The year-on-year double-digit revenue and volume increases for the craft segment has been the big story for a while and it continues to be a source of great optimism for everyone in the industry—especially if the massive congregation around the Craft Brewers Pavilion at the National Beer Wholesalers Association’s (NBWA) 76th annual convention last month is any indication. However, the consensus among the big brewers, importers and the lone craft producer on a power panel during the convention was that the clear path forward involves a return to positive growth for the overall beer market.
“The craft beer community recognizes that we need to see overall beer trends return to the positive,” said Dogfish Head founder and president Sam Calagione. “We want to see a return to health in that world. While we disagree on what constitutes a craft brewery, we can agree on the quality of the big producers.”
Calagione joined Luiz Edmond, president, North America, Anheuser-Busch InBev; MillerCoors CEO Tom Long, Crown Imports president Bill Hackett and Heineken USA president & CEO Dolf van den Brink as they returned to the NBWA general session stage—a sequel of sorts to last year’s panel featuring the same five leaders.
With the exception of 2012, the overall industry has been flat to down about a percentage point each year and it likely will again dip into the negative once the books are closed on 2013.
With that market reality in mind, the panelists tried to figure out just how to get the beer market into positive territory and keep it there.
The short answer to that, they believe, involves doubling down on investment in strong branding.
“It really is about building brands and building brand equity—that’s going to be the marker of success for our industry,” offered Bill Hackett, president of Crown Imports, which is likely having the best year among the big companies represented on the panel. In the Anheuser-Busch InBev acquisition of Modelo, Crown ended up owning a brewery in Mexico (suddenly becoming a producer as well as an importer) and with a perpetual U.S. license to import Modelo brands. “You can’t change the weather, and you can’t change what competitors are doing, but you can control what you do,” Hackett told the distributor audience. “Control the controllables, focus on execution and continue to build the brands with the support we give you.”
Innovation constitutes a substantial part of brand building, noted Long.
“We have to recognize that variety is a thing of the future,” Long said. “If something ails the industry, innovation can fix it.”
Heineken’s van den Brink pointed out that the effect that changing demographics has been having on the industry is not to be underestimated. And the panel had barely reached the 10-minute mark before someone brought up the millennials. “Why we continue to lose share against spirits and wine I think has a lot to do with generations,” offered van den Brink. “The millennial generation is going to be the largest generation that has ever lived in the U.S. That generation is moving away from beer. That is the No. 1 challenge we face as an industry.”
The solution: reinvention.
“I think we need to challenge ourselves to reinvent how we build our brands, how we resonate with that generation,” said van den Brink.
Millennials, noted AB InBev’s Edmond, define themselves through their non-conformity. “In my generation [the trend was] we should look the same,” Edmond said. “In [the millennial] generation, to be a part of the group you need to look different. Yes, we [beer marketers] are behind the curve]. Yes, liquor has mde significant progress in being more aspirational as far as the big brands [are concerned]. We need to elevate the quality of our message.”]
It isn’t just about men hanging out with men or women hanging out with women anymore, he said. There are more cross-gender social groups sharing the same experiences and using social media. Harnessing that is key.
Interestingly, some of the best brand and demographic insight at the NBWA convention came from two individuals who aren’t even in the beer business. And one of them underlined a major conundrum with making brands relevant for millennials: That generation, generally speaking, aren’t big on declaring their allegiance to any one brand.
Millennials, said Jason Dorsey, aka The Gen Y Guy, chief strategy officer at Generational Kinetics, told the audience that millennials need to try a lot of different things before they choose one brand over any others—and it’ll be a long time before they’ve decided they’ve tried enough.
“[Millennials] have the least established brand loyalty,” Dorsey said.
Look Beyond the M-Word
Interestingly, a day before Dorsey’s presentation, Jim Johnson, a professor at the University of North Carolina at Chapel Hill, told the same audience that marketers shouldn’t be putting all of their eggs in the millennial basket to begin with.
For one thing, the Great Recession hasn’t done that generation any favors. They’re coming out of college in a heap of debt, with limited job prospects, thus postponing their financial independence and making them a bit more frugal than the immediately preceding generations. “They’re going to be more like they’re great-grandparents,” Johnson said. “They’re going to be more like Depression-era people in their spending habits.”
(That assertion seemed to be somewhat in conflict with what Dorsey would say the next day, that in 2017, “My generation will outspend baby boomers in the U.S.”)
There are so many other relevant demographic trends at work, Johnson noted, and “if you ignore them, you ignore them at your peril.”
For one, the South is rising again, as far as population’s concerned. There’s been a redistribution of population, he said, from the Northeast and Midwest to the South. Additionally, Florida went from a “magnet” to an “exporter” of people, as the retired became un-retired as their retirement portfolios took a massive hit during the recession.
On the immigration front, he points out that the debate has been hijacked to focus on the negative. “People say immigrants cost more than they contribute, but the data don’t support that,” Johnson said. The reality, he said, is immigrants contribute to the economy by buying products and necessitate entire new local industries to cater to their needs, whether it be translation specialists or immigration attorneys.
He also painted a much more much more multi-ethnic future for America, led especially by the rapidly growing Hispanic demo.
Additionally, he talked about the rather ominous sounding “end of men,” where, for the first time in history, women are about to surpass men as the majority of the paid work force. It’s a function, he said, of men “doing so poorly in American society today,” with three times a many men not working today as they did in 1969.
And possibly the biggest mistake would be for marketers to write off the baby boomers in favor of their children’s demographic.
“The way the majority of boomers work and play is little different from those in their 40s—they’re not obsessing over arthritis or incontinence,” Johnson said. “The aging boomer market is a $17 trillion prize. You’d have to be an idiot to turn your back on this enormous market. Boomers will redefine what it means to be old.”
What’s more, unlike the younger generation that everyone seems to be focusing on, boomers are a lot more brand loyal, especially when it comes to the value brand segment.
“Don’t forget about the economy drinker,” said MillerCoors’ Long during the beer leaders panel. “The economy drinker is the most loyal drinker of beer…Pay attention to brands.”
That will be among the factors, Long said, that will help beer recover drinking occasions from wine spirits.
At the end of the day, how dire the situation is for U.S. beer really is a matter of perspective. As A-B InBev’s Edmond pointed out, in terms of dollar sales, the beer business is still doing better than many other industries out there.
“I’m very bullish,” Edmond said, “that this industry will continue to grow.”