With a marketing push estimated at $80 million for just two of these new brands, as well as new products and interest throughout the beverage industry, the so-called "malternative" segment has the makings of the next wine cooler. The trick is to duplicate the early success of those once popular drinks while avoiding a nosedive.
The newest entry is Bacardi Silver, a clear beverage to be produced, distributed and marketed by Anheuser-Busch Cos. The drink is scheduled to roll nationally next year, presumably by spring, in anticipation of the peak summer drinking season. An Anheuser-Busch spokesperson confirmed the name of the product, but declined to elaborate further.
The product stems from an alliance between the world's largest brewer-which has a spotty record with new products-and Bacardi USA, a subsidiary of Bacardi & Co., marketer of the country's leading spirit by volume. With Bacardi Silver, A-B gets a high-end, potentially profitable entry into a hot category that has dented beer sales, while the rum runner gets higher visibility-especially among couch potatoes less familiar with its brand since Bacardi spirits are advertised primarily in out of home and print vehicles. Bacardi did not return phone calls seeking comment.
Silver will have plenty of company. High off the January launch of Smirnoff Ice, Guinness-Bass Import Co., a subsidiary of Diageo Worldwide's Guinness-Bass-UDV North America, plans more ready-to-drink products, perhaps using a rum or scotch brand name. No. 2 malternative Mike's Hard Lemonade, marketed by Canada's Mark Anthony Brands, is eyeing additional flavors. Miller Brewing Co. wants in, as does Constellation Brands' Barton Brands, which is considering a product using its Fleischmann's gin. Other distillers are looking for beer partners, while E&J Gallo Winery-marketer of Bartles & Jaymes wine coolers-is looking at the market with renewed interest. And those are just the major players.
The $601 million category could continue to dent the $33 billion beer industry for another two to four years, predict onlookers. "It will cannibalize beer, but you don't know to what extent. [Brewers think] `I've got to be there to save my volume,' " an executive familiar with A-B said. Beer sales were soft in 2000, according to newsletter Beer Marketer's Insights, down a half percentage point to 179.5 million barrels. This year domestic beer sales are projected to be down 1% to 2%, and observers attribute part of that slip to the rise of Smirnoff Ice and other malternatives.
Even when the new category begins to slip-as most beer alternatives over the decades have-it's likely to retain some heft. "It's not like you suddenly hit a brick wall and go to zero. That slide can take a lot of years. Bartles & Jaymes is still here," said one spirits marketer planning a malternative entry. "You can't simply disregard a 100-million case category."
Smirnoff Ice has become the country's leading malternative and is expected to sell about 1.8 million barrels in its first full year. From a standing start, it has jumped to the country's 24th most popular malt beverage-behind a slew of beers. But that doesn't guarantee longevity. Anheuser-Busch's Bud Dry sold more than 3 million barrels its first year, but trickled to about 200,000 by this year, according to Beer Marketer's Insights. And Gallo's Bartles & Jaymes coolers sold 1.3 million barrels in 1990 but just 84,000 barrels in 1999, according to the Impact database for alcoholic beverages.
Smirnoff Ice spent $14.4 million in measured media in the first six months of this year, according to Taylor Nelson Sofres' CMR, and is expected to spend $50 million by the end of 2001. Mike's Hard Lemonade dedicated $9.6 million to first-half spending, with an estimated $30 million to $40 million slated for this year, insiders said.
Smirnoff and Mark Anthony Brands did not return calls seeking comment. Anheuser-Busch is expected to pour money into its Bacardi offering; however, it's not yet settled on an agency or strategy. Players who want to be viable in the two-year-old category must get into it by this summer and write big checks, observers agreed.
"They're going to have to pony up if they want to play ball," said Benj Steinman, editor of Beer Marketer's Insights.
Contributing: Kate MacArthur