Non-alcoholic beer shipments plummeted 25% for the first quarter of the year, following a trend that began in late 1993, figures from the Bureau of Alcohol, Tobacco & Firearms show. While that drastic drop has moderated this summer, the Beer Institute projects shipments could be off as much as 16% this year. "I don't have enough information to say whether people are shifting to alcoholic drinks or to other non-alcoholic drinks," said Phil Katz, VP-research for the Beer Institute. "There's a lot of competition out there from other things including [iced] teas."
Frank Walters, research director for Impact, a liquor trade book, said non-alcoholic beers fill a niche though they "had limited potential anyway, and in my view, the void has been filled."
Already, Miller Brewing Co. has cut much of its ad support for Sharp's, leaving Anheuser-Busch's O'Doul's and Stroh Brewery Co.'s Old Milwaukee NA, along with a handful of imports, as the most aggressive players in the segment.
"Aggressive" in the realm of non-alcoholic beers is decidedly less impressive than in the beer category as a whole. In an industry where a major ad campaign can cost upwards of $30 million, Sharp's got $16 million in ad support last year; O'Doul's, $12 million; and Old Milwaukee NA, $2 million.
Big brewers' interest in non-alcoholic beers was always somewhat of a surprise, considering the segment's relatively small size: about 1.5% of the 190 million-barrel domestic beer business.
"It's not a big enough segment for the domestic" brewers, said Phillip Van Munching, director of advertising for Van Munching & Co., U.S. importer of Heineken beer and Buckler non-alcoholic beer.
Though big brewers have contended they got into the segment for profit potential, their entrance coincided with heavy Washington pressure for higher beer taxes, as well as growing controversy over a variety of ad issues.
Arrival of non-alcoholic products-in which virtually all the alcohol is removed after the beer is brewed-like Sharp's and O'Doul's allowed the brewers to say they made a whole range of products.
While the regulatory pressure hasn't entirely let up, brewers are now taking closer strategic looks at the segment.
Miller said it continues to view non-alcoholic beers in general, and Sharp's in particular, as viable. But Miller noted it has other priorities-like managing its array of ice beers-and that it has moved some Sharp's ad money into promotion. Sharp's ad agency is Young & Rubicam, Chicago.
"When the category started, there was heavy investment spending," said Mark Ziskind, allied brands director for Miller. "Over the last year or so, it looks as if it has matured."
Mr. Ziskind said non-alcoholic beers still have some room to grow, but Miller feels the niche is nearly fully developed. He notes that despite the 4% share non-alcoholic brews have claimed in Europe, closer to home just 2% of the Canadian beer volume is non-alcoholic.
Segment leader Anheuser-Busch, however, hasn't pulled back.
"Our sales are still going up at double-digit rates, and brand awareness is increasing," said Anne Suppiger, senior brand manager. She added that while some of O'Doul's increase may have come out of rivals' sales, A-B also believes it can grow the segment.
D'Arcy Masius Benton & Bowles, St. Louis, handles.
Stroh, too, is taking more of a long-term view. For Stroh, a leadership role in a smaller segment like this may be preferable to taking on the bigger brewers in a larger segment. Stroh claims Old Milwaukee NA has now passed Sharp's in sales. This year, local advertising for its non-alcoholic product is being supplemented by two network TV spots from Hal Riney & Partners, San Francisco.
"This year is a bit of an anomaly," said Mark Duchovi, Stroh's director of consumer marketing. "In the growth of light [beers], there also were hiccups. But the baby boom generation is moving into the prime NA target age."
The top sellers last year: O'Doul's at 12.2 million cases; Sharp's, 7.6 million; Old Milwaukee, 3.3 million; Coors Brewing Co.' Coors Cutter, 3 million; and G. Heileman Brewing Co.'s Kingsbury, 1.8 million.