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Supermarket GROCERY Business: Tapping into a trend

Imports. Microbrews. Ice beers. Flavored malt beverages. Like clockwork, almost every two years it seems a new craze strikes the beer aisle. This time it's low-carb products. Led by Anheuser-Busch's Michelob Ultra and a repackaged Miller Lite, sales of light and ultra beers have skyrocketed as consumers look to Atkins and other low-carb diets as an effective way to shed those beer guts and love handles.

So far, low-carb brews are the most popular beer introduction of the 21st century. Introduced only last fall, Anheuser-Busch's Michelob Ultra, with 2.6 grams of carbs and 95 calories, has already captured a 2.1 share of the beer industry, according to the company. And now Adolph Coors, the No. 3 brewer, will be rolling out its Aspen Light low-carb brand in March.

Introduced Oct. 1, Rock Green Light, from the Latrobe Brewing Co. division of Labatt USA, had already shipped 1 million cases by December. "That's a great success, above our expectations, and we're going to continue that momentum in 2004," says Jon Genese, director of marketing for Domestic Specialty Brands at Labatt USA in Norwalk, Conn. He notes that the brand is backed with a national TV campaign that started airing Feb. 9. "You will definitely see that within the light category there's a great opportunity in the southern markets, like Florida, Texas, and parts of North Carolina and Georgia. We're building distribution very nicely in those markets, and we're also building distribution in our core Northeast market," he says.

Accel, the new low-carb beer from Utica, N.Y.-based Matt Brewing Co., has also been surpassing expectations. "What we're seeing is that as the consumer sees it, they're trying it and loving it!" exclaims Fred Matt, v.p., marketing and sales at the family-owned firm. With 2.4 carbs per 12-ounce serving, Accel is currently the lowest-carb beer on the market. "The playback that we're getting is that Accel just tastes better than the other low-carb products," Matt says.

The company's also looking to build sales via television. "We just started to roll some TV into markets, which we think will help," Matt says. "We're doing rebates -- $1 on a six-pack and $2 on a 12-pack -- to drive trial."

TV or not, the low-carb beers have become so popular that the potential is there to change the beer industry permanently.

"If the low-carb segment captures 5 percent of the total beer market, it's likely that low-carbs will become the norm of the mainstream beer business," says Brian Sudano, senior v.p., consulting services at Beverage Marketing Corp., a New York-based marketing and consulting firm.

If that were to happen -- and Sudano cautions that it's a very big "if" -- the existing mainstream light beers on the market would be reformulated to low-carb versions, and low-carbs would usurp the current light beer segment. "There wouldn't be Bud Light, but Bud Light low-carbs," Sudano predicts. "They would keep the brand equity and try to reformulate and come as close on a flavor basis as they can and approach the carbs of a Miller Lite, but I think it's unlikely that we're going to see a long-term subsegment develop here."

From light to low-carb

It looks like the repositioning of light beers as low-carb beers is already occurring. For instance, Rock Green Light has replaced Rock Light. "Rock Green Light is not a watered-down version of Rock Light," Genese says. "It's totally reformulated and its own product. That was the reason to really take advantage of the excitement."

Miller Lite, which has been around since 1975, has always been a low-carb beer. In fact, its early label proudly stated that it had 2.8 grams of carbohydrates. Today Miller Lite contains 3.2 grams of carbs, and that fact is being played up in current marketing and advertising. "Yes, we are a low-carbohydrate beer, but what's more important is that we can combine low carbs with great taste," says Tiffany Dodson, brand manager, Miller Lite at Miller Brewing Co. in Milwaukee. "That substantiates our 'great taste, less filling' position. We're able to offer a beer that's 3.2 carbs -- half the carbs of Bud Light, our main competitor --and we're also able to deliver taste to the consumer while doing that."

As in the case of Miller Lite, the repositioning of Michelob Ultra from Anheuser-Busch is helping to grow the light category.

"Michelob Ultra has become a phenomenal hit among adult fitness enthusiasts, adult consumers living an active lifestyle, and those looking for a great-tasting beer with lower carbohydrates and fewer calories," says a spokesman for Anheuser-Busch in St. Louis. "Michelob Ultra has provided us with an opportunity to bring in new beer drinkers to the industry.

"Some women were staying away from the industry because they couldn't find a product that met their needs in terms of low carbs and calories," the spokesman continues. "We believed Ultra would have a higher appeal to women initially, but we found that it has a very high appeal among both men and women."

To further expand Michelob Ultra's appeal, last month Anheuser-Busch began offering it in 12-ounce cans, in addition to "slope shoulder" bottles and on draught. As part of its bid to attract people with active lifestyles, the brand is continuing its partnership with Runner's World magazine and has become golf's "official beer" by sponsoring the LPGA Michelob Ultra Open at Kingsmill. Additionally, last summer Michelob Ultra became the "official alcohol sponsor" of the hit Broadway musical "Thoroughly Modern Millie," while also sponsoring the popular Billy Joel musical "Movin' Out."

Low-carb menus

Labatt is working with restaurant chains, including TGI Friday's and Ruby Tuesday, to incorporate Rock Green Light into new low-carb menus. "We're working to communicate the low-carb message and see where Green Light can be the featured brand within those menus, because it's a trend that's happening and we're an alternative," Genese says.

Matt Brewing is accelerating sales of Accel by offering samples in liquor stores, where allowed by law. "While you can't generally sample in supermarkets, we can sample in liquor stores in Connecticut, Pennsylvania, and Massachusetts," Matt says. "In any state where we can do sampling, we're taking Accel to the customer and giving them the choice, and thankfully we're winning a lot of the time." Accel is currently packaged in six- and 12-pack bottles, but a box of 12-pack cans will be introduced in March.

In addition to cans, the low-carb phenomenon is also spreading to malternatives -- flavored malt beverages. Miller has teamed up with Skyy Spirits to introduce Skyy Sport, which contains 160 calories and 15 grams of carbohydrates per serving, half the carbs of most other leading malt beverage brands.

"The flavored malt beverage segment is driven by news," says Laura Emory, brand manager, Skyy Sport at Miller. "About 40 percent of the segment this past year was driven by line extensions. The flavored malt beverage consumer is looking for new products, flavors, and ideas in the segment, which is why we're launching Skyy Sport, a new flavor with a refreshing citrus taste and a splash of cranberry."

Skyy Sport is aimed primarily at male and female consumers from 21 to 27 years old. A comprehensive marketing program that includes print advertising, promotions, and sampling events is supporting the launch. Ads are being developed by Carlsbad, Calif.-based Lambesis, the same agency that does advertising for Skyy Vodka.

"Flavored malt beverage drinkers are really seeking variety, and this is another choice and innovation for them within the Skyy franchise," says Sue Hearn, p.r. manager at Skyy Spirits in San Francisco.

The popularity of low-carbs is causing those who are not yet in the category to regard it with a watchful eye. "Look at the malternatives," says David Boggs, v.p., marketing at High Falls Brewery, the Rochester, N.Y.-based manufacturer of Genesee, Genny Light, J.W. Dundee, and other brands. "That category just exploded and went straight north in terms of growth. Everyone got really excited, crowded into the segment, and now it's flattened. We're not sure whether the same thing might happen with the low-carbs. If this thing tops out in terms of total volume, it's going to be a relatively small pie, all of the hitters are going to want a share, and we can't afford to play in that game."

Questionable future

Boggs says that everyone has to have a light beer, but it hasn't reached the point yet where everyone has to have a low-carb offering. "Low-carbs are currently about 5 percent of the total light beer market," he says. "Put another way, 95 percent of the people who drink light beer don't drink low-carbs. But if that 5 percent becomes 10 or 15 percent, then there may be room for everybody."

Boggs' opinions are echoed by Beverage Marketing's Sudano, who says if consumers are truly concerned about their carb intake, they'd be better off drinking spirits, which have zero carbs because of the distillation process. "If you're on a low-carb diet, beer can't match the spirits industry, and the spirits industry is starting to jump on the carbs issue," he says. "Accounts are starting to push that if you want a rye and ginger [ale], why not drink diet ginger? Rum and Coke? Try Diet Coke -- there are no carbs."

That may be the threat down the road, but for now the nation's brewers are hoisting their steins to the biggest innovation in the beer category since flavored malt beverages.
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