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The Honolulu Advertiser
Posted on: Saturday, October 15, 2005

Beer battling to remain Americans’ drink of choice

By Margaret Webb Pressler
Washington Post

WINE, SPIRITS GAINING GROUND

While wine and spirits sales have gone up in the past six years, there has been a decline in beer sales.

Percentage change from 1998 to 2004:

Wine Up .09 percent

Spirits Up .06 percent

Beer Down 1.5 percent

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WASHINGTON — When a huge consumer products company starts slipping in sales or market share, even just a little bit, it can be a sign of a much bigger problem. And that explains why beer executives are on the offensive these days.

Though beer is still the most-quaffed alcoholic beverage in the country by far, it is slowly losing its grip around the marketplace edges: among new drinkers, among aging baby boomers and among other Americans whose tastes are gradually becoming more sophisticated. More and more, when people kick back with friends and enjoy a drink, they're not choosing beer.

From 1998 through last year, beer's share of all alcohol servings slipped from 59.6 percent to 58.1 percent, according to Adams Beverage Group, a market research company based in Palm Springs, Calif. By contrast, consumption of spirits and wine has been inching up for several years, reaching 28.5 percent and 13.4 percent respectively last year.

The beer industry is madly trying to figure out how to reverse this trend, which industry insiders insist is cyclical but which some analysts warn could represent a more long-term change in who drinks what and when.

"Demographic trends are working against the brewers," said Bonnie Herzog, a beverage industry analyst for Citigroup Investment Research.

Younger consumers raised on an ever-growing array of soda flavors and juice drinks, Herzog and others say, are finding the transition into alcohol a little easier with mixed drinks, which can be sweeter than beer and personalized to one's own taste. Baby boomers, meanwhile, are gradually transitioning from beer to wine and cocktails. And across the board, beer is suffering from a bit of an image problem.

The core consumer of a cold brew is widely thought to be either the football-loving couch potato or anyone with a household income below $45,000 a year. But in today's Internet-savvy, consumer-driven culture, those are not exactly the beacons of a populace that increasingly buys well-designed home products at Target and flips longingly through the Pottery Barn catalogue.

"The industry was very complacent in the last couple of years," said Robert Lachky, executive vice president of global industry development for Anheuser-Busch Inc. "Frankly, the back door was left open."

But brewers say they get it now. They say they're on it, even though the industry continued to dip through the first half of this year, according to researchers who follow beer sales. Companies are investing heavily in new product development, new packaging and new marketing — all aimed at getting people to turn to beer for more "drinking occasions."

One of the ways the beer industry has tried to counteract the slide in sales is by cutting prices. After regularly increasing the price of a six-pack through much of the 1990s, in the past two years the price of mass-market beer has been sliding. Just last month, Anheuser-Busch announced it would again forgo the traditional autumn price hike for its beer.

Beyond pricing, the nation's two biggest brewers have taken markedly different approaches to tackling the industry's woes. For Anheuser-Busch, the defense is built largely around new products — innovative malt-based beverages that company executives believe will increase the number of occasions that people drink beer or any other Anheuser-Busch product. At SABMiller PLC, the focus is on marketing to improve the image of beer, thereby making it a more acceptable choice for more consumers in a wider variety of settings.

It has been hard to miss the new ad campaign from Miller on television these days. The company has chosen high-profile shows to run its new campaign for subpremium Miller High Life beer, including a debut on the season premieres of "Survivor: Guatemala" and "The Apprentice."

Anheuser's strategy isn't to fight marketing with marketing — it's innovation.

The company has unveiled a dizzying array of new brands and new packaging in the past two years, most recently a product called Tilt, which is a beer that contains ginseng and caffeine.

It has made large, eye-catching aluminum bottles and partnered with Bacardi to make Bacardi Silver, a malt-based beverage that is sort of a hip alternative to a wine cooler.