Beer sales falling flat

Beer sales falling flat as wine, other beverages grow in popularity

Sunday, August 06, 2006

By Len Boselovic Pittsburgh Post-Gazette

"SOPHISTICATED BEER DRINKER."

If the above phrase leaves an oxymoronic aftertaste on your palate, you have an idea of what beer makers are up against.

U.S. beer shipments last year were flatter than a stale ale, falling

0.1 percent according to the Beer Institute. The industry group says shipments to the U.S. market -- which accounted for about 86 percent of overall business -- declined 2.2 percent to 178.8 million barrels. The drop was offset by a 7.2 percent increase in imports and an 8 percent increase in exports.

Shipments fell in 30 states including Pennsylvania, where they declined less than 1 percent to 8.6 million barrels.

Meanwhile, the Wine Institute reports wine consumption grew 5.2 percent in 2005 while the Distilled Spirits Council says sales rose 2.9 percent based on the volume of alcohol sold.

Marketing experts say the disparity indicates the degree to which wine and distilled spirits producers have capitalized on changing consumer tastes. Drinkers are more sophisticated, willing to try something new, and looking for different beverages that are appropriate for different occasions.

More importantly, they don't want to be seen drinking the same thing as everybody else.

Brewers, long criticized for advertising that targeted the lowest common denominator, are finally realizing that a crucial market is more sophisticated than their baby boomer parents.

"This twentysomething is so different from anything we've seen before," says Judy Ramberg of Iconoculture, a consumer research consulting firm. "They don't want to be seen as a guzzler, a dumb guy, six-pack drinker. They want to be seen as a connoisseur."

The beer industry created those perceptions with high-priced advertising: Old Milwaukee's Swedish Bikini Team, Miller Lite's "Catfight" ad featuring two scantily clad women trying to resolve the "tastes great, less filing" debate, and Coors Light's bikini twins.

"When you drink a lot of wine, you're refined. When you drink a lot of beer, you're just a beer drinker," says Michael R. Solomon, an Auburn University professor whose specialty is consumer behavior.

Perception is only part of the problem. While major brands such as Budweiser, Miller Lite and Coors Light still dominate the market, all the growth is coming from craft brewers and imports. That reflects what Mr. Solomon calls "some sort of boredom with the major brands." Drinkers want something unique, something that makes them stand out.

"Domestic beer occupies this territory of being ordinary, every day," says Jim Forrest, vice president of Synovate, a market research firm. "It's hard to get incremental growth when you're perceived to be ordinary and every day."

Mr. Forrest says wine and distilled spirits producers have done a good job of fashioning strategies around occasions to consume their products. Craft and import beer producers have done the same, he says.

The importance of appealing to more discriminating, higher-brow tastes is evident in the distilled spirits industry. While overall sales grew

8 percent last year, sales of premium products grew at a double-digit clip, says David Ozgo, chief economist for the Distilled Spirits Council. Consumers view a $30 or $40 bottle of vodka as an affordable luxury and "tend to want to drink better," he says.

Brewers are catching on. To tap demand for specialty brews, Anheuser-Busch introduced Beach Bum Blonde Ale this summer, the fourth in its lineup of seasonal beers. "Beach" and "blonde" may conjure images of previous advertising, but the marketing literature takes the high road, highlighting the ale's "rich golden color, pleasant hop aroma and slightly spicy and malty taste."

The industry hopes to capitalize on more discriminating palates through its Here's To Beer campaign, an initiative spearheaded largely by Anheuser-Busch. Advertising features Spike Lee and other famous people describing who they'd like to share a beer with.

"You want to romance the product. The young consumer wants a variety of experiences with their drink," says Kevin Sproule, general manager of Fuhrer Eagle Sales and Service, the South Side wholesaler of Anheuser-Busch products.

The St. Louis brewer has stakes in two craft brewers -- Redhook Ale Brewery of Seattle and Portland, Ore.-based Widmer Brothers Brewing. More recently, it paid $82 million for the Rolling Rock brands, beers that are marketed nationally but retain a cult following because of Rolling Rock's green bottle.

Ms. Ramberg says Anheuser-Busch realizes it has to grow by increasing its portfolio of specialty products, not by getting more people to drink its flagship brands. The danger is that the specialty brands will lose some of their appeal if drinkers realize who's making them.

"If beer drinkers find out they're involved in some of these craft beers, they'll lose all of their cachet," says Ms. Ramberg, a Heineken drinker.

Mr. Forrest disagrees, arguing many drinkers don't connect the dots. He says many people in the industry don't realize Blue Moon Belgian White is made by Molson Coors, the world's fifth-largest brewer. Protests from diehard Rolling Rock aficionados notwithstanding, the iconic brew should give Anheuser-Busch a buzz.

"From a consumer standpoint, as long as they stay true to what that brand represents ... they'll still have the following," Mr. Forrest says.

There are some signs the industry's new approach is paying off. Nearly half of the 250 bartenders and bar managers surveyed recently by Synovate are forecasting domestic beer sales will top 2005 results, while only one out of 25 forecast a flat to light year for beer.

"Bartenders may be reacting to the domestic beer industry's renewed focus to appeal to a wider range of consumers and their innovative strategies to make beer consumption more palatable," Mr. Forrest says.

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(Len Boselovic can be reached at snipped-for-privacy@post-gazette.com or

412-263-1941. )
Reply to
tomkanpa
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The article would have been more effective - and accurate - if it had focused more on what's happening within beer sales. Beer sales may be flat overall, but there are significant shifts occurring within the segment that don't fit with the article's premise that beer = unsophisticated. Craft beer and quality imports are gaining market share while mainstream beer is losing or flat. That would confirm the article's contention that drinkers are becoming more sophisticated. It errs hugely by lumping all beer together.

-Steve

Reply to
Steve Jackson

The comparison of beer to wine and spirits is off because the writer didn't elaborate on the causes of the rise of sales of wine and spirits. Wine is going through a major change as the US and Australia become the major producers. They grow grapes in areas with better weather and more sunny days than Europe and mid-level producers have a larger supply of good quality varietal juice for blends. As a result, where you once either bought a French varietal for $25 per bottle or a blend (like Gallo chablis) for $5 per bottle, you can now buy a good merlot or chardonnay for less than $10 per bottle. As for spirits, going to a liquor store is like going to a bar with 50 beer taps. A huge market has developed for flavored vodka, gin, and rum, as well as liqueurs and pre-mixed drinks.

Compared to this, the major brewers have been sitting in place, relying on their flagship products and old strategies. I don't expect them to stop being the big three, but I don't see how they can reverse their losses in the beverage trade without big changes.

Tom W

Reply to
Tom Wolper

A-B has been experimenting quite a bit of late so they aren't exactly sitting in place. ;^)

I'd certainly like to see SAB Miller and Coors/Molson get off their duffs...

Reply to
Bill Becker

I know A-B's making an effort, but I haven't seen any new product, so I assume it's not that serious yet.

Tom W

Reply to
Tom Wolper

They've put out a few seasonals like(currently) Beach Bum, Jack's Pumpkin Spice, Winter Bourbon Cask Ale and a few others. That's wayyyy thinking outside of the box for them. :^)

Reply to
Bill Becker

A-B has been messing with stuff for at least a decade, and I'm not just counting crap like ice beer. Michelob amber bock has to be getting close to

10 years old now, and there have been many other attempts over the years. The big problem with A-B's efforts is that they have tried too much to chase after fleeting trends, rather than finding exploitable niches.

Coors already has, and they've had some reasonable success. It's faded sharply in recent years, but they did have a pretty good run with Killian's Red which, while far from a spectacular beer, was significantly different than their standard offerings. And Blue Moon Belgian White seems to still be clipping along just fine, and isn't a bad beer.

Then again, those beers hit the market a dozen years ago or better, and there hasn't been much new since then.

-Steve

Reply to
Steve Jackson

Would that "duff" be Henry K. Duff's Private Reserve?

Reply to
Bud

Miller certainly did. They bought Celis in Austin, TX. :0o

Reply to
Douglas W Hoyt

Miller then proceeded to run Celis into the ground, while Pierre Celis went back to Belgium, had Celis White brewed there, and has since introduced some other beers, including the splendid Grottenbier.

Since then, Miller sold off the former Celis brand to Michigan Brewing, who revived the brand. Miller is (as noted above) now part of the international SABMiller brewing combine, with major operations in the USA, South Africa, and portions of Europe, including Pilsner Urquell in the Czech Republic.

Reply to
dgs

dgs wrote: : Douglas W Hoyt wrote: : :>>>>>>I'd certainly like to see SAB Miller and Coors/Molson get off their :>>>>>>duffs... :> :> Miller certainly did. They bought Celis in Austin, TX. :0o : : Miller then proceeded to run Celis into the ground, while Pierre Celis : went back to Belgium, had Celis White brewed there, and has since : introduced some other beers, including the splendid Grottenbier. :

I seem to recall that their announced intention, at the time, was to let Pierre maintain complete control of the brewing process while they (Miller) would improve the distribution. In order to do this they had to withdraw the product from current distribution for x amount of time (was it 6 months, a year?). It sounded weird to me at the time. Needless to say it disappeared from the shelves nefer to return again except for local distribution around Austin, TX.

That was around '95 IIRC.

Reply to
Bill Benzel

Ouch!

I was pleased last weekend to drink a Celis (Michigan) Grand Cru from my Celis (Austin) Grand Cru glass. It seemed a bit grainier, not quite as smooth, and a tad lighter (body and color) than the original version, but still GOOD.

Reply to
Joel

I'm sure A-B is in agreement.

Reply to
Bill Becker

I'd be delighted to see them go belly-up!

vince norris

Reply to
vincent p. norris

A-B was included in spirit, if not explicitly.

vince norris

Reply to
vincent p. norris

And don't forget that Pierre is now *back* in Austin, working with Real Ale (okay, that's Blanco, about 30 miles from Austin, but close enough), and we should have Celis designed and brewed beers on our shelves here shortly. When that happens, I'll be glad to arrange some trades to tide y'all over 'til Real Ale is ready to move up to wider distribution. (Might be a while; they've just quadrupled their capacity and have already maxed out trying to keep their current accounts happy.)

dave

Reply to
dave kelley

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