Young Drinkers Have Abandoned Big Beer -- Can It Be Saved?
Big Beer still has a problem: Drinkers, especially millennials, aren't consuming enough of it.
That much was made clear this week at the annual meeting of the National Beer Wholesalers Association in New Orleans, where 2,000 distributor and brewing leaders gathered to debate a range of issues facing the industry.
While everyone involved in beer seems to be making money -- in some cases lots of it -- the industry's recent sales volume slide is taking on a new sense of urgency. "At the end of the day, my fear is what we've done is we've lost consumers," said Joe Thompson, owner of beverage consulting company Independent Beverage Group, during a presentation. "And we've lost young drinkers. And somewhere down the road, we are going to pay a price for that."
Total beer volume is on pace to decline 1% in 2014, and Anheuser-Busch InBev and MillerCoors will both be down, according to Mr. Thompson's estimates. That would follow shipment declines in four of the past five years, according to figures from Beer Marketer's Insights.
The underlying factors in 2014 are the same ones that have plagued big brands in recent years: Wine and spirits continue to make gains. And while craft beer brands are surging, the gains are not enough to overcome declining sales of stalwarts like Budweiser, Bud Light, Miller Lite and Coors Light.
Beer's share of absolute alcohol consumption has fallen steadily in the past 15 years from 59.6% in 2001 to a projected 50.9% in 2015, according to Independent Beverage Group's presentation, which cited the Distilled Spirits Council. "We've got to do a better job of fighting to keep these consumers at all levels … or you are going to wake up 10 years for now and we are going to have a real problem," Mr. Thompson told distributors.
One rather pessimistic theory is that the big light beer brands that launched in the early 1980s are in a freefall simply because the current generation of drinkers does not want to drink what the generation before it drank.
"There is a strong correlation to the concept of not drinking my father's beer," said Mike Mazzoni, a former beer industry executive who is a senior partner at Seema International, a business-strategy consultancy. "Millennials aren't drinking the Gen Xers beers," said Mr. Mazzoni, a proponent of the so-called "product life cycle theory," which holds that big brands will eventually mature and begin to falter. "And Gen Xers aren't drinking the same that that they did 20 to 25 years ago. So what we have is an inexorable decline of the major brands."
But brewing executives expressed faith in their big brands, which they are seeking to fix with marketing, packaging and other changes. "Over the past decade or so, we made the mistake of allowing consumers to equate differences in beer style with differences in beer quality and we've seen a growing misperception that lighter beers are somehow lesser beers when it comes to quality," MillerCoors CEO Tom Long told distributors during a private meeting, according to a transcript of his speech.
As fuller-bodied craft beers successfully began "equating higher quality with stronger taste" it implicitly suggested that lighter beers were of lower quality, he said. He rejects that argument, but suggested that big brands are partly to blame.
"While craft beers were waging the argument, the three big premium lights continued to stick with the same positioning and the same marketing that made light beer such a force in the 1990s with a heavy emphasis on lifestyle and humor and very little focus on selling the functional strengths of the beers," he said, according to the transcript.
Miller Lite is trying to reclaim its quality positioning, beginning with last year's re-introduction of its original can design.
"We're going to further embrace who we really are with both Miller Lite and Coors Light - authentically embracing our core propositions," according to Mr. Long's remarks, which he described as "world's most refreshing beer" for Coors Light "and the light beer that invented light beer" for Miller Lite.
A-B InBev, meanwhile, continues to adapt a marketing strategy that relies heavily on tying TV and digital ads to experiential executions in an effort spark interest among millennials. At a private meeting with distributors, the brewer cited positive results from its recent takeover of a town in Colorado. The campaign involved covering the town in Bud Light branding and naming it "Whatever USA" as a tie-in to its "the perfect beer for whatever happens" campaign by BBDO.
The campaign generated 66% more earned media impressions that a typical Bud Light Super Bowl campaign, according a copy of the brewer's presentation. Some 37,000 pieces of content were created from the event, including thousand of pieces of user-generated content shared over social media, reaching 15 million consumers and delivering an engagement rate of 5.6%, which the brewer said was nearly 40% higher than its Super Bowl efforts.
But if big brands are going to make a comeback, it could depend on some factors outside of the control of marketers, like the economy.
Lester Jones, the NBWA's chief economist, pointed out that the fastest-growing segments are craft beers and imports, which appeal to higher-income drinkers. "Anything that is in the upper, super-premium world is doing really well," he said. "That is an indicator of a segment of society that is doing well."
But overall, he takes a rosier view on the larger beer industry than some of his colleagues, projecting that beer volume will finish the year up 0.5%, "given the right macro conditions."
He largely rejects the product lifecycle theory, saying recent declines are due to external factors like stubbornly high jobless rates among young adult males. "Everyone always has this crazy notion that big beer is dead," he said. "I don't think it's dead," he added. "I think the factors that give people reason to buy beer are injured."
But nobody knows when, if at all, the healing will begin.