The Squeeze is On

Despite continued sales in beer, wine and liquor, and a seemingly growing and liberated approach to state and federal regulations, the merchandising minds for beer, wine and liquor products are feeling pressured. Retailers are clearing the aisles; distributors in some cases are beginning to take P-O-P matters into their own hands; and a steady continuation of new products has created a retail war for shelf space (malternatives aren't leaving, and the trend of low-carb beers has flooded the market).As a result, marketers are focusing on fewer pieces with higher quality and more innovation. But opportunities still exist if marketers respond to the changing landscape, says Frank Polley, director of customer marketing and marketing services at Labatt USA, Norwalk, Conn. For instance, tougher restrictions on cigarette sales and the addition of gasoline pumps at club and mass merchant stores are diminishing sales in c-stores' top two categories. That opens the door for beer to gain some market share and add presence, Polley says. "The key is to have our brand teams thinking differently about each channel as they develop programs and decide where they'll be used," he says. "In the past, we could do one big sweepstakes promotion and force it through the channels. That's difficult today, because it's not as relevant to grocery and c-stores. The buyers want to know how the program increases the basket share or drives customers to the store." However, not all programs address those questions, he says. "We need to create different tactics for each channel to drive the overall strategy."Growing Market The market is definitely worth fighting for. Overall sales rose for the fifth consecutive year in 2002, according to Adams Beverage Group, which publishes an annual handbook of statistics (2003 sales were not yet available at press time). Retail sales climbed 6.3% in 2002 to $137.2 billion. "The future looks bright, with all three segments forecasted to grow in 2003," the company's report states.All three segments (beer, wine and spirits) gained in case volume and retail sales, according to the report. Total spirit consumption climbed 1.8% in 2002, to 153 million 9-liter cases. Wine consumption rose for the ninth straight year, increasing 3.3% to 241.6 million 9-liter cases. Beer grew for the seventh straight year, rising 1.8% to 2.8 billion 2.25-gallon cases."Consumers' unquenchable thirst for high-end premium products contributed to the upswing," says Bob Keane, spokesperson for Adams Beverage Group. High-end products, especially imports, continued to outperform the overall business across all categories. "This trend began to surface in the roaring '90s and will most likely endure," he says. Flavor and mixability also were cited as growth factors. Imported and varietal wines are posting the largest gains. Imported wines grew at a considerably faster rate in 2002 (up 9.5%) than domestics (up 1.7%), although the base for domestic products is considerably larger. In the beer category, malternatives, lights and imports saw the largest percentage growth. "An influx of new product introductions fueled malternative growth even as some were pulled or scaled back," the report states. Products Are ProliferatingIt seems like old news to mention the popularity of malternatives, but the truth is they do continue to grow. Allied Domecq has found success with its launch of Kuya Fusion Rum, which mixes rum with cola. Miller Brewing Co. teamed with Skyy Spirits and released an offshoot brand of its Skyy Blue malt beverage -- Skyy Sport. The citrus malternative with a hint of cranberry is targeted to the low-carb customer. It offers 15 grams of carbohydrates per serving. The low-carb craze is a burgeoning trend in beer. Anheuser-Busch paved the low-carb way with its Michelob Ultra beer, while Coors Brewing Co. launched its Aspen Edge low-carb beer in March 2004 with a full mix of P-O-P. The low-carb beer isn't just contained to the big 3: Miller, Coors and Anheuser-Busch. Long Beach Brewing Co. introduced a low-carb malt beverage, Thin Ice, with just one carb and 90 calories. Flavored vodkas are likewise in the limelight. Larry Kass, corporate communications manager for Heaven Hill Distilleries Inc., Bardstown, Ky., says they "definitely have become a major trend." This maker of such brands as Evan Williams whiskey just added the sixth, seventh and eighth flavor extensions to its Burnett's vodka. "Last year there were a few, and now it's Katie bar the door," Kass says. "They represent an opportunity to add to brands with new audiences and gain more facings."A similar surge in product introductions also is adding to the wine category. Consequently, the wine market has moved in two directions, says Sally Osborne, U.S. brand manager for Hardys at Pacific Wine Partners in Gonzales, Calif. "The programs I see are either big or small -- there's not much middle ground today," she says. "It seems to be either neckers and coupons or high-quality, mass display pieces. Single and double case cards appear to be used less across the category."Todd Kennedy, senior brand manager for Korbel champagne at Brown-Forman Wines, Louisville, agrees. "Chains are using less and less P-O-P from a case card standpoint," he says. "They're looking for nicer display pieces." As a result, the company is "looking at the dollars we're investing" and trying to limit the amount of such temporary items as case cards and pole toppers so it can focus on larger pieces, he says.Mike Mouvet, vice president of corporate off-premise for Allied Domecq Spirits North America in Westport, Conn., puts it simply: "Grocery stores are beginning to use less and less P-O-S materials. The traditional materials -- case cards, pole toppers, etc. -- are not useable in a chain environment."Accent on Innovation"Real estate is more precious than ever, because the chains are not growing as fast as the proliferation of new products," says Jeff Muller, national promotions manager for the table-wine division of Canandaigua Wine Co., Canandaigua, N.Y. "The quality of the pieces being used is growing, and innovative secondary-placement solutions are needed. Consumers are responding to what is unique. As a result, we're looking at anything that enhances display aesthetics while improving the shopping experience."Adds Labatt's Polley, "We're moving away from mass displays and ensuring the ones we create are as innovative as possible, because, otherwise large pieces aren't used." An example is the company's general store display for summer, designed as a semipermanent piece. "We're trying to pare down the number of elements and focus on what works in each channel." Neal Stewart, senior brand manager for Pabst Blue Ribbon and Rainier at Pabst Brewing Co., San Antonio, Texas, agrees that the market for merchandising pieces is evolving. "We're using fewer thematic pieces and more permanent point-of-sale materials," he says. "Chains aren't using as much, so we're focusing more on seasonal themes that stay up for three or four months versus a short-term sweepstakes approach."Tim Peters, brand manager for Alice White and Vendange wines at Canandaigua Wines, says, "retailers want more creative ideas. They're allowing less into the aisles, and they want to lower the amount on the shelves." He believes his brands are well-positioned for the changes, saying that Vendange has become a dominant brand with more leverage, and that Alice White has been growing rapidly. "The bigger a brand becomes, the more cases the retailer is willing to put on the floor, and the bigger the display can be."Set 'em Up, Keep 'em UpAs P-O-P quality rises and the total number of pieces falls, companies are looking to create longer-term displays. Heaven Hill, for example, is using more wooden racks, Kass notes, to reflect the products' quality and gain more time in the aisles. Its Evan Williams whiskey brand has had good success with a rack playing off the use of wooden barrels, to suggest the distilling process. "We're trying to use materials that are economical and consistent with the brand character to get noticed," Kass says. "Wooden pieces get up in the store, and they stay up. There's a holiday mentality of wanting to dress up the stores more, and permanent wooden displays provide that upscale feel."As these displays become more sophisticated and expensive to produce, though, gaining placement becomes more critical. "Ease of assembly is a high priority when we're developing new pieces," says Pacific Wine Partners' Osborne. Heaven Hill's Kass agrees. "They have to look good and work, but they also must get into the store and be easy to assemble and maintain in the first place," he says. Even the products that sell quickly by the case require more attention. "The products that churn on the floor need to be dressed up with strategic [P-O-P] pieces that also work well from an assembly and maintenance perspective."Canandaigua is working to ensure shipper displays are easy to create, says Peters. "We're making our shippers into billboards by incorporating the point-of-sale materials into the box graphics. We're even putting the point-of-sale pieces into the shipper or attaching the neckers, so there's almost no assembly needed when the shipper is opened."Tapping Into Distributors' ExperienceBecause distributors often as-semble and maintain P-O-P, and work with retailers to ensure placement, marketers first must sell their wholesaler networks on the validity of the pieces and make certain these distributors know how to assemble them. "They're good extensions and advocates for us," says Kass. "They're good filters, too, because they know their markets." That feedback helps tweak upcoming programs to ensure efficiency.Because of this close relationship between wholesaler and local retailers, wholesalers want more control over some aspects of the creative materials to customize pieces for local markets. "Distributors are printing a lot more of their own pieces," says Pabst's Stewart. "They like to have creative in their own hands." Retailers are encouraging that local control, as well as other customization for their own needs, adds Allied Domecq's Mouvet. "More pieces are being made customer-specific," he says. "National customers are looking for P-O-S that they can run in all their markets that is tailored to their store 'look and feel.'"Sensory P-O-PMarketers say they are receiving a strong response to bells and whistles. "Visual creativity, motion, sound, any type of stimulus is popular," says Kass. "The challenge of grabbing attention is the same, but the environment has changed. People are more savvy and less receptive to ideas that worked in the past, and the clutter overall is higher. So it's tougher to get noticed."Alcoholic-beverage marketers also are being pushed into more general competition with all other consumer-goods marketers, notes Kennedy. In particular, displays in the snack aisle and related fields are being used as a yardstick to determine what is upscale, and their use of high-tech ideas and higher quality are noticed. "Those comparisons are forcing us to take new approaches to remain comparable. As a result, retailers are more receptive to motion pieces than other types," says Kennedy.Marketers also are looking to new locations and ideas that don't intrude on the clean-aisle policies. Pabst, for instance, is using more danglers because they get out of the aisle and offer a longer life span, says Stewart. Floor clings also provide an alternative, especially as they expand their capabilities with high-tech options, adds Polley. "We're testing a lot of different ways to make an impact in the aisle, and floor graphics offer potential, because you can attract consumers' attention while they're walking."For the same reason, aisle violators are gaining attention. Some chains are using generic versions to increase their ability to manage their shelves, and marketers are considering ways to expand on that concept. Labatt, for instance, has used a three-dimensional cooler cling for c-stores featuring a hockey puck that appears to be breaking through a sheet of ice. "It really attracts attention and impacts impulse purchases," Polley says. "We need to do more pieces like that. When you walk down the cooler aisle in the store, nothing stands out except the cooler handles." Cross-Merchandising Gains Cross-merchandising and partnering, according to the marketers interviewed, can gain off-shelf space by expanding the shopping basket through impulse purchases or the combined sales of products that otherwise might be bought separately. Canandaigua, for instance, saw strong results when Vendange joined with Butterball Turkeys for a holiday display. A large merchandiser featured two moving hands clinking glasses, while a smaller version offered spaces for Butterball's dressing and broth products, for which a coupon was supplied, along with space for wine on the bottom. "The concept helped consumers buy more of both products, and that's what retailers want to see," Peters says. The combination of larger and smaller formats also was critical, he notes. "We need to provide retailers with more options and ideas today for using displays flexibly."Allied Domecq also has become more focused on partnering opportunities, says Mouvet. The program he terms most successful in 2003 came from partnering with Russell Stover Chocolates at Valentine's Day. Chocolates were packaged with money-back coupons on the purchase of bottles of Kahlua. In some instances, recipe cards and magnets also were offered, with chocolates suggested as a garnish. "It was a natural fit for the two products to be paired together in the cross-merchandising promotion," Mouvet says.Korbel has found strong success through cross-merchandising its products in supermarket floral departments. It uses a wire rack that offers space for flower bouquets to be displayed. Now in the third year of production, the rack offers space for four cases of champagne, up from two and then three cases in previous years. "It's been tremendously successful, because it's efficient and has a small footprint," Kennedy says. "Floor managers love it."Labatt's Polley sees potential for more cross-merchandising. "The deli counter offers a big opportunity that few companies are tapping into for the beer category," he says. "If you consider the time that's spent waiting to be served, especially at such an early entry point to the supermarket, it represents a tremendous opportunity to grab their share of mind and generate an impulse ring."Packaging: From Cork to BoxAs P-O-P adapts to the new realities, so too does packaging. Some companies are offering value-added packs, such as including wine charms. Last year, Alice White used an "Outback Pak" promotion with a free sample of another varietal along with Alice White Chardonnay. This year's version (which ran in March and April) included a trial-size bottle of Alice White Lexia in a holster-like necker. About 40,000 cases of the combined bottles shipped, Peters says. "We're doing more added-value programs, and they work very well."Packaging itself also is evolving, in ways that might surprise traditionalists. "Our options for new packaging with wine products are really limited," points out Canandaigua's Muller. "Our packaging is limited to a cork, bottle and label." Even so, Canandaigua has leveraged two of those elements, revamping its Alice White labeling as more flavors were added to make it easier to distinguish among types of wine. The company also has begun using its corks for promotional purposes. Those efforts began last year with the "Message in a Bottle" program for Talus, in which one in 12 corks were colored purple to signify they were good for prizes and entry into a sweepstakes. This spring, the company launched "Can You Spell Vendange," in which each of the letters in the brand's name were imprinted on corks, allowing consumers to collect a full set to receive prizes. "It's created a great way to generate consumer loyalty and allow customers to look beyond price," says Peters.But corks aren't a given these days for wine. Because of their expense and difficulty of use, more manufacturers are looking at screw-cap tops. And now, a significant trend is developing that is changing the basic bottle.A variety of companies have begun packaging upscale wines in three-liter boxes. The format reduces packaging costs, so pricing can be lowered, and it also allows the wine to stay fresh after the package is open, according to Pacific Wine Partner's Osborne. The boxes are easier to store and carry to outdoor activities, with no breakable glass to worry about. The casual design also takes away some of the "ceremony intimidation" that wine can achieve, she notes. "This is a really hot format right now. It's gotten a phenomenal response," she says of the company's own Black Box, Banrock Station and Hardys Stamp of Australia brands. The new format requires new display pieces to take full advantage of the design, she notes. "It's really a whole new category, and we have to help retailers determine where best to put it."Labatt also has introduced a new packaging approach, with its testing of a 20-pack triangular-shaped carton. Called the Labatt Blue Mountain Pack, it was introduced last July to about half the country. "This is a real packaging innovation," says Polley. The package works as its own P-O-P, with large sloped "billboard" sides that allow an array of unique stacking designs."Packaging is the number-one vehicle, especially in c-stores," he points out. "Packaging makes a great way to deliver your message." He says he's amazed to see how many companies don't consider the various ways their package can be positioned on the shelf, especially in a c-store cooler. "Six-packs can sit either the long or short ways, but many only have their message on one side," he explains. "When the other panel faces out, the consumer misses it. We will continue to look at innovative solutions for presenting our message."State Regulations LooseningStriving for innovation will remain a credo in the off-premise alcoholic-beverage market, as brands proliferate and space continues to be restricted. Not even the vast variety of state regulations represent a bigger challenge. Most marketers indicated they see restrictions either remaining at their present level or lessening, and they have systems in place to ensure they stay current in each state. "State and federal laws are loosening up," says Allied Domecq's Mouvet. "Spirits, wine and beer are becoming more accepted, and states are becoming more liberal to their sale. There is movement in several states to open more licenses to chain stores as state regulations are changing."Heaven Hill's Kass agrees. "More changes are occurring in our market due to consolidation in wholesale and retail channels than due to regulation," he says. "Retailers want more uniform displays and product line-ups. That has a bigger impact."Finding new ideas that can turn the consumer's head -- and that ensure a program is assembled in the aisle -- remains a top priority. "Retailers are looking for innovation and ideas that are 'out of the box' and something that is different and eye-catching," says Allied Domecq's Mouvet. Retailers are trying to respond in every way they can. "We are doing some things in our Australian markets that I'd like to apply to our brands," says Pacific Wine Partners' Osborne. "We're definitely looking at new ideas for labeling and encouraging customer recall." Canandaigua's Peters agrees. "We're always looking for new ideas, and there are some cool technologies on the horizon," he says. "There are more suppliers trying to outdo each other all the time."

The Squeeze is On

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