When did beer become such a contentious category? Lately we’ve seen craft brewers taking on the major suppliers in the “craft vs. crafty” debate and headlines about the so-called death of big beer. Wholesalers and retailers are grumbling about the challenges of managing the proliferation of SKUs, and consumers are being accused of abandoning the category and flocking to spirits and wine.
Change is always painful, and the beer industry is changing at a rapid pace, which is likely the source of all this noise. We’re wrapping up our BeerTAB report now, and let’s just say it’s not your father’s beer industry. Some thoughts on the hot topics:
- Craft vs. crafty—In our research we adhere to the Brewers Association’s definition, with an understanding that the specs may evolve as the craft industry does. The Brewers Association attempted to draw attention to “crafty” beers and demand transparency from major marketers late last fall, posting on its website a “blacklist” of companies and brands that do not fit its definition of craft yet are marketed as craft and do not disclose the parent company on labels. The list has since been removed from its website. Undeterred, the marketers of Blue Moon have recently affirmed the beer’s origin as a craft brew created by a Belgian-trained brewer and continue to roll out seasonals and specialty beers under the label. Now the industry can debate all it wants about what is a “craft” beer, and beer bloggers and aficionados will discuss it over many a brew, but the consumer will ultimately determine what is and what is not craft. In the meantime, we at Technomic are doing some research to gain critical consumer insights on their perceptions around the term “craft.” Stay tuned and let me know if you are interested in this topic as well.
- Requiem for big beer—Three words: not so fast. Yes, the major brands are challenged, but when you consider that the mainstream domestic and light domestic segments account for 71 percent of total beer volume and 66 percent of retail dollars, according to BeerTAB, you realize that business is not drying up overnight. And within the major domestic segments, product innovation is yielding offshoots that are achieving significant case volumes. The caveat is that the lifecycle of these offshoots is often characterized by quick out-of-the-box performance followed by decline (think Bud Light Lime). So the big brewers will keep the hits coming, bringing them to market in quick succession and turning their attention to the next innovation once they start to slack.
- SKU proliferation—Indeed, brewers of all sizes have been busy. We tracked more than 120 new brews coming to market in 2012; so far in 2013 we’ve recorded 60 in our New Product Tracker in our DRINK online database, and the fall will certainly bring a new round of seasonal brews. The number of breweries also increased by 400 facilities last year, and more are opening in 2013. SKU proliferation will continue, challenging wholesalers to find room on their trucks and retailers to determine whether to make room in their limited shelves, refrigerators and tap handles for new offerings. Strong category management strategies are the only way to benefit from this influx of innovation. Retail store operators have had a good handle on category management best practices for some time, and the on-premise channel would do well to get serious about it also. Category management programs require supplier and wholesaler support, so we at Technomic are working on some adult beverage category management initiatives that we hope to share with the industry soon.
- Consumer abandonment—Today’s consumer drinks more beer than any other adult beverage. The volume numbers bear it out and so do our consumer insights. That said, today’s consumers, particularly Millennials—who are adopting wine and spirits at a younger age than preceding generations did—also drink wine and spirits frequently. Beer is now in competition with spirits and wine in a way never seen before, but the competition is really for occasion. In looking at our insights and observing consumers, I’ve found imbiber preferences vary by occasion and by the whim of their flavor preference in that particular moment. The new normal is that beer, wine and spirits are each vying for consumers’ attention and dollars every time consumers make a drink decision.
Savvy beer pros at every level of the industry see the opportunities in each of these situations. Change is inevitable—it’s how you manage it that determines whether your brands succeed.