An explosion in craft beer sales is giving grocers good reason to cheer.
They sell a lot of beer at the Central Market in Shoreline, Wash., an independently operated 80,000-square-foot supermarket that carries 450 items in 48 feet of beer cooler space and a big promo island.
But only about 10 percent of those sales come from the major breweries in the United States, which get a mere 4 feet of space combined. By far, the majority of the rest of the space is allocated to craft breweries and local and regional operations, as well as those with national distribution. The rest? Imports.
All of that space is devoted to the smaller brews, with a wide variety of flavors and styles, for a reason. And it's not just to be hip.
"There has been an explosion in craft beer sales," explains Jeremy Cumbow, the store's wine steward and beer buyer. "It's been a reaction to customer demand over time. The domestic set has kind of shrunk, and craft just kept growing."
What really convinced Cumbow to focus on craft products was a promotion the store ran for the 2008 Super Bowl. "The decision came down to do a big promotion for domestic beer over a one-week period, and we did," he recounts. Budweiser and Coors 12-packs were sold at $8.99. Six packs of a popular craft beer were sold for $5.99. The results: just 10 12-packs — five cases — of the domestic brands were sold, compared with 170 6-packs of the craft beer.
"That did it for me," Cumbow affirms.
The popularity of craft brews appears to be growing in supermarkets across the nation, despite a poor economy that has consumers typically "trading down" for just about everything to save a buck.
While overall U.S. beer sales declined 2.2 percent in 2009, according to SymphonyIRI numbers cited by the Boulder, Colo.- based Brewers Association, the trade group for craft brewers, growth of the craft brewing industry that year was 7.2 percent by volume and 10.3 percent by dollars, vs. increases of 5.9 percent and 10.1 percent, respectively, in 2008 over 2007. Imported beer sales were off 9.8 percent in 2009. According to the Brewers Association, the sales share of craft brews in 2009 was 4.3 percent by volume and 6.9 percent by dollars, with 1,595 breweries operating during some or all of 2009 — the highest total since before Prohibition. However, about 1,000 of those breweries are brew pubs, most of which don't sell their products off-premise.
"We're seeing growth in the supermarket industry, with many chains getting involved," notes Julia Herz, the Brewers Association's craft beer program director.
Why is this happening in the face of overall declines in beer sales over the past two years? According to a presstime report from The Nielsen Company, significant numbers of consumers are trading down when it comes to beer purchases because of the economic downturn. To the contrary, before the start of the downturn, 16 percent of beer consumers tended to purchase less expensive products most often. Yet sales of the more expensive craft beers continue to increase.
It's a conundrum that has craft brewers excited and at least one traditional brewery executive perplexed.
"Overall, we are seeing grocery decline a little bit," acknowledges Jerry Stephens, customer solutions at Chicago-based MillerCoors. "But we continue to see the craft segment grow. It is kind of an ironic thing, considering the trade-down trend. It is something that we will have to continue to watch."
The company's Blue Moon/Belgian White products are up some 30 percent this year in national chain business, according to Stephens, and emerged as the company's No. 1 growth brand entering 2010. "As we have expanded our breadth and depth of regional and national distribution for Blue Moon, we have experienced incremental growth from that distribution," he says. "Also, as retailers expand their specialty and import sections, the shopper is becoming more aware of the amount of selection that the beer category offers. Ultimately, the retailers are seeing the benefit."
MillerCoors is aggressively leveraging innovative products to defend its turf. The company has been testing a draft version of Coors Light and Miller Lite in several states, and is now rolling out those products to supermarkets and other retailers nationally. Additionally, the company's Miller Lite aluminum pint, which came out last year, has experienced significant distribution growth this year.
Among the other highlights of Nielsen's recent report, the economic downturn is a "significant opportunity" for alcoholic beverage retailers as more consumers stay home rather than spend money on a night out at a restaurant or bar.
"Staying in continues to be the new night out," said Danny Brager, Nielsen's VP, group client director, beverage alcohol. "As the economy worsened, consumers turned to at-home dining and entertaining, and now that the economy is starting to improve, uncertainty about the extent of the recovery continues to dampen the consumer 'rush' to go out more often."
Seizing the Opportunity
Craft brewers large and small recognize this opportunity and are taking advantage of it, some with more economic clout than others, but all with plenty of zeal.
The Boston Beer Co., brewer of Samuel Adams products, is first on the Brewers Association's list of top 50 craft brewing companies in the United States and fifth on the list of top 50 overall. The company's 2010 first-quarter financial report showed a 19 percent core shipment volume increase for the three months ended March 27 over the same period last year. Net income of $6.3 million for the quarter jumped $4.9 million over the same period.
Boston Beer spokeswoman Katie Powell says the Boston-based company's pump is primed to aggressively promote its Samuel Adams Summer Styles Variety pack through the end of August via six beers "that are great for summer," including seasonal Summer Ale, Pale Ale, Latitude 48, Blackberry Witbier and Sam Adams Light.
Beef 'n Beer
"In addition, we are offering Boston Lager and beef tastings in a number of supermarkets throughout the summer," says Powell, noting that Samuel Adams Boston Lager "is a perfect pairing for steak or burgers."
Several major grocers are seeking to stoke their summer suds sales with cookout- themed tie-ins and special promotions, including Lakeland, Fla.-based Publix Super Markets, Inc., which is offering a two-piece Samuel Adams Boston Lager glassware gift pack featuring a 6-pack of Sam Adams at a retail price of $14.99. The glass, which debuted in late 2006, was originally created to enhance "a full sensory drinking experience [for beer lovers] by showcasing Samuel Adams Boston Lager's balance of malt and hop flavors," explains the company's founder and brewer, Jim Koch.
Although other craft breweries may not have Boston Beer's economic muscle, they're working creatively and aggressively to leverage the obvious increased consumer interest in their products.
"Coming off hard economic times, people have asked what's important to them," observes Herz at the Brewers Association. "What are they going to cut out? There is a perceived value in craft beer. It is less expensive than wine, and you can trade up from some typical beer, like light American lager. And there is also the trend of pairing various beers with food, and that's a terrific opportunity for supermarkets."
In fact, the Brewers Association's Web site, www.craftbeer.com, includes such resources as a beer-food pairing chart and additional beer-food pairing material. "King Soopers in Colorado has ordered our food-pairing guides," adds Herz, noting that "it's been [a] great way for them to cross-promote beer and food."
Ironically, King Soopers uses the guide to enhance its cheese sales, since supermarkets in Colorado, where it has 140 stores, are prevented by law from selling beer. "We put their brochure on our islands, and it's been well received," says Bonnie Hammonds, the Kroger division's director of merchandising/delicatessens. The company's cheese supplier, Atlanta Foods International, is playing a lead role by providing "romance cards" to place in the case that describe the attributes of individual cheeses while concurrently suggesting pairings of wine and beer.
Has this link with the beer that they can't sell boosted cheese sales?
"We are No. 1 [among] Kroger divisions in terms of specialty cheese, and we have been running double-digit increases every year," says Hammonds. "Anything we can do to educate our customers, and give them another reason to be curious, stimulates cheese sales. I certainly wish we could sell beer, but this is fun."
Speaking of the Rocky Mountain State, local brewer Oskar Blues is also riding the craft beer boom, having increased production from 17,500 barrels in 2008 to 29,500 last year, with an estimated 41,000 on tap for 2010. The Longmont, Colo.-based company has expanded its production capacity to accommodate that growth, which, according to spokesman Chad Melis, includes Central Markets/ Town & Country in Washington state, Whole Foods and Top Foods/Haggens.
"We've had some good success on the East and West Coasts with chain stores," observes Melis. "We've matured as a brand on a national scale and won some national awards. A small brewery has a disadvantage in getting into supermarkets, but we've been collecting accolades, and that's helped give us an opportunity to promote our brand."
The first challenge, says Melis, "is to get in to see the buyer. There is a lot of competition for limited shelf space." A key point of differentiation for Oskar Blues is that its craft beers are sold in cans rather than bottles — a fact that reduces distribution costs and allows retailers to use cooler space more efficiently.
"Large chains are fact-driven," he notes. "The facts are that our cans are more environmentally friendly, better for the beer, and better for the consumer, because they are more portable. As we continue to educate the consumer, our business will continue to grow." The reason cans are better for the beer, Melis continues, is that they prevent oxygen and sunlight from affecting the brew inside.
MillerCoors' Stephens notes that his company's Blue Moon and Leinenkugel are available in 12-pack 12-ounce cans. "There is a certain segment for craft in cans," he says, citing their "portable nature … that keeps the liquid fresher. But I'm not sure right now how large that segment is."
Melis believes craft beers attract beer lovers who are proud of the fact that there are beers local to their area, as well as those who enjoy the different styles of beer offered by craft breweries. In addition, he suggests, increasing numbers of people realize that just as certain wines enhance the flavor of certain dishes, so do certain beers.
"Look at all these different exciting craft beers," urges Melis. "We can match them with dinner and bring out the different flavors in our food."
Monroe, Wis.-based Minhas Craft Brewery is also is doing well with supermarkets, says brewery development manager Tyler Peters. The second-oldest brewery in the nation, Minhas sells to such chains as Roundy's, Cobbs, Pick 'n Save, Metro Markets, Piggly Wiggly, Woodman's and Festival Foods.
"We're fortunate to say that, yes, we are selling more these days to supermarkets," affirms Peters, noting that his company, in addition to producing craft brews, sells a value line of premium lager, branded as Mountain Creek in Wisconsin and Mountain Crest elsewhere. The typical retail price, he says, is $9.99 for a 24-pack.
Minhas sells four flavors of craft brews packaged in 8-packs, providing extra value against competitors' 6-pack cartons. "There is a huge education side to craft beer," observes Peters, adding, "We are doing our best to educate the consumer about what's in the bottle."
Craft beer, he continues, "has come a long way. Just a couple of years ago, people wouldn't have known what IPA is (India Pale Ale). Now it's the fastest-growing style of beer. People are picking up craft beer and having a better beer at home. That is a big change."
Certainly, according to Peters, it continues to be a challenge to persuade many supermarket beer buyers to allocate shelf or cooler space to Minhas' brands. "For us, it's making good on what we say we are going to do, and executing. At the end of the day, it doesn't matter if the guy likes me or not. My product has to sell in the store."
With summer events and activities upon us and football season and the Super Bowl just around the corner, there are plenty of beer promotions available to supermarket beer buyers.
Anheuser-Busch offers a huge variety of promotions and cross-merchandising offers, such as Budweiser's Grill Labor Day offer targeted at lobby, high-traffic and meat/seafood locations in the store. There's a Bud Light Tailgate deli and chicken cross-merchandising offer, another pairing the brew with Combos, and yet another promoting salty snacks, ice, charcoal, propane, coolers and more.
Details of all of the Anheuser-Busch promotions are provided in the Progressive Grocer/AB Beer Profit Guide at www. beerprofitguide.com/progressivegrocer/profitguides/ beer/ab/promotions/index.isp.
Heineken, the top-selling European import beer in the United States, has launched its "Plug into Summer" initiative aimed at bringing music experiences from some of the most popular artists in the United States — Kid Cudi, The Hold Steady, Cold War Kids and Tito El Bambino among them — to consumers from Memorial Day through Labor Day. The program combines promotional packaging, shot code technology, in-store programming, and merchandise tie-ins with a number of partners.
Additionally, Dos Equis, one of the fastest-growing import beer brands in the United States, has launched its "Most Interesting Cargo Hunt" retail program, which runs through Labor Day. The program is designed to build consumer awareness and interaction at retail, on-premise and online, while driving incremental volume for Dos Equis throughout the season.
Inspired by the brand's "Most Interesting Man in the World" campaign, the Cargo Hunt challenges consumers to participate in a "hunt" to find and return the rare objects and treasures recently lost by the Most Interesting Man during a treacherous transcontinental journey.
Retail POS materials, including display materials and enhancers, pole toppers, and cooler decals, are available, along with cross-merchandising offers for other Summer Cargo Essentials, including energy bars, premium meats and seafood, trail mix, and bottled water.