As brewers seized on the popular diet craze, the low-carb-beer segment shot from nonexistent to substantial since 2002. But now that the trend is waning, low-carb beer's share is losing ground. Low-carb brews declined to 3.3% of beer sales in supermarkets-20% of industry sales-for the four weeks ended July 11, according to Information Resources Inc., down from a peak reached in April of 3.5%.
Once seen as a potential growth source, the beers now are expected to become a niche, forcing brewers to find new ways to build the brands and adjust their messages. That's expected to take a bite out of Anheuser-Busch's Michelob Ultra and Coors Brewing Co.'s recently introduced Aspen Edge.
But Miller Brewing Co.'s Miller Lite still looks to be well-positioned, however, since it's increasingly been touting taste and de-emphasizing the low-carb message that helped spark the brand's turnaround (see story at left). A spokesman said the shift of emphasis reflects an evolution in ad strategy and isn't based on concerns that low-carb diets will wane. Low-carb messaging will continue in print, radio and other media.
In an Aug. 18 report, Morgan Stanley analyst Bill Pecoriello wrote that the "while the low-carb diet fall-off will create a slight head wind for Lite, the brand's broadly improving equity suggests ... [it] should be able to gain share of the beer industry, albeit at a declining rate as comps get tougher in September."
The declining popularity of low-carb diets may actually help Bud Light, which has lost sales to Michelob Ultra and Miller Lite, Mr. Pecoriello wrote.
A-B pretty much created the category with Michelob Ultra, taking it nationwide in late 2002. It hit 3.1 million barrels in shipments in 2003, according to industry newsletter Beer Marketer's Insights. But the brand's growth is slowing. Supermarket sales were up only 25.6% on a year-over-year basis for the four weeks ended July 11, according to IRI, vs. a 64.6% increase for the year through July 11.
Sales could drop by 15% or more next year as people walk away from the diets, Mr. Pecoriello wrote in a report last month. To prevent that, A-B has to find a way to establish a new positioning for Michelob Ultra, such as the lightest light beer, said Tom Pirko, president of consultant Bevmark .
Coors affected, too
"We are extremely pleased with the performance of Michelob Ultra," said Rick Leininger, director-Michelob family at A-B. "This brand is well-positioned for the active lifestyle beer drinker. "
The waning of the low-carb trend also hits Coors, which rolled out Aspen Edge with fanfare in the spring. But the brand hasn't made much of a dent and in the four weeks ended July 11, Aspen Edge's share of supermarket sales slipped to 0.3% from a peak of 0.35%.
Brian Sudano, senior VP of the consultancy Beverage Marketing, suggests the brewer should focus its energies instead on flagging Coors Light, the company's leading seller, which posted a decline in 2003. "It's important for them to strengthen the franchise," he said.
But a Coors spokeswoman said the brewer is confident the brand will succeed and still sees opportunity in the low-carb segment. It has run new ads emphasizing taste from Interpublic Group of Cos. Deutsch, Los Angeles, during "Monday Night Football."