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    Supermarket GROCERY Business: The beer necessities

    Imports, light products and--thanks to the Atkins diet--low-carb ultra brews are the hot items in the beer case.

    By Richard Turcsik

    This year marks the 70th anniversary of the repeal of Prohibition, but given the current state of affairs, many in the beer industry don't exactly feel like celebrating. So far this year, sales have been flat, hampered by the war in Iraq, an uncertain economy, and, most of all, the weather. A cold, rainy spring and early summer in much of the country has just about made the backyard cookout extinct, taking the joy of downing an ice-cold brew with it.

    "In spite of how well our members market and promote their products, the weather does have a big impact," says Jeff Becker, president of the Beer Institute, the Washington, D.C.-based trade association representing the nation's brewers. "We have been a victim of the weather. The question is, can we rebound through June, July, and August and make up for what were pretty sluggish first and second quarters?"

    "Beer sales have been down a little bit," acknowledges Michael Magnotto, owner of Magnotto's Shop 'n Save in Hermitage, Pa. "Once we get a warm, sunny day, sales will shoot through the roof."

    They're already edging up on the imports. "People will walk down the aisles and see the imported beers and go down memory lane thinking about when they were in Europe or Japan, and buy that particular imported beer," says Magnotto. "They are doing very well for us. We have beers from around the world, and our big sellers are from Ireland, Germany, Belgium, and Mexico. We even have beer from Croatia, which is doing surprisingly well."

    Light imports

    Thanks to the popularity of Corona and Tecate, Mexico is the leading supplier of imported beers, with more than 40 percent of the market, followed by The Netherlands, with Canada a distant third, says Brian Sudano, s.v.p., consulting services, at Beverage Marketing Corp. in New York. "There has been a acceleration of the light segment within the imports, which is consistent with what you would expect when you look at the overall market trend," he says. "On a macro basis, the big standard brands, like Budweiser and Miller, continue to decline, along with the lower-end beers, like Busch and Milwaukee's Best. The trends, from a volume growth perspective, continue to go toward the light beers and the image-oriented brands, including imports."

    One of the more popular imported beers is Grolsch, which is imported from The Netherlands by United States Beverage in Stamford, Conn. "We have a new point-of-sale program that includes a case card with a motion-activated sound chip that says 'Schtop and enjoy a Grolsch' when a person walks by," says John Chappell, s.v.p. of marketing. A key marketing point of Grolsch is that its bottles have a ceramic swing top instead of a traditional metal crown cap. "The bottle opens with a 'pop' sound, and the 'schtop' personifies that," Chappell says.

    Rival Dutch brand Heineken, imported by Heineken USA in White Plains, N.Y., is targeting Hispanic consumers this summer with its Heineken Presents La Leche Tour, a summer-long concert tour aimed at the white-hot popularity of the burgeoning nortec music scene. Nortec is a cutting-edge fusion of traditional northern Mexican folk music and electronic music. Heineken has teamed up with the Sonic 360 record label, and will sponsor a tour stopping in Houston, Chicago, Miami, Los Angeles, and New York. Each event will feature performances by DJ Playboy Zen, a world-renowned nortec deejay, and a live nortec band.

    Beck's en español

    Hispanics are also being eyed by Beck's. The German import has launched an advertising campaign in New York and Miami featuring Hispanic-focused radio spots and outdoor advertising designed by Alturas Communications. "The Hispanic market is very important to us and plays a vital role in our growth strategy for Beck's in the U.S.," says Mike Harrington, executive v.p. of marketing for Beck's North America in Stamford, Conn., a division of Interbrew. "We purposely hired our first multicultural agency, Alturas, to ensure that our product and messages are communicated effectively. We believe that Alturas' radio and outdoor creative reinforces Beck's theme of choosing to live life in a distinctive way, which imparts cultural relevance among Hispanic consumers."

    Citing Simmons NCS 2002 data, Harrington notes that imported beer consumption among bilingual households has grown 26 percent since 1998. To increase its share of the market, Beck's plans to expand its multicultural marketing efforts throughout the year in select cities to develop culturally relevant relationships with consumers.

    While imports continue to fly high, several industry observers have expressed concern that the continuing devaluation of the dollar against the euro will cause the price of imports to skyrocket, sending consumers back to domestic product. Many have already found that they don't have to search the world to find the best-tasting beer—it's often in their own backyard.

    "We sell Iron City beer from Pittsburgh as well as Rolling Rock, which is another local brand, and both of those are doing very well," says Magnotto.

    "The big thing going on right now is the specialty brews, and right here in Utica we have our own brewery, Matt Brewing, which makes Saranac and Utica Club," says Mark Chanatry, v.p. at Chanatry's French Road Market in Utica, N.Y. "Our beer sales on those products are flying. We are big beer connoisseurs here in upstate New York, and the real hot beer up here is Saranac."

    Saranac is truly a world-class beer, having won the Oslo World Beer Festival and numerous other gold medals. "Our product always has to be balanced and drinkable, and that is a big challenge for a small brewery," says Robert Kelly, director of trade & community relations at Matt Brewing Co.

    Seeing the writing on the wall, Matt introduced Saranac in 1985, according to Kelly. "Traditionally we made 'yellow beer' and competed against the giants, but there was no future in that kind of thing," he says. Today Black and Tan, Adirondack Amber, Pale Ale, and Black Forest Porter varieties are marketed under the Saranac label, along with special holiday offerings. "We offer an above-premium product and have a variety of distinctively different beers that appeal to the 21- to 45-year-old age group, the higher-income folks, but we do not price it at a 'specialty brew' price," he says. "Even though we are making a specialty brew, we're more value priced."

    Prohibition party

    One of Matt's most popular products is Utica Club, which has the distinction of being the first brand of beer in the United States to be sold legally after Prohibition, getting license D-1 from the Treasury Office at 12:01 a.m. on April 7, 1933, a full hour ahead of Anheuser-Busch, based in St. Louis, where it is Central Time. "We celebrated back in April and had a party at the Hotel Utica, the very first account to receive legal beer when we came back," Kelly says. F.X. Matt made it through Prohibition by bottling soft drinks; a line of them is still produced at the brewery and marketed under the Saranac label. "Our root beer is actually brewed here using many of the same processes that we use to make beer," he says.

    But consumers who are watching their weight, particularly those on the Atkins diet, might want to shy away from sugary soda and instead switch to a low-carbohydrate beer, which is where Anheuser-Busch's Michelob Ultra comes in.

    "Our other popular beer is Michelob Ultra, which is very popular right now because of the Atkins diet," says Chanatry. "The Atkins diet has really helped our meat business, too," he adds.

    "So far Michelob Ultra is well on its way to capturing a 2 share of the grocery beer market," says Sudano of Beverage Marketing. "It was 1.8 in May, and it is likely to hit 2 percent sometime this summer."

    Generally the lower-carbohydrate beers will also have fewer calories, which certainly doesn't lessen their popularity. "New products are probably going to focus around that ultra segment and high-end premium because that is where the market is moving," says Sudano. "Expect a competitive entry from a major player in the ultra segment later this summer."


    New items continue to be introduced into the wine cooler and malternative beverage segments, even though these categories are suffering from sluggish sales. Compared with last year, sales are flat and that may be related to the weather. U.S. Beverage has introduced Seagram's Smooth, a ready-to-drink malt beverage available in Citrus and Red, a mixed-berry flavor. It became available nationally last month in 12-ounce six-packs and 24-ounce single-serve bottles.

    "RTDs are a proven and high-growth beverage category, and we are introducing a brand with supermarket taste and will turn it into a leader," says Chappell. "The unique packaging, taste, and the recognition of the Seagram's name for quality and tradition will provide immediate brand recognition, offering retailers and distributors substantial sales potential."

    That potential will be backed by a major ad campaign. "We're signing a contract to sponsor the tour of a new up-and-coming hip-hop artist named Blu Cantrell," says Chappell. "We will feature her on point-of-sale, and there will be a sweepstakes to attend some of her concerts."

    A proposal by the Tax and Trade Bureau to reclassify malternatives as malt beverages and not neutral grain spirits might also help sales. The way the law currently stands, if the products are made from neutral grain spirits instead of malt, they cannot be carried by beer distributors that aren't licensed to carry liquor products.

    "We think the rule, if it's finalized, will protect the market," says Becker of the Beer Institute. "By supporting the rule, supermarkets, convenience stores, and other off-premise places will continue to carry those brands that reformulate. There is an inconsistency between federal and state law, and that needs to be cleared up. We think the proposed rule would do that."

    Now if the skies could just clear up, then everybody would be happy.

    By Richard Turcsik
    • About Richard Turcsik

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