Thursday, September 19, 2013 | Edited by Daniel Moores
||Draft Dodging: Why Big Beer is Going Flat
And What Industry Giants Are Doing to Get Their Buzz Back
When the beer industry has its annual gathering in Las Vegas this month, attendees can expect the usual educational seminars, legislative rundowns and vendors pushing everything from beer salt to delivery trucks. And if past National Beer Wholesalers Association meetings are any indicator, there'll be plenty of cheerleading about the state of suds.
And, boy, does the industry need it. "As bad as it's ever been," said Harry Schumacher, editor of Beer Business Daily, of beer's continuing sales-volume decline. Then he added, "I guess Prohibition was worse."
The industry's biggest players, Anheuser-Busch InBev and MillerCoors, whose mega-brands have dominated America's tap handles and supermarket shelves for decades, are being battered by a new wave of competition from inside and outside the beer market and starting to lose their grip.
On one side, newly aggressive liquor brands are stealing share, especially among the coveted young-adult demographic. As a result, beer has seen its piece of the total alcohol market fall to 48.8% last year from 56% of sales in 1999, according to the Distilled Spirits Council of the U.S.
On another, craft brews, once a trendy badge for beer geeks, are now mainstream options for Joe Sixpack, a development that has contributed to eight of the top 10 U.S. beer brands losing share at stores in the 52 weeks ending Aug. 11, according to IRI. It tracks convenience stores, supermarkets, drugstores, mass-market retailers and select club stores.
Among the losers are No. 1 Bud Light, whose sales fell 0.7% in the period to $5.9 billion, and No. 4 Miller Lite, down 2.5% to $1.9 billion. Though light beers began declining about five years ago, their descent has accelerated this year, noted Benj Steinman, president of trade publication Beer Marketer's Insights. "And that really matters," he said.
That's because light beers account for well over half of the volume at both A-B InBev and MillerCoors, Mr. Steinman said. Together the two brewers control nearly 97% of the light-beer market, equaling some $7.8 billion in store sales from January through mid-July, according to IRI.
The situation is grim, but not irreversible. The two big brewers still control 74% of beer-shipment volume in the U.S. by Beer Marketer's Insights' calculations. And with their massive scale and marketing machines, the companies have experienced early success with new brands meant to take on liquor and smaller craft beers. But before the beer industry can regain its buzz, it's important to understand the six-pack of hurdles it has in front of it.
When speaking with Paul Chibe, VP-U.S. marketing at A-B InBev, it's best to tiptoe around the subject of the flatulent horse. Part of a suite of ads for Bud Light that ran several years ago under a previous marketing regime, it's become an internal symbol at the brewer of what not to do in advertising. "It's not going to build the category," he said. The horse spot epitomized the brewer's once-sophomoric ad humor, though the period also produced memorable ads such as the Budweiser frogs.
For a category once known for some of the best TV ads, hits over the past few years have been too few. Only one beer campaign has achieved pop-culture acclaim in recent years -- Dos Equis' "Most Interesting Man in the World."
Former A-B Chief Creative Officer Bob Lachky -- who was behind the A-B classic "Wassup?!" -- blames his ex-employer for overtesting. "It's almost impossible to get a breakthrough idea through a system that may be overanalyzing in the pre-test stage," he said. "Once in a while, you do have to take a chance."
Mr. Chibe counters that the new regime is taking plenty of risks; it's just using data to make smarter choices. "Everything that I am running on-air is an ad that has been tested and qualified to drive purchase intent and persuasion," he said. Mr. Chibe has put a premium on music-themed marketing, signing up artists like Jay Z and Justin Timberlake, as the brewer seeks to appeal to millennials with more aspirational ads and fewer frat-boy pranks.
Big brands are also resorting to packaging as a major marketing tool. Coors Light is pushing a "double-vented wide-mouth can" that the brewer says produces a smoother pour. Miller Lite, which launched in 1975 as the first successful mainstream light beer, will be repackaged in its original can design from Jan. 1 to March 15, harkening back to its glory days as the beer that "tastes great" and is "less filling."
Is It the Taste?
There's growing reason to believe that the best advertising in the world may not heal the light-beer category. Only 30% of drinkers describe such beers as "tasting great," down from 33% in June 2012, according to a recent survey by ConsumerEdge Insights' Beverage DemandTracker, a periodic survey of U.S. adults who consume alcohol at least once a week.
Consumers who once reflexively ordered beers by brand are now scanning menus organized by taste profiles and alcohol content. Consider the Yard House chain, whose website presents beer options under headers such as "malty," "dark" and "bitter." How can mainstream light beers possibly compete?
"It all boils down to positioning," said MillerCoors Chief Marketing Officer Andy England. As other beers get heavier, Coors Light -- which is marketed as "the world's most refreshing beer" -- is the perfect choice "on a hot day or following a hoppy, malty brew when you want something that is a little lighter to wash that down," Mr. England said.
Although they're declining, light beers remain a popular option. That's true even at Yard House, where Bud Light, Coors Light and Miller Lite still rank in the top seven draft-beer choices, according to Yard House data cited by MillerCoors. Still, before the craft-beer boom, big brewers pretty much had the bar to themselves.
The beer market is fragmenting like never before. While in the old days consumers might stick with their favorite light beer all night, today they "are drinking more types of beers for different occasions," switching between crafts, light beers, flavored-malt beverages and cider, said Bill Pecoriello, CEO of GuestMetrics, which tracks bar and restaurant trends.
Big brewers are responding by flooding the market with line extensions and brands that blur the line between cocktails and beer. A-B InBev this winter will add Bud Light Lime Cran-Brrr-Rita as a seasonal, adding to the lineup of margarita-inspired malt beverages that include Lime-A-Rita and Straw-Ber-Rita. MillerCoors, meanwhile, has put major marketing muscle behind its Redd's Apple Ale, recently following it up with a strawberry version. "Today's 21- to 27-year-olds grew up expecting variety," said David Kroll, MillerCoors VP-innovation.
Liquor is Winning
But as they innovate, brewers are butting heads with liquors, which have found success with flavorful varieties and dessert-inspired vodkas like Smirnoff Cinna-Sugar Twist. Beer has also lost what was once a distinct ad advantage over liquor as broadcast TV networks relax their rules to allow for more liquor commercials in late night and the last hour of prime time. Liquor brands spent $243 million on network, cable and spot TV ads in 2012, up from $145 million in 2010, according to Kantar Media. Beer's spending grew more slowly in that time, to just over $1 billion from $976 million. And it's liquor brands, not beer, spawning some of best ad characters and storylines, such as the continuing Captain Morgan campaign inspired by real-life privateer Captain Henry Morgan.
Big beer is fighting back with higher-alcohol extensions targeting nighttime drinking occasions. MillerCoors next year will launch Miller Fortune at 6.9% alcohol by volume (compared with 4.2% for most light beers), following the 2012 launch of Bud Light Platinum, which checks in at 6% and is backed by Justin Timberlake ads. Will these strategies bring the sexy back to beer? It's too soon to tell.
Losing the Bar Battle
One reason drinkers are switching to liquor is that they see it as a less expensive way to get higher alcohol content, GuestMetrics found. This could be one reason why sales trends for beer at bars and restaurants are so lousy. On-premise beer volumes fell 5.3% in the four weeks ending Aug. 11, according to GuestMetrics, which is concerning, Mr. Pecoriello said in a report, especially because of the slight improvement in underlying volume trends in spirits and wine in the same period.
MillerCoors has found millennials use social media to meet up at private residences where they drink more affordably before heading to bars where they down expensive cocktails. The key for beer, Mr. England said, is to lure young adults to the bar earlier with light-beer specials.
What About Women?
One path to recovery is to capture more female consumers, who account for only about 20% of beer drinkers. At last year's beer wholesaler's convention, A-B InBev North American President Luiz Edmond conceded that in the past the brewer has been guilty of portraying women "in a way that they were not necessarily at the same level" as men. But that is changing as brands move away from frat-boy jokes and babes in bikinis.
Also, sweeter brands like Redd's Apple are experiencing some success with women, brewers say.
(Source: Advertising Age, 09/16/13)
||QSRs Lead 2Q Restaurant Industry Traffic Growth
The quick-service segment led industry traffic growth in the second quarter of 2013, as it has for much of the past two years.
During the quarter, overall restaurant visits rose 1 percent compared with a year earlier, and consumer spending increased 3 percent, according to new data from The NPD Group.
The Port Washington, N.Y.-based firm found that fast-casual restaurants, which it includes in its quick-service segment research, drove second-quarter results. Fast-casual restaurant traffic increased 8 percent compared with a year earlier. The overall quick-service segment, which accounts for 78 percent of restaurant visits in the United States, rose 1 percent compared with the second quarter of 2012.
The only other industry segment to record traffic growth was fine dining, at 6 percent, though that sector accounts for only 1 percent of total overall restaurant visits in the United States.
The casual-dining segment and the midscale and family-dining sector, both of which account for 10 percent of overall restaurant industry traffic, reported flat traffic and a 2-percent decrease in visits compared with a year earlier, respectively. For the previous eight quarters, casual-dining chains collectively reported negative traffic.
"There were several bright spots in the industry in the second quarter, and certainly casual dining ending its cycle of traffic losses is one of them," Bonnie Riggs, The NPD Group's restaurant analyst, said in a statement. "Any gain in the current market is good news and keeps the industry steady."
Most of the industry's traffic gains in the second quarter came in the breakfast and morning meal daypart, in which restaurant visits grew 3 percent across industry segments. Meanwhile, lunch and dinner traffic were flat compared with the second quarter of 2012. Visits during the evening snack daypart inched up 1 percent compared with a year earlier.
NPD's data was based off the firm's CREST research service, which surveys consumers on daily restaurant usage patterns.
(Source: Nation's Restaurant News, 09/18/13)
||Health Law Faces Skepticism
New poll results show the depth of the Obama administration's challenge on the eve of the rollout of the federal health law's core provisions, as many Americans say they don't understand the law and don't think it will help them.
A Wall Street Journal/NBC News poll found that even those lacking health insurance, who are supposed to be the law's biggest beneficiaries, generally believe it wouldn't do them much good.
Overall, nearly 70% of poll respondents said they didn't understand the health-care overhaul passed by Democrats in March 2010 or only understood a part of it. Only 31% said they thought the overhaul was a good idea, with 44% saying it was a bad idea and 25% saying they didn't have an opinion or weren't sure.
Uncertainty over the law has created a window for political groups on both sides to try to shape opinion in advance of midterm elections next year. Conservative organizations such as Americans for Prosperity have begun television advertisements criticizing the law, while Organizing for Action, the spinoff of President Barack Obama's re-election effort, is running ads in its favor.
"I think that the coming six months or so is going to say a lot about whether this law comes forward or collapses under its own weight. The administration has a pretty heavy lift," said Levi Russell, a spokesman for Americans for Prosperity. "I think clearly people are skeptical, and rightly so, and that's a good thing," he said.
"There have been very relentless efforts under way by opponents of the health law designed to undermine successful education efforts," said Tara McGuinness, a senior White House official.
"From staff in community health centers, to public service announcements and outreach efforts, the six months from October to March will be key to raising awareness about the new market places and the benefits of the law for Americans," Ms. McGuinness said.
New health-insurance exchanges where people can shop for individual insurance plans and apply for subsidies toward the cost of premiums will open for enrollment on Oct. 1. Plans sold through the exchanges will take effect Jan. 1, the same date on which most Americans will have to have coverage or pay a penalty.
Those exchanges are aimed at the portion of the population -- about 46 million Americans -- who don't currently have access to coverage through an employer or government program such as Medicare or Medicaid.
But the financing of the exchanges may not work well if they fail to sign up enough people, in particular healthy young people, who generally don't need a lot of health-care services. That is why spreading the word about the law is critical to its success.
Among the uninsured, 76% of respondents said they didn't understand the law and how it would affect them. Only 32% of the uninsured thought they were "fairly" or "very" likely to use the exchanges. That proportion was even lower among people who are currently getting insurance on the individual market. Of those, 23% believed they would use the exchanges.
People who don't already have access to insurance through an employer or government program were as skeptical of the law as the people less directly affected by it.
Some 34% of respondents who don't currently have insurance said they thought the law would have a negative effect on their family, and 52% said it wouldn't change things for them. Among people already buying coverage in the individual health insurance market, 34% thought they would be worse off as a result of the law and 43% said they didn't think there would be much of an impact either way.
Overall, 53% of those polled said they didn't believe the law would affect them or their family, alongside 30% who said it would have negative effects and 12% who thought it would be positive.
The Obama administration has limited funding to promote the law, especially in parts of the country where there is the most hostility to it, and are relying on a coalition of supporters, celebrities and private companies such as pharmacies and insurers to encourage participation.
The survey of 1,000 adults was carried out Sept. 5-8 and has a margin of error of plus or minus 3.1 percentage points.
The law has a more limited impact on benefits already offered voluntarily by companies to their workers. But some big employers have announced changes to their plans, including United Parcel Service Inc., which told workers last month it would no longer cover workers' spouses who had an offer of coverage from another company, in part because of higher costs UPS said it expected to incur as a result of the health-care law.
Many companies have also tweaked their policies to accommodate some new requirements in the law, such as allowing parents to keep children on their plans until their 26th birthdays, and covering preventive services including contraception without out-of-pocket costs.
(Source: The Wall Street Journal, 09/16/13)
Daily Sales Tip: Overheard at the Radio Show
Music recording artist Big Sean, speaking on a panel hosted by Carson Daly yesterday, gave advice that any salesperson can use (paraphrased): "If you are apprehensive about aggressively going after an opportunity, let your heart take over and go for it."
A video recording of this programming-oriented panel presentation is available free online at www.radioshowweb.com.
If your program director was unable to attend the Radio Show, make sure you let him or her know about this important professional development opportunity.
Source: John Potter, SVP/Professional Development, RAB