Cider House Rules
Besides the successful craft segment, cider has begun to capture consumer interest in a big way, prompting beverage alcohol companies to respond with appropriate products and distribution strategies.
“Cider is … growing at an incredible rate,” observes Nick Lake, senior director of category management at White Plains, N.Y.-based Heineken USA. “From 2008 to 2011, cider’s compound annual growth rate was 10.5 percent, while beer’s was -1.8 percent. By 2020, ciders are estimated to be half the size of flavored malt beverages today. This bodes well for Strongbow, the latest addition to our portfolio of premium brands.”
As a result, “now is the time for [us] to further accelerate Strongbow’s growth by supporting the brand with the full weight of our resources and capability,” he notes.
“We’ve seen success with our Michelob Ultra Light Cider, which was launched last year,” says Mike Potthoff, VP, import craft and specialty beers at St. Louis-based Anheuser-Busch. “We saw this as an opportunity to expand the cider category as consumers continued seeking products that appeal to a sweeter palate, yet remain refreshing and drinkable.”
Continued Potthoff: "As more people discover cider, we’ve found that many view traditional ciders as either too heavy, too sweet or both. This perception has often limited ciders to a seasonal beverage during fall and winter, but we saw an untapped potential to expand the category as a year-round option for adult drinkers. Michelob Ultra Light Cider fills this void with a lower-calorie cider with a milder but distinct sweetness that can be enjoyed straight or over ice.”
Chicago-based MillerCoors offers the award-winning Crispin line, which includes 3-liter boxed apple and pear ciders, English-style canned ciders, and Honey Crisp bombers, as well as 4-packs of Crispin Original and Fox Barrel Pacific Pear ciders. Ross Lipari, the company’s VP of national accounts-grocery, predicts that cider will keep growing in popularity.
One indication of how true that prediction may prove is the fact that other beverages are now taking their inspiration – not to mention flavor – from cider.
“The past year has shown a spike in consumer interest in cider, which is something we considered when crafting Shock Top Honeycrisp Apple Wheat,” says Adam Oakley, Anheuser-Busch’s VP of import, craft and specialty beers, of the latest offering from the company’s Shock Top beer line. “Consumers seem to be trending toward beverages with sweeter tones, and more unique styles of beer. We found a way to meet both of these demands with Shock Top Honeycrisp Apple Wheat, by combining our Belgian wheat beer with sweet cider for a crisp, refreshing and flavorful offering.”
Sky’s the Limit
Craft beer can expect further growth.
What does the future look like for craft beer, which is currently experiencing an uptick in consumption? Although it currently accounts for just 6 percent of the beer market, Jim Koch, brewer and founder of The Boston Beer Co., maker of Samuel Adams, believes that “we have lots of room for growth.”
According to Koch, “I project that the ‘better beer’ segment could achieve 35 percent of the total U.S. beer market, up from about 25 percent today.”
The main reason for this is growing consumer acceptance of unusual beer varieties. “Craft beer is entering the mainstream, and drinkers are experimenting with new and interesting styles of beer,” affirms Koch. “They want to discover the next great beer, and they are more knowledgeable about brewing beer than drinkers in the past.
While craft beer has a broad appeal across all demographics, Koch notes that it’s “the alcohol beverage of choice [of] the millennial generation,” making targeted promotions to that group especially important for manufacturers and retailers (for more about this key demographic, check out “Millennial and Multicultural” below).
Research by Chicago-based market research firm Mintel confirms Koch’s assessment of craft beer’s possibilities, showing that sales nearly doubled between 2007 and 2012 -- rising from $5.7 billion in 2007 to $12 billion in 2012 -- with predicted growth to $18 billion by 2017, meaning that the segment will have tripled in the decade from 2007 to 2017.
“The growth rates seen by craft beer are impressive, especially during a period when domestic and imported beers have shown a flat to declining performance,” says Mintel Beverage Analyst Jennifer Zegler. “Unlike its domestic and imported beer counterparts, craft beer has been able to defy overall beer market trends and continue expansion during the economic downturn and subsequent slow recovery. While the craft and craft-style beer category remains a small segment of the $78 billion U.S. beer industry, the category has been able to stabilize the overall beer industry, which has experienced volume declines in the domestic and imported beer categories since 2008.”
Coming up from Boston Beer in time for the change of season are Samuel Adams Alpine Spring and Samuel Adams Spring Thaw Variety Pack. “Alpine Spring is an unfiltered medium-bodied lager with bright floral and citrus notes that showcases Tettnang Noble Hops,” says Koch, while the variety pack features a combination of old favorites and the new brews White Lantern, Double Agent IPL and Maple Pecan Porter. While the first two will be sold year-round starting this month, the third is exclusively available as part of the Spring Thaw variety pack.
Mintel suggests that to keep craft beer sales growing, brewers might expand on the variety concept. “To bring that local feel to consumers regardless of location, craft breweries should consider partnering to create multibrewery variety packs that would offer consumers a taste of one city, state, or region,” offers Zegler. “These taste-of-an-area packages would allow consumers to experience smaller breweries from their own or other geographies.”
Craft Beer Trends
What’s up and coming in the segment? Plenty.
“We’re seeing quite a few different trends occurring right now, and there are reasons for each one,” says Melody Daversa of the Karl Strauss Brewing Co., a San Diego-based craft brewer, which at presstime was readying the launch of its 24th Anniversary Flanders Style Ale and Barrel Aged Wreck Alley Imperial Stout. Both beers will be available throughout California (the company’s products are currently only distributed in the Golden State).
The trends are as follows:
- Session Beers: Easy-to-drink, low-alcohol beers that can be consumed over a long time, a “great example” of which is Karl Strauss Amber, a sessionable amber coming in at 4.2 percent ABV, Daversa notes, adding, “For a while, the trend was really high-alcohol beers, so this trend is towards more balanced, easy-drinking beers that pack a lot of flavor, without a lot of alcohol.”
- Experimentation: “One of the most exciting parts about the craft beer culture is the constant innovation and experimentation,” notes Daversa. “Brewers are always pushing the boundaries on existing styles, creating new styles, doing collaborations, and trying new ingredients.” An example from Karl Strauss is its recent holiday beer, Mouette a Trois. “We called it a ‘Fruitcake Ale,’” explains Daversa. “It was brewed with apricot, cherries and all of the traditional fruitcake spices, along with brandied oak chips.”
- Barrel Aging: “Brewers are getting very creative with aging high-alcohol beers in oak barrels,” says Daversa. “It used to be that you could only find beers aged in bourbon barrels, but today you see brewers experimenting with red and white wine barrels, tequila, brandy and bourbon.” Karl Strauss has been experimenting with barrel aging “for a few years,” according to Daversa, and now has 100-plus oak bourbon, brandy and wine barrels. This year, the brewer’s annual barrel-aged Anniversary series is a Flanders-style sour red ale aged in bourbon barrels for 12 months, while a new limited-release series of Karl Strauss’ Wreck Alley Imperial Stout aged in bourbon barrels will be ready in March.
- Sours: Although sour beers have been around since beer’s beginnings and have long been popular in Belgium and Germany, they’ve become more mainstream in the craft beer world of late, notes Daversa, adding that the company’s 24th Anniversary ale, a sour red ale based on the Flanders style from Belgium, “is pleasantly tart and reminiscent of sour cherries and pomegranate.” Of the several types of sour beers available on tap at “better craft beer bars across the country,” Daversa says, “They are refreshing and unexpected.”
Something for Everyone
Consumer research pinpoints just what beer drinkers want in a beverage.
When it comes to selling more beer to more consumers, beverage alcohol companies are leaving nothing to chance.
“Beer is a very emotional beverage,” asserts Ross Lipari, VP of national accounts-grocery at Chicago-based MillerCoors. “We don’t necessarily look at a target consumer per se, but look more at occasions or “demand spaces” and how brands map up against those. The same consumer may make very different brand choices depending on whether they’re watching the game, out at a barbecue or entertaining guests for a special event.”
To answer those diverse needs, MillerCoors has “done a lot of work to segment shoppers, and we find our brands map up against and intersection of the shopper and the occasion,” notes Lipari. “We also look at beer as a ‘journey’ where some consumers stay close to home with familiar, traditional styles, and others are into extreme travel, continually testing the boundaries. We’re lucky enough to have a portfolio that covers a very wide range of styles at each step along the beer journey, so we have something for just about everyone.”
For instance, many of the company’s Tenth & Blake (TAB) craft and import items “are squarely targeted against the sophisticated TAB enthusiast or the deal-savvy TAB explorer, the folks who are looking for interesting and unique taste profiles,” he explains. “This ranges from trade-in and invitation crafts like Blue Moon Belgian White, Leinenkugel’s Summer Shandy and Killian’s Red, to exploration brands like Pilsner Urquell or Crispin Cider, to the far end of the intense flavor profiles of the Leinenkugel’s Big Eddy series or the Blue Moon Vintage series, brewed with wine grapes.”
Meanwhile, MillerCoors’ prestige imports, Peroni and Grolsch, target “image-conscious drinkers who still like traditional pale lagers,” says Lipari.
Anheuser-Busch, meanwhile, conducts “extensive consumer research to understand and reach the appropriate target consumer for each brand,” notes Mike Potthoff, VP large format at the St. Louis-based company. “We’re committed to continue growing our brands in the right way and giving beer and cider drinkers the variety they’re seeking.”
A-B has uncovered “several key consumption trends” through research and, based on this information, has “advised supermarket retailers to adjust their approach accordingly.” One important finding is that 80 percent to 90 percent of beer is sold cold. “Beer shoppers will walk out of the store if their beer is out of stock and not cold, but margins erode when slow-velocity beers tie up refrigerator cold space, because it’s costly to chill,” says Potthoff. “That makes it important to have fast-turning brands in the cold space.”
Goes Great With Beer
Retailers can boost beer category sales further by cross-merchandising products.
The perfect illustration of a win-win situation: beer and other popular supermarket items.
“Cross-merchandising programs with other large food categories have been a success for both consumers and retailers,” says Mike Potthoff, VP large format at St. Louis-based Anheuser-Busch. “For example, by pairing beer with snack foods and other high-volume segments, retailers can merchandise two destination categories to drive traffic, market basket and, ultimately, revenue to the beer category.”
For example, Bud Light has teamed up with Plano, Texas-based Frito-Lay, a division of PepsiCo, “to bring the grocery channel multiple cross-merchandising programs that bring together the nation’s best-selling beer and the top snack food brand,” according to Potthoff. The programs will roll out to the grocery channel during key beer and snack selling periods.
This year, A-B is collaborating on a joint promotion with Purchase, N.Y.-based PepsiCo that kicks off during Super Bowl. “As an official National Football League sponsor, we are in a unique position to help our consumers celebrate Super Bowl XLVII with brands like Pepsi, Doritos, Budweiser and Bud Light,” says Potthoff. “The promotions between PepsiCo and Anheuser-Busch will offer convenience and value to consumers during a variety of occasions in 2013.”
Millennial and Multicultural
Brewers believe these two groups represent the future of beer drinkers.
With their fingers on the pulse of the category, beer companies are paying particular attention to two key demographics: millennial and multicultural consumers.
“Millennial consumers of legal drinking age are adopting craft beer the way their parents adopted wine 30 years ago,” notes Jim Koch, brewer and founder of The Boston Beer Co., maker of Samuel Adams. “When this happened, the wine industry experienced 25 years of growth, which is something retailers should definitely keep in mind.”
Similarly, Chicago-based Mintel found that craft beer’s biggest fans are 25- to 34-year-old consumers, with fully half of older millennials opting for it. However, the market research firm cautions brewers not to rest on their laurels in regard to this demographic.
“To continue growing, craft beer must be its own best advocate and expand appeal beyond millennials, who are most likely to consume craft beer,” warns Mintel Beverage Analyst Jennifer Zegler. “An additional barrier is lack of knowledge. Craft brewers need to focus on education through tastings and classes that inform consumers about the differentiation in flavor between craft beer and other alcoholic drinks.”
In seeming illustration of this recommendation, White Plains, N.Y.-based Heineken USA has another promising group on its mind as well. The company’s “brands speak to confident, millennial, multicultural consumers,” says Nick Lake, senior director of category management. “Millennial consumers represent a rapidly growing and increasingly influential upscale consumer base, and an estimated 70 percent of beer category growth up to 2020 is expected to come from the multicultural segment.”
To that end, “Heineken USA’s portfolio of upscale import brands fits well with the preferences of these discerning millennial and multicultural consumers and blends seamlessly into their social occasions,” observes Lake, who adds that “winning in this market is about building long-term consumer brands that appeal to beer lovers while also delivering smart product, packaging and marketing innovations that change the game.”
The company’s new product rollouts include “several expanded flavor profiles, including Tecate Michelada, a refreshing, bold beer cocktail mixed with lime, spices and a hint of chili pepper, and Amstel Wheat, a pure hefeweizen with a smooth and crisp taste,” notes Lake.
Coming up: Heineken’s Newcastle Brown Ale Limited Editions offerings, which Lake says “directly target the craft consumer,” thereby appealing to both millennial and multicultural beer lovers, will be augmented by two new varieties.