India and Pakistan have fought four wars in their 66-year history. And as of this writing the relations between the two countries remains precarious at best. So far, the best diplomatic minds on the planet have been unable to make much headway in easing the tensions between the two countries.
Could an ice-cold Coke?
That was what Coca-Cola set out to test this past Spring when it embarked on its “Small World Machines” project. Coke set up high-tech vending machines in each country that allowed citizens to see each other in real-time and even virtually “touch” hands to get a Coke. A sleek, pull-at-your-heart-strings YouTube video that accompanied the project has since been watched more than 1.6 million times. And yes, be warned—it does give you goosebumps.
Small World Machines is an example of a new kind of marketing, one that is already popular with many beverage companies, and will be even more so in the future. To reach today’s rising generation of millennials, those born—depending on whom you ask—roughly between 1981 and 2004, you have to tell them stories, not just tell them to buy your drink. And the stories have to be engaging enough that they will want to share them with their friends. And, perhaps most importantly, your brand has to stand for something. It has to have a back-story of its own, and one that appeals to the general open-mindedness and optimism of the millennial generation. Small World Machines ticked all these boxes.
“The rise of social media and its consequent effects on customer expectation is driving a new way of communicating with millennials,” says Amy Valenzuela, senior shopper insights manager, National Shopper Insights, Convenience Retail, The Coca-Cola Co. “We believe technology—digital, social and mobile—are re-writing the rules of marketing—a world where it is no longer a one-way brand-to-consumer communication but a world where a brand can facilitate a true consumer experience and drive much greater engagement.”
Some 80 million strong in the U.S. alone, with an estimated purchasing power today of $200 billion (expected to reach $400 billion by 2020) the millennial generation is likely to have more of an impact on the beverage marketplace than any generation to come before it. As Michael Bellas, chairman and CEO of Beverage Marketing Corp. told the audience at The Beverage Forum this past May: “The biggest consumer change over the next 20 years will be the continued rise of the millennial generation and the concurrent decline of the baby boomers. They will make up the largest population cohort the U.S. has ever seen. They will shortly outnumber boomers and their influence will be as profound in the decades ahead as the boomers’ was at their peak, if not more so.”
As evidenced by the popularity of Coke’s Small World Machines, the impact of the millennials is already being felt. But that’s when it comes to marketing; what about the beverages themselves? Yes, they’re making themselves felt there, too. The past decade’s craft beer boom? You can pretty much thank the millennials for that. Artisanal spirits? Ditto. Craft sodas? Same. In fact, pretty much any beverage category that now finds itself transitioning to a more natural, healthful profile can thank the millennials for that. But to explain it away as a generation of health nuts is to miss the point. After all, this is also the generation scarfing down hamburgers made with doughnuts for buns. No, the real issue here is trust and transparency. Millennials are reluctant to trust anyone except their friends, and maybe their parents. A drink that’s sitting on the store shelf? Consumers don’t know how that got there, how it’s made, what’s inside it. A drink sold at a local green market stand? They have a better idea.
And what’s more, their impact is being felt beyond just the beverages themselves. Even the distribution end of the business is being forced to evolve to meet the needs and demands of this new generation.
What Drives Them
The millennial generation has been described as vastly different from any generation that has come before it. And much of that has to do with technology. “This millennial has had the Internet in their pocket for a number of years now and they’re really used to using it,” says Gary Thompson, chief operating officer for the Orion, Mich.-based beer wholesaler Powers Distributing.
At the same time, many of them have played so many video games they have begun to think of real life as a game. They often approach life problems like they would the latest puzzle in a game, with the goal of “leveling up.”
Millennials also inhabit an odd paradox. On the one hand, they are part of a huge generation of 80 million people. But on the other, many of them also have had a sense of uniqueness or individuality instilled in them by their parents. “Their boomer parents were consciously aware of how competitive it was going to be when their kids were born based on the numbers,” explains Jamie Guttfreund, chief strategy officer for the Los Angeles-based Intelligence Group. “Everyone was terrified—they’ll never get into college, they’ll never get a job and they wanted their children to be able to feel special, to believe that they can do anything or be anything. They empowered them to feel like their thoughts and their opinions were incredibly valuable, which is a drastic parenting change. Gen X were raised by wolves, no one asked us our opinion, no one cared.”
Why this all matters, says Guttfreund, is suddenly you have this gigantic emerging generation of consumers who are very idealistic, even very optimistic. And put that together with the internet and social media, “and this is the perfect storm for millennials for marketing,” she says. “They’re already so group-oriented and this gives them the ability to connect and to collaborate.” As a result, we’ve seen things like crowd-sourced brewing on Twitter, or Pepsi asking consumers to help it come up with the next variety of Mountain Dew in its “Dewmocracy” campaign.
Furthermore, unlike their baby boomer parents who first got to know a brand by the commercials broadcast on network television or on the radio or glanced at on a billboard, millennials, because of their sense of empowerment, are the last people to be lectured to by a mass-market ad. They want to feel like they are part of the brands they love, not just consumers.
“The broadcasters are fine,” says Ted Wright, CEO of Fizz, a marketing firm in Atlanta that specializes in word-of-mouth marketing, “but the people that are buying that broadcast time are sending out messages that are not believable the vast majority of the time, even if they’re being watched. For millennials, their friends are the authorities they listen to because in their lives they’ve seen the authorities at every level be caught not telling the truth. And so they have just come to rely more and more on their friends.”
Thus, says Wright, a brand’s ability to gain the trust of the millennial consumer becomes paramount—and gaining enough trust that the influencers among a group of friends will want to pass along what they like to drink to the rest of their Google+ circle or hundreds of Facebook friends. And, what they most want to pass along today are stories—stories that show a living, breathing brand that exists in their world, something to which they can relate. This could be Coke trying to foster better relations between two long-time warring nations, as in Small World Machines. Or it could be a craft brewer that constantly pushes the boundaries, like Dogfish Head, whose founder Sam Calagione was recently featured in a New York
Times article brewing his chicha, a Latin American corn beer, the traditional way—with his own saliva.
“A major fallacy is millennials don’t care about anything,” says Coke’s Valenzuela. “In fact, they care deeply about a number of issues, which is reflected in their purchasing decisions. For one, value is critical. More than other generations, millennials seek value from retailers and brands. This goes far beyond price. They want to know what the company or manufacturer does to help their community and protect the environment, or whether they provide scholarships.”
But there is a downside to all of this. Millennials are experts at calling out fakes and are “natural researchers,” according to Guttfreund. When Maker’s Mark recently announced plans to dilute its whisky because of a supply shortage it was met with a huge public outcry. “Because the story of Maker’s Mark is craftsmanship, and you don’t see craftsmen cutting a corner: ‘We’re just going to shave a little off and nobody will notice,’” says Wright. “They broke a covenant. It had nothing to do with 3 proof points and it had everything to do with, ‘we buy this thing because we think it’s really tasty and it’s really good, but we also like that hand-crafted-ness.’ It’s not very hand-crafty to cut a corner. That’s very corporatey.”
The Exposure Effect
As in the case of Maker’s Mark, the attention to ingredients and brand transparency is something millennials own like no other generation before them.
Aside from the trust factor, Wright also points to the increasing exposure to new types of foods and beverages. “We call it the Spaghetti Sauce Theory,” he says. “A jar of spaghetti sauce in the 1970s was Ragu with mushroom pieces in it, that was haute cuisine. Now we have Eataly in New York City, an Italian food shopping mall. As Americans get exposed to more and more complex and interesting things, they will go in that direction.
“And that’s what I think is going on with millennials and beverages,” he continues. “I think you see that with soda, I think you see that with juices, I think you see that with health foods like açai, and I think when people get of age and they can drink beverage alcohol I think you see that with craft beer and with different spirits. As more Americans have been exposed to more and more complex and interesting and diverse things, a decent-sized segment of them have moved from yellow fizzy beer, and brown soda, and water out of a tap, and that never goes back.”
Adds Coke’s Valenzuela: “Access to a variety of choices—from sparkling soft drinks and ready-to-drink tea, juice drinks and sports and energy drinks—strongly appeals to this audience. Millennials also seek new and different products and flavors. Innovation is critical to these beverage categories to attract additional buyers and keep products top of mind. It enlivens the everyday and continues to delight and surprise the shoppers.” She also points to Coke’s Freestyle machine, which allows consumers to dispense more than 100 individual Coke brands in an almost endless variety of combinations using an easy to use touchscreen.
This also means beverage warehouses busting at the gills to find places to store all of these new drinks. Thompson, of Powers Distributing, says his company finds itself facing a host of new millennial-related challenges, from having to find room for all of the new beverages, to job-seekers who are cannier than ever, to even the very essence of what it means to be a beer wholesaler in the year 2013.
For example, he has had jobseekers walk through his door that “are more discerning with respect to where they want to work,” he says. “They’re not tied to the companies that they know or their parents knew or anybody else. They’ve got at their fingertips the ability to find out just what’s out there in the world. So, we’ve got to compete on a bigger level. You’re not competing against the guy down the street anymore. You’re competing against people all over the state, all over the country, all over the world. It forces you to be truer to who you are and what you are and it forces you to pay greater attention. And all those I think are good things.”
Jobseekers, he says, tend to be more knowledgeable, for instance, about things like benefit levels and compensation, “because they’ve got the internet and there’s a lot more communication available about companies. They’ve got a better idea what compensation ought to be, they’ve got a better idea what training they want to get out of somebody and what they want to end up knowing. And as a result of that, they’re able to ask really good questions and have a really good idea about the employers they’re going to go talk to before they start. And so your reputation within the employment world just became easier to discern and you better walk your talk.”
But the most obvious impact of this new generation is on the products that Powers stores in its warehouses and distributes—and the role the company has to take on as a more direct communication link between the brands and the consumers themselves. It’s becoming more and more common for consumers to contact Powers directly in attempts to locate that beloved craft beer, for example.
“People can get on the internet now and find out Stiegl is an Austrian beer that actually does a radler and they start trying to scope out where they can get it,” Thompson says. “So they’re able to figure out that Powers Distributing has a Radler and they will literally email us and say ‘Where can I get this beer?’ So we have more direct consumer interface than ever before, and we’re literally just scratching the surface on it right now.”
Powers also finds itself taking on more of a role for the big brewers looking to tap into the millennials’ love of “all things local” by creating more local marketing affiliations, whether it be with athletes or venues. And the many smaller craft brewers just starting out don’t have the resources or know-how to do much marketing, so that’s where Powers comes in.
“So we become their marketing department,” says Thompson. “Just like MillerCoors has its marketing department, we become that local brewer’s marketing department. We have to be a full-service, full-circle, organization. It can’t just be about us and the retailer customer anymore. We have to engage the consumer and engage this generation.”
He then adds, “And it’s a wonderful generation. The interesting thing about it is they really brought passion back to beer and to brewing as you can see by the number of new breweries opening up every day. They’ve really opened up everybody’s eyes with respect to flavors and flavor profiles, and willingness, and interest in experimentation.”
And perhaps the most amazing this is, they’re only just getting started.
Targeting Young, Bi-Cultural Consumers
Millennials, specifically those known as bi-cultural millennials who embrace both their Hispanic and American heritages, have played a major role in how Heineken USA (HUSA) has been marketing two of its Mexican beers in the U.S.: Tecate and Indio.
Bi-cultural Hispanic millennials comprise 22 percent of the total U.S. millennial population of 80 million, or about 17.6 million people, and to Heineken USA, the advantages of trying to appeal to them with these two brands are obvious.
“I think it’s a no-brainer for any company to focus on the Hispanic consumer,” says Felix Palau, vice president of marketing for the Tecate Equity and Indio. “The growth in the next 20 to 30 years is going to come mainly from the Hispanic consumer. So as a company strategy, we have to have brands that are able to target this specific consumer.”
Bi-cultural Hispanic millennials, who often are second- and third-generation Hispanics in the U.S., naturally lean toward the American culture they’ve grown up with and they default to speaking English. “But there are some elements like food, art, family and other values that are important touch points that make them unique in the way they celebrate their heritage,” says Palau. “So they basically write their own agenda. They choose when they behave more like a Hispanic consumer per se. So that’s a challenge for any brand.”
Interestingly, bi-cultural Hispanic millennials are some of the largest consumers of TV pay-per-view events, spending twice as much as the average consumer to watch boxing and other PPV events. Thirty percent of them have bought a PPV event in the past year, compared with just 15 percent for the average consumer, Palau says.
Tecate, available in the U.S. for more than 40 years, was a brand that originally was targeted to Mexican newcomers in the U.S. It had built its positioning around masculinity, trying to identify with the tougher life these newcomers had in the U.S. With the huge population surge of the millennials, however, HUSA decided to evolve that marketing strategy to also include bi-cultural millennials. So the brand’s marketing took on a more celebratory tone and also started to make use of more, as Palau puts it, “wit,” as it tried to be more inclusive of the broader Hispanic consumer in the U.S. It also evolved to English speaking advertising.
As for Indio, it already had been targeting Mexican millennials in Mexico before its introduction to the U.S. market in 2012, so not as much of an evolution was needed. The brand is marketed more toward artistic and creative types, even hipsters, especially those who fuse their Latin and urban cultures. A recent promotion around the Mexican Dia de Muertos, or Day of the Dead, emphasized a lot of art, for instance. The marketing has relied more on influencers rather than the traditional advertising that Tecate has. And, since this bi-cultural millennial consumer tends to ease between American culture and Hispanic, it also uses more Spanglish.
Alison Hillhouse, VP of insights innovation for MTV, points out that, as in the case of U.S. and Mexico, millennials, as a global demographic group, possess similarities no matter where they live in the world. However, she adds, there are some caveats. “A lot of what we tend to find is that there are some huge commonalities that are happening around the world, but of course there’s nuances,” she says. “Economies are very different in different countries and political environments, etc.” – A.K
Two Millennials in One?
Increasingly, those who study the millennial generation are beginning to discern some significant differences between the older millennials and those on the younger end of the spectrum. Much of this, they say, has to do with the impact the Great Recession has had on the younger millennials, many of whom have grown up never knowing a period of economic prosperity. This has resulted in some fundamental differences in the way the two ends of the millennial generation view their lives.
During this year’s Beverage Forum, Constellation Wines’ chief marketing officer, Chris Fehrnstrom, shared what one millennial told him: “Oftentimes marketing people are talking about us as if we’re this monolithic group, and we’re not a monolithic group,” he says she told him. She went on to explain that those in her generation between the ages of 28 and 35 are closer in a lot of their values to Generation X’ers.
Alison Hillhouse, VP of insights innovation for MTV, says her group recently completed a study on the younger end of the millennial demographic, and the research bears this out. For its purposes, MTV defines millennials as those born between 1981 and 2000, so between the ages of 13 and 32 years old. “What we are starting to see is that the younger end of the demo, the teens, are quite different from the ones who are getting close to 32 now,” she says.
As Hillhouse explains, older millennials came of age when the economy was still going strong, when dream jobs seemed obtainable. Many of these dreams ended up being dashed for them by the recession. But the situation for the younger millennial demographic has been even more severe. “For somebody who’s 13 today, they don’t even know a world where the economy was amazing,” she says. “For them, there’s always been a downturn. They’ve seen parents lose jobs, they’ve seen friends’ parents lose jobs.” Furthermore, the immediacy of social media has made horrors like natural disasters, terrorism and school shootings seem more up close and personal for them. “They’re still optimistic, but they feel a bit more limited in possibilities,” Hillhouse says. “They’re thinking a little bit more pragmatically and practically about their future and aware of some of the challenges they may face.”
Despite these differences, Hillhouse says it is unlikely the younger millennials will eventually be classified as something else. After all, she says, the experts are already too busy worrying about what to call the next generation coming down the pike. “Gen Z? Plurals?,” she asks. We’ll just have to wait and see. – A.K.