Beer Marketers Search for Answers as Wine and Spirits Keep Winning

The beer industry's wine and spirits anxiety has reached a fevered pitch, if the annual National Beer Wholesalers Association meeting of 4,000 distributors and suppliers this week is any sign.

From the main stage in a Caesar's Palace ballroom, speaker after speaker lamented the ground that beer has lost with drinkers, especially millennials. Liquor keeps creeping into occasions once dominated by beer, like drinking at pro sports stadiums. And hard booze brands have burst through societal boundaries that once kept them from making big-budgeted marketing splashes. The latest watershed moment came this year, when the NFL lifted its liquor-ad ban.

Beer executives have sounded alarms before; the industry even ran a Super Bowl ad for beer, collectively, in 2006 as wine and spirits' encroachment was becoming clear. But at this year's event, the urgency seemed particularly acute.

Beer as a proportion of the alcohol consumed by 21-to-27-year-olds fell to 43 percent last year from 65 percent in 2006, said Joao Castro Neves, North American president and CEO at Anheuser-Busch InBev's, the world's largest brewer. "If this trend continues at the pace it is today, by 2030 beer will no longer have the largest share in the alcohol category," he said.

Ronald den Elzen, president and CEO at Heineken USA, said the industry has lost 35 million barrels of beer in the past 20 years as result of competition from wine and spirits. "Every consumer today drinks on average one bottle of beer less per week than they did 20 years ago," he said. "If this is not a wake-up call that we have to do something, I don't know what is."

"Wine and spirits are not sitting still and marijuana is being legalized in many states across the country," he added. "We have to act now and we have to do it together."

But the paradox is that by some measures, beer looks healthy. The craft beer revolution has driven new interest in small brands and led to a dizzying array of styles, reaching far beyond the yellow-tinted light lagers that have long dominated.

As of the end of last year, 5,301 breweries operated in the U.S., up from 2,475 in 2012, according to the Brewers Association. And last week, some 60,000 people attended the Great American Beer Festival in Denver, with tickets selling out for the craft-beer friendly event in four hours.

Still, even craft beer sales have slowed. Production volume in the first half of the year grew 5 percent, which is shy of the 8 percent growth pace at the same time last year, according to the Brewers Association.

But big brands carry most of the blame for the beer industry's volume woes. The four largest brands—Bud Light, Coors Light, Bud and Miller Lite—collectively fell more than 4.5 percent in volume in the nine months ending Sept. 30, according to Nielsen figures cited by Beer Marketer's Insights. "How can the industry turn around with its top four brands that are almost 40% of biz collectively declining at mid-single digit rate?" the trade publication asked in a report this week.

In his speech, Heineken's den Elzen suggested more industry-wide cooperation in the U.S. to improve beer's image. He pointed to a campaign that European brewers have collaborated on called "Love Beer" that tries to shatter negative beer stereotypes, including that it is only for middle-aged guys with beer bellies. The European ads make direct appeals to women. "Europe is not the U.S., but we have the same issues over here. We cannot solve this alone," he said.

Castro Neves also called for raising beer's sophistication level by linking it to fashion and culture, while using unique glassware. He also suggested more food-and-beer pairing programs. And he said beer should be "alert to emerging trends."

"Beer can appeal to the health conscious, fitness-minded consumer in a way that spirits and wine cannot, or it would be difficult for them," he said. "Imagine you are coming in from a hard run, a hard bike. You wipe the sweat off. You want to celebrate your hard work with something lighter and more refreshing. What do you think of? Beer."

That insight is fueling the marketing for brewer's low-calorie Michelob Ultra brand, which has enjoyed strong growth in recent years. A new ad for the brand "directly addresses the misperception that wine is always the healthier option." The spot, below, is by FCB Chicago.