to be "moving beyond the traditional beer-and-pretzel promotions," says Sean Taylor, field marketing manager for the northern division of InBev, Norwalk, CT, which handles such brands as Labatt Blue and Stella Artois in the U.S. market. "We're doing a lot more with the deli department and the seafood department, health and beauty," he says, adding that they're exploring partnerships between Beck's and men's grooming products, tied into the brand's suave, nightlife-oriented positioning. "Three years ago, it would have been, 'What are we doing for the Super Bowl, and who is going to be the chip partner, and who is going to be the pretzel partner?' We've gone beyond that. We're doing a much better job of recommending certain brands for certain types of foods," he says.Widmer Brewing Co., Portland, OR, built a beer rack, similar to wine racks, designed to be placed in the produce department near the lemons, says Marc Adams, business development manager for Grand and Benedicts, also of Portland, which manufactures the display. "We do thousands of racks for the wine industry and bottled waters. This is the first time we cracked into the beer category," Adams says. "They decided this nice wooden rack placed underneath the produce section would be fairly unobtrusive: You grab your lemon and your six-pack, and you're ready to go."The cross-promotion with food extends to the convenience store market as well, says Jeff Lenard, director of communications at the National Association of Convenience Stores, Alexandria, VA. "It's about getting that right six-pack in people's hands to go along with that meal," he says. "For those who offer some upscale, home-meal replacements, there's a different strategy than just moving volume."Pittsburgh Brewing Co., Pittsburgh, goes well beyond food in its in-store marketing partnerships, linking with 84 Lumber for a joint anniversary cross-promotion that features Iron City Beer and the tagline, "We Built This City," says Tony Ferraro, vice president of sales and marketing."Customers register to win high-end DeWalt tools from 84 Lumber," Ferraro says, adding the partnership arose because "we're two icons in southwest Pennsylvania." He says that Pittsburgh Brewing also cross-promotes around amateur and professional boxing matches, hunting and fishing events, and golf outings.Sampling SellsIn addition to cross-promotions, beer companies have followed the lead of wineries in talking up the beer-making process and in offering the chance to sample their wares on-premise. Chris Trogner, vice president of Troegs Brewing Co., Harrisburg, PA, believes those tendencies are particularly noticeable among micro-breweries."We're trying to talk to the consumer about the specifics of the beer, the characteristics of it; which I think the wine industry has done very well," he says. "The drinkers have become more sophisticated. ... Beer has just as much sophistication, if not more, than a lot of the wines you're buying."Troegs partners with bars or restaurants to hold tastings, passing out 2-ounce samples, information on the brewing process, and an offer to tour the brewery, Trogner says. "That's a lot of legwork, but when you have direct interaction with someone who's enjoying your beer, you can hopefully build long-term loyalty," he says. "That, and brewery tours, are our best advertising by far."Operating on a limited budget, Stevens Point Brewery, Stevens Point, WI, doesn't offer many extras but is trying to work sampling into its mix, says Joe Martino, operating partner. "We do the basics," he says. "We've got table tents, we've got some easel cards, and that's about it -- banners for special events. We're trying to do some tastings, getting people out and having them sample." Major brewers see sampling as a way to build brand loyalty, as well. "We're more into educating consumers about our beers. We want people to appreciate beers -- how to serve beer, how to enjoy beer, the difference in styles," says Hoffman of A-B. "We modeled our beer sampling after the wine in that respect." He adds that Anheuser-Busch has not abandoned its more traditional approach: "We still have the fun, big, blow-out promotions like tie-ins with Maxim magazine for Bud Light."But there is evidence beyond stepped-up sampling efforts that beer companies are going beyond the usual. Rave Media has worked to create on-premise P-O-P that's functional in addition to communicating a brand message, which greatly boosts its placement chances, Groetzinger says.For example, the company created a six-pack style carrier for napkins, salt and pepper, and condiments. "The reason it's so successful is that it helps the servers do their job better," he says. "Everything stays in a nice, neat compact container in the center of the table, and the consumers' eyes are right on that."Miller's "Taste Matters" program sent teams of marketers on-premise to collect data about the habits of beer consumers, particularly the target 21- to 27-year-old demographic, says Michael Shea, senior manager of experiential marketing, at the Milwaukee-based leader."All the data of every interview they do comes back to us through a reporting system," he says. "I can see whether I'm getting a bump in sales," from a particular promotion. "Hot brands are pretty much all born in the on-premise. That should translate into carryover sales, especially in c-stores."C-Stores Front of MindSales in convenience stores have become a greater focus of beer makers in recent years, comprising 26% of beer industry sales, while on-premise makes up 25%, supermarkets 20% and package stores 17%, according to Rave Media's figures. Beer is also important to c-store retailers: Making up 11.9% of all sales in 2004, beer is the channel's fourth most popular item, according to the National Association of Convenience Stores."Beer is obviously a traffic driver," says Lenard of NACS. "The huge challenge for our stores is that they're small, and they're not accordions. They can't expand and contract. ... If something goes on the shelf, something else has to come off."Everybody probably also wants to have all their P-O-P on display, but that's not possible either -- and convenience stores are cutting back significantly in some cases. Circle K has reduced its in-store marketing by "probably 80%," Wilkins says, and uses its own screenprint company to create generic static cling signs with an icicle motif "to communicate the coldness," rather than using manufacturers' own clings. Circle K is increasingly interested in digital signage, he adds.Todd Wente, director of marketing communications for Indyme Retail Solutions, San Diego, says that's true generally of convenience stores and smaller footprint groceries. "They're trying to compete via digital signage specials and promotions on soft drinks, beer and liquors," he says. "That's going to continue to be a growing market."Localize ItStevens Point has used electronic messaging to customize its point-of-sale "literally by account" with help from a vendor called P-O-S Live, Martino says, adding that his company is not alone. "Even the big breweries have really pushed a lot of the customization and marketing to their local wholesalers," he says. "When you go to a store and you see a banner that has the bar's name on it, or the grocery store's name, and it says, 'Come here to buy beer,' the wholesaler's actually doing it."That's exactly what Anheuser-Busch does for its mom-and-pop accounts, Hoffman says. "Our wholesalers, they're in the store every day, and they know what's best," he says. "We give them the authority to make those decisions. From those templates, they can then drop in their own package, their own price, their own call-out messaging. It works very well." Anheuser-Busch works directly with chain stores to customize programming, through different cross-sell partnerships, for example.Anheuser-Busch has also created displays to help retailers merchandise the beer section in ways that play down the brand names and focus on categories, Hoffman says, adding that "retailers with 'no-sign' policies are much more accepting" of this toned-down approach.Coors has focused heavily on consumer research with the idea of helping retailers in all channels win market share, Selman says. "There's a lot of opportunity in this category because there hasn't been as much work done as there has in other categories," she says. "Our shoppers approach the channels differently and have different reasons why they're buying in those channels."Pittsburgh Brewing has found convenience stores more amenable to less conventional P-O-P, Ferraro says. "Whereas with groceries, it's prearranged," he says. "This is what you can do; this is how you can do it."But Groetzinger says c-stores, particularly newer ones, are moving in that direction. "You're working more with the store up front, rather than just sending them a picture and saying, 'Isn't this pretty?'" he says. "They don't want their beer coolers cluttered with stickers because the consumer can't see the beer. There's been a big trend in c-stores toward hanging displays, window displays, so that the store décor itself is not getting cluttered."John Chappell, senior vice president and director of marketing at U.S. Beverage, Stamford, CT, says he works with both independents and chains, and believes micro-brews have had an easier time finding space in all channels as their sales have grown in the past decade. "You have seen bigger displays for craft beers, and more of them," he says. "A lot of these craft beer companies are very small, so the marketing aspect is maybe less intense or less professional. That's starting to change."Big Brewers Flex Their MusclesLarger brewers still typically have the advantage when it comes to targeted in-store marketing, whether tied to specific holidays, ethnic groups or licensed properties such as athletes or sports teams, according to brewers of all sizes.Anheuser-Busch has enhanced its Christmas season efforts to compete with liquor companies; cross-merchandised with Hispanic-oriented brands like Goya; and worked with Dale Earnhardt Jr. and NASCAR, among other sports heroes, to build its brand, Hoffman says. "There's nothing more powerful than those team associations. That continues to be a big focal point for us," he says. During holiday time, Coors tries to leverage its diversity of brands, ranging from the flagship, to Killian's to Molson and Blue Moon, Selman says. The company has "dedicated groups" targeting both African Americans and Latinos, she says, while on the licensing side, the NFL and Super Bowl remain central. "That's an important property for us," she says. "Because [football] is an occasion for the consumer, we want to tap in."But others say they're not equipped to go beyond a basic campaign. "We don't necessarily have the means or the marketing budget, or the ability to change things on a quarterly or monthly basis," Trogner says of Troegs. "The big guys, mass marketing beers, they're looking to appeal to a mass audience and have the means and the budget to do that. We try to build a consistent image for the brewery."U.S. Beverage believes Black Dog Ale might reach the point where breaking it down makes sense, but that time hasn't come yet, Chappell says. "Right now, we're focused on building distribution," he says. "The program will get more sophisticated and detailed at the right time. ... We think Black Dog has that brand power and potential to go beyond just another craft beer."Martino of Stevens Point speaks of no such ambitions. "We're just a little guy trying to survive against the big boys," he says. "We're just trying to get our little niche."

Category Report: Beer Merchandising

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