The beer category remains in a precarious position. Big brands have been shrinking for years, while craft, so reliant on taprooms and on-premise, suffered a blow from the pandemic.
Another problem driving these troubling trends? Look elsewhere in the retail store or beverage menu. With red-hot products like whiskey and tequila — and the exploding world craft cocktails — the spirits category has swiped consumers away from beer at an alarming clip.
Growth in U.S. spirits sales outpaced beer by 3% in the decade before the pandemic. This according to information from the The National Beer Wholesalers Association’s 84th Annual Convention and Trade Show, held earlier this month in Las Vegas. That growth disparity only ballooned during the Covid-19 crisis. Since 2020, the spirits category has grown three times as fast as beer.
What can beer do to stem the tide of receding customers? The answer likely lies in a changed look for the NBWA. During its 2021 convention, the organization revealed a new logo. And beneath that graphic runs a new tagline: America’s Beer & Beverage Distributors.
Obviously it’s the fourth word that’s key.
“Nearly three years ago, the board debated refreshing our logo and expanding our tagline from ‘America’s Beer Distributors’ to ‘America’s Beer and Beverage Distributors’,” says NBWA President and CEO Craig Purser, in a release. “Mid-way through 2019, it felt like we might be getting ahead of ourselves. But now, with all the continued expansion in our sector, this is absolutely the right time to refresh our logo . . . It reflects who we are, where we’ve been and where we’re going.”
This subject came to a head at the 2021 NBWA convention during a panel in the general session, entitled “Beyond Beer.” Speakers included Nuno Teles, president, Diageo Beer Company USA; Pete Marino, president of emerging growth, Molson Coors; and New Belgium Brewing CEO Steve Fechheimer.
All three shared the opinion that the future of the beer category relied on non-beer products. Namely: hard seltzer, Ready-to-Drink cocktails and nonalcoholic products, all of which have trended heavily as the pandemic unfolded.
Molson Coors even made a similar move with its name recently as the NBWA. This change took the global corporation from “Molson Coors Beer Company” to “Molson Coors Beverage Company.”
“This follows the consumer movements towards spirits and expanding beyond alcohol,” Marino explains. “We have to be following the consumer.”
Fechheimer agrees. “We’ve been looking beyond beer, because the growth hasn’t been [in beer],” he says. “Craft has been losing share within beer, and beer has been losing share to spirits. You have to have a broader view now.”
Unsurprisingly, all three agreed that this view must include hard seltzer.
“Diageo recently acquired [hard seltzer-maker] Lone River Ranch Water, and that’s bringing consumers into the malt category who would normally go to spirits,” says Teles.
Lone River Ranch Water almost certainly represents the future of the malt category. It’s a low-ABV, low-calorie canned drink. This product blurs the line between hard seltzer and RTD. Flavors include Spicy and Rio Red Grapefruit, with ingredients like lime juice, jalapeño pepper, Texas grapefruit and organic blue agave nectar.
“We’re tapping into consumers who like the agave taste profile,” Teles explains. “In the next couple of years, tequila sales will likely surpass vodka, so that brings that trend into malt beverages as well.”
His thoughts on Diageo now rostering a spicy hard seltzer? “80% of our category’s new consumers are now multicultural,” Teles says.
Overall, the point Teles drove home was that “consumers today want convenient products, products that are convenient to drink.” Such as flavorful beverages in cans. (Or CBD drinks that deliver functionality.)
But what about the eye-opening developments this summer in hard seltzer, as leading brands readjusted their sales forecasts significantly downwards?
Marino attributed the growing pains of Truly and others to a lack of consumer loyalty. Hard seltzer, while trendy, remains a young category. Perhaps not as many people as we think have already picked their go-to brand. And there’s plenty more people who are only now entering the category.
“The bigger brands haven’t brought everyone in yet, so we need to think, ‘How can we position ourselves to capture consumers still coming into the category?’” Marino says.
“I remain bullish on hard seltzer,” he adds. “And the boom in RTDs continues.”
Better Beer Brands
Another way for beer to fight back is by building better brands.
“Beer is outspent in marketing by spirits,” says Fechheimer. “And I’d say that the spirits industry is better at building brands, too.”
New Belgium, like other leading craft brewers, has recently addressed these issues by focusing more dollars and marketing on fewer of its brands. In the past few years the brewery has discontinued seven of its brands that altogether represented 10% of New Belgium’s business. With freed-up capital, the company doubled its marketing spend, highlighting a handful of key products.
The result: New Belgium is up 15% in 2021.
Building brands means establishing premiumization and consumer loyalty.
“People already make great beers at all price points — that’s not hard to do,” says Fechheimer. “True premiumization comes down to brand building. The point is to win the hearts and minds of consumers so that they stick with the brands they love. It doesn’t help any of our businesses to have consumers switching between companies.”
To wit, Fechheimer points out that New Belgium’s flagship Voodoo Ranger line — with a greatly increased marketing focus — is approaching 60% of the company’s total sales.
Teles agrees with this strategy.
“We need fewer but bigger innovations rooted in consumer preference,” he says. “The answer is more sales per SKU, not more SKUs.”