While beer is heavily promoted throughout the summer, consistent merchandising can bring steady sales all year long.
By Nora Caley
While beer and barbecues go together, consumers continue to purchase beer long after the grills go cold. Industry experts say winter is a good time to promote beer, and not just for football season. As craft beer becomes more popular, consumers look for heartier brews as the weather cools. Also, brewers and retailers are looking to the winter holidays for a lift in sales.
That may be good news for breweries large and small who are struggling with disappointing beer sales. According to the Chicago-based SymphonyIRI Group, for the 52 weeks ended Aug. 8, in food, drug and mass stores excluding Walmart, beer sales totaled more than $9.4 billion, an increase of just under 1.4% compared to the same period the previous year. Case sales totaled more than 485 million, down almost 1% compared to the previous year.
Dollar sales of domestic premium beers were flat at $3.94 billion, while case sales were down 1.8% to 220.8 million. Domestic premium beers make up about 41% of the beer category. At $1.9 billion, dollar sales of imported beer were also flat compared to the previous year, as were case sales. Imported beers make up about 20% of dollar sales in the category.
Steve Ward, vice president of national accounts for White Plains, N.Y.-based Heineken USA, says 2010 was a challenging year. “The beer business is fundamentally different today, which should be expected in this fluid, ever-changing economy,” he says.
He notes that the Heineken USA portfolio is performing well. Brand Heineken, Dos Equis and Newcastle Brown Ale are seeing increased shares. He is optimistic as winter approaches, as sales of darker beers such as Newcastle Brown Ale increase in the colder fall months. Also, it’s a good time for retailers to capitalize on certain celebratory occasions. “Halloween is fast becoming a great party night for adult consumers,” he says. “Also, many consumers tell us they give Heineken as a gift to friends or co-workers.”
People might drink certain beers in their homes, but if they have to bring a beverage or hostess gift to a holiday party, they might bring an import beer. “It’s important that retailers remember that import and specialty beers represent a great trade up opportunity for volume and dollar sales. The higher margins in the import specialty segment result in increased profits,” he says.
One bright spot was craft beer, which totaled nearly $775 million, an increase of more than 13% compared to the same period the previous year. Case sales were up almost 11.4%, for a total of 25.1 million. Craft beers make up just over 8% of the beer category.
Jim Koch, brewer and founder of Boston Beer, which makes the Samuel Adams line of beers, says people also like to bring craft beers to parties. “For craft beers, fourth quarter is our strongest,” he says. “In October we have demand for our Octoberfest beer, and then you’re into the holidays. It’s a good time for higher-end alcoholic beverages in general. The high-end spirits guys could tell you a staggering percent of volume is sold the last two months of the year.”
Koch says people don’t stop buying their regular beers during the holidays. They buy additional beers. “As people adopt a beer with more flavor, it may not be displacing the standard beers but maybe they’re buying an additional six pack,” Koch says. “It’s not like somebody stops drinking the mass domestic brands. They just add some Sam Adams occasionally or another craft beer.”
Joe Whitney, director of sales and marketing for Chico, Calif.-based Sierra Nevada Brewing Co., says craft beer companies were worried their customers would trade down during the recession. “The trade down never came for craft,” he says. “It came for domestic premium beers.”
Whitney says one thing that’s helping the craft segment is the variety. “Consumers are really excited because there are so many new beers and so many flavors,” he says. “The majority of innovation comes from the craft segment.”
He says certain brews are especially popular. “IPAs are red hot right now,” he says of India Pale Ales. “They’re not new, but many haven’t been nationally distributed. Now they’re more widely accepted. It’s the largest growing segment.” Sierra Nevada’s Torpedo Extra IPA was a seasonal beer, and became a year-round item in 2009.
Whitney says retailers can increase sales if they borrow a tactic from wine sales. “One of the things I’ve seen that worked really well for retailers is where they started in-store sampling programs with food and beer pairings,” he says.
If grocery or mass retailers cannot host these pairings, they can at least educate staff on which foods go well with which beers. Whitney says some grocery chains have done this for wine, and they can do the same with beer. “Customers come in and say, ‘I am making pasta, what kind of beer should I buy?’ There is huge opportunity for grocery, and those that have been doing it have had success.”
He says some stores even cross merchandise craft beers with foods throughout the store. Some beers go well with some cheeses or meats, for example. “If there is a food in the store, there is great beer that goes with that food better than wine,” he says. “Spicy food such as Thai or Mexican really goes well with a good hoppy ale.”
Koch says there are about 1,600 craft beers, so that presents a challenge. Retailers have to decide how much space in the beer section to allocate to craft beers, and then decide which craft beers to stock.
Depending on the drinker base and store location, the section can vary from 2% craft beers to 25%. For example, the Pacific Northwest has a strong craft beer customer base, while consumers in some Southeast tend to buy more mass domestic beers. Also, retailers usually stock regionally popular brands that are often brewed locally.
He says it helps to mark the category by billboarding the lead brands prominently. For example, putting some of the better selling craft beers together shows consumers they are in the craft section of the beer aisle. “The research says you don’t want too much assortment because people become confused and they don’t buy anything,” Koch says. “Or they buy something but wonder if they should have bought something else.” Sam Adams’ newest product is an IPA called Latitude 48.
Ward says there are more options than ever for adult consumers of alcohol. “There are more than 250 beer brands fighting for these consumers’ attention. Take that and combine it with the fact that today’s younger LDA [legal drinking age] consumer craves variety and wants to have a unique beverage personality from their parents, we have found that they may drink as many as 12 different beer brands a month,” he says.
Heineken works with retailers to develop the right program. “While each retailer and each retail channel presents its own opportunities, it’s important for us to best understand the myriad consumer segments and help our partners develop a more customized approach to meet their business goals,” he says. For Halloween, the company will focus on its Dos Equis brand with displays and cross merchandising programs. Brand Heineken will have more displays during the holiday season.
Koch says people are becoming interested in different types of beers, just as they became interested in learning about different wines. “We have all seen the success of wine in the U.S. in the last 30 years,” he says. “In 2010, beer is the new wine.”