Category Report: Beers Getting Crafty

As more consumers increasingly thirst after new craft brews, giants Anheuser-Busch, Miller and Coors are launching their own specialty beers to compete with craft breweries, import brands and other niche players. And the battle is being played out in-store, because craft brewers rarely can afford mass advertising.The niche players might have a fraction of the volume of the big three, which generate about 85% of the category's revenue, but they've got momentum at their back, experts feel. "It's a difficult situation for most of the major players," says Roman Shuster, research analyst at Chicago-based Euromonitor. "They're fighting tooth and nail to protect these large brands."While the beer category has been largely stagnant with sales of about $78.6 billion in 2006, specialty brews are slowly but surely eating into sales of conventional, mass-market brands, according to Euromonitor. Sales of economy lager were $14.7 billion in both 2006 and 2001, while sales of dark beer climbed to $2.6 billion from $1.9 billion in 2001. What's more, sales of Weissbier nearly doubled to $530.8 million during the same period and sales of amber ale hit $395.5 million, up from $230.6 million in 2001, Euromonitor reported.Going In-Store The rapid growth of specialty offerings is changing the way brands and retailers regard the category. Instead of relying on TV commercials, the marketing focus of craft brewers is largely at the point-of-purchase. "They'll throw promotions, like a beer tasting at a local bar. They'll educate the consumers about their brand and give them a chance to see the product in the grocery store and purchase it," says Euromonitor's Shuster. "The smaller players spend a larger percentage of their budget on point-of-sale than the big guys do," says Rod Groetzinger, president of Rave Media in Hilton Head, SC. "They're not big enough to spend $80 million or $100 million on national television. Therefore, that's all they've got."For many specialty players, P-O-P and merchandising campaigns are all about getting consumers talking about the products. Redhook Ale Brewery, with locations in Woodinville, Wash., and Portsmouth, NH, sponsors "keep the glass" promotions at bars to get people to remember its craft beers, says Aaron Ward, marketing coordinator. Other giveaways also are effective. "It tends to reinforce that 'these guys are cool guys; I just got a free hat out of it,'" he says.The company relies on neon signs, hanging wall signs and unique tap handles to advertise its beer to bar patrons. The signage for its Long Hammer brew includes a big sledge hammer on what looks like a granite background and the tagline, "Everything great was built with a long hammer." Through an alliance with Widmer Brothers Brewing, it also markets Widmer's Hefeweizen in stores using a giant Widmer bottle that wraps around the base in front of a lemon stand, communicating that the product should be consumed with a lemon. A basewrap display depicting a giant Widmer bottle also delivers the message.It's not unusual for craft beers to start out as draught-only, then move to retail once they have established a following. That's the pattern Anheuser-Busch, St. Louis, has followed with seasonal beers like Winter's Bourbon Cask Ale or Beach Bum Blonde Ale. "We created eye-catching tap handles, glassware and coasters to grab consumers' attention and built buzz for these beers through word-of-mouth," says Keith Levy, vice president of sales and retail marketing at Anheuser-Busch.Going Local"For the big three, P-O-P is becoming very localized," says Rave Media's Groetzinger. Except for national P-O-P campaigns for the NFL and NASCAR, he says the giants are customizing in-store displays at the store level. This doesn't come as a surprise, since craft brews generally are regional favorites and play up their local tie-ins.Many local and regional brews have no problem negotiating display space with retailers once they have developed a following. "The retailers are very approachable to those local beers," Groetzinger says. When Yuengling beer came to Hilton Head from Pennsylvania, where it was made by the family-owned brewery D.G. Yuengling and Son, "It got 100% distribution in a week," because so many Hilton Head residents are transplants from Pennsylvania, he says.Anheuser-Busch now offers specialty beers like Michelob Marzen and Jack's Pumpkin Spice Ale, depending on the season, as well as nationally distributed organics Stone Mill Pale Ale and Wild Hop Lager. "We aim to make choices available to adult consumers regardless of the drinking occasion," says Levy.The company is also taking a closer look at shoppers who prefer local retailers to chains. "It is imperative that we understand the demands of consumers at each individual location and work with the operators to utilize marketing displays and messaging that appeal to unique consumers," according to Levy.Anheuser-Busch also is expanding its local specialty beer program, which caters to regional taste preferences. The company launched the program in March 2006, brewing Demon's Hop Yard IPA in Merrimack, NH, and Burnin' Helles in Columbus, OH. Since then it has added four more, including three launched in April: Ascent 54 out of Fort Collins, CO, Tarpon Spoon in Jacksonville, FL, and Skipjack Amber from Williamsburg, VA. The beers are available on draught on-premise, featuring eye-catching tap handles and supported by branded glassware and coasters, Levy says. The company also uses sampling and other promotional events.For another major brewery, going local didn't spur new success as much as creating a new flavor profile altogether. The new Miller Chill, brewed with a hint of lime and salt, has been a big summer launch for Miller Brewing Co., Milwaukee. Large endcaps and displays hit supermarkets, bars and liquor stores focusing largely on its bright yellow and green festival packaging. "The package has been tremendously important to our supermarket and c-store sales," says Chuck Hardinger, director of brand identity and packaging development. "It says, 'This looks like a fun type of product for sale.'"In general, Miller has moved toward a more "design-centric" approach for its traditional brands such as Miller Genuine Draft. The new package design is "cleaner, simpler, less cluttered," he says. "People are bombarded with so many marketing messages; the time to sit down and relax and have a beer is not the time you want to be bombarded with complexity. The package is very important. It's that moment of truth when the consumer is going to pick it up or not."Going CustomTypically, P-O-P used in on-premise locations tends to be more upscale and highly stylized than supermarket or convenience store displays, Groetzinger says. "Bars are sensitive to their decor. They won't allow you to put up just anything at Chili's. It has to conform to the Chili's look."To play ball, beer companies often use the graphics from a restaurant's menu in their P-O-P to create a unified image with the establishment. Supermarkets, on the other hand, generally don't have a unified theme and aren't as picky about the signs brands and distributors put up. "It doesn't have to use the same colors and logo" as the store, Groetzinger says. But custom signage that names the retailer as well as the brand is becoming more common in supermarkets and convenience stores. "Distributors will include the store logo so [the display] is talking about the store and not just the beer brand."Thanks to just-in-time technology, marketers can print custom signs on demand, says Catherine Widmer, vice president of business development at Brunswick, OH-based POS Live. With no left-over inventory, it offers a significant cost advantage, as well as more flexibility. "We get a better message out," she says."When a brewer or manufacturer has a center-aisle display, anything that is customized and unique has an increase in sales lift of up to 800%," Widmer says. It helps to direct the message down to the consumer so that "it becomes an impulse buy." Going for PriceTypically, in-store signage in supermarkets has featured low prices. "Price is key," Groetzinger says. "Everyone is going to discount."That might be true for A-B, Miller and Coors, but it doesn't always hold water with craft brewers. "We have never advertised and never discounted," says Greg Koch, co-founder of Escondido, CA-based Stone Brewing Co., which is projecting sales to climb 40% this year to $24 million.Instead, the company relies on word of mouth and educates retailers on why they should give Stone Brewing Co. a prominent display. Its beer typically makes the "Top 10" list online at www.beeradvocate.com, where its Russian Imperial Stout was recently ranked sixth among the "Top 100 American Beers," Koch says. The most convincing argument to the trade comes down to dollars and cents, he says. "It's simply more profitable," because his beer has a higher price point and offers higher margins than the mass lagers. For the retailer, "It's a quality business decision."Still, not all retailers understand the logic. "Stores will confusingly spend so much energy trying to chase after the very cheapest consumer and spend less energy trying to attract people to things the store will find profitable," Koch says.Koch takes his message that Stone Brewing is better beer and costs more for a reason to independent store directors, who generally are willing to listen, he says. In-store, Stone Brewing's displays tend to be no-nonsense -- simply a classic case stack. The company uses small posters above the cases or on the face of the stack to identify the beer by name and its distinct gargoyle logo, together with an image of the beer in a pint glass.Going Across the StoreCross-promotions from one merchandise category to another also can appeal to the trade. This fall, Anheuser-Busch is offering tailgating cross-promotions with Johnsonville Brats, Kingsford Charcoal, KC Masterpiece BBQ Sauces, Hormel Chili and others. "By positioning beer with complementary products, we are able to help retailers grow the collective market baskets of their shoppers and draw traffic to their stores to ultimately sell more beer," Levy says.Widmer Brothers Brewing, with sales of 270,000 barrels in 2006, focuses on "the lemon ritual" with its Hefeweizen through cross-promotions with Sunkist lemons. "We try to get our beer into the lemon produce section," says Trent Tokos, brand manager. A location outside of the beer aisle helps to set the product apart. That's becoming increasingly productive as the number of Weissbiers grows, he says, noting that the wheat beer category has become much more competitive with Coors focusing on Blue Moon and Leinenkugel marketing Sunset Wheat."It's hard to stand out. That's why the cross-promotions and anything you can do creatively from a display really helps," Tokos says. Most of the company's displays show the pour of beer and the Weizen-style glass. Going GreenAt Alaskan Brewing Co., which sold 106,000 barrels last year, bottleneck and shelf tags help tell the company's environmental story. Noting that poor water quality led to more than 25,000 beach closures throughout the country in 2006, the company created Coastal CODE -- Clean Oceans Depend on Everyone -- and recently participated in a beach cleanup in Yakutat, a fishing community in southeast Alaska.In-store signage, such as bottleneck tags, announces the initiative and communicates that the company is giving 1% of the proceeds from its Alaskan IPA to Coastal CODE. "It's in our point-of-sale materials. We are trying to reach out," says Geoffrey Larson, president of Alaskan Brewing Co. in Juneau, Alaska.The P-O-P campaign includes table tents, coasters and shelf talkers that say, "Enjoy our new Alaskan IPA -- 1% of IPA proceeds will benefit our oceans," he says. "We use big surf boards that tie into the label of our IPA" and attract attention to the product. The company also is selling T-shirts that say, "Making a difference one beer at a time," with $5 from every shirt sale going to the Coastal CODE fund.Local labels also can develop a cult-like following, particularly if they give consumers a reason to embrace a brand. In Alaska, Larson says, "It's all about the environment." The company is hoping its P-O-P effort supporting its IPA and the Coastal CODE program will cultivate a grassroots movement to encourage people "to be a good citizen to the planet," he says. "We're trying to make it approachable for an individual to make a difference."