Beer Marketing: Brewers binge on malt drinks

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With beer volume flat and brewers scrapping for every incremental sip, this will be the summer of the alternative malt beverage. But despite new products, big money and high hopes, some analysts and industry participants predict alt malts could go flat within a year and could enter the wine-cooler pantheon within three.

Despite dim long-term prospects, brewers are rushing into the high-priced category for its brilliant short-term outlook. At last count, nine flavored malts will hit this summer, supported by more than $350 million in ad dollars. Last year's figure was more than $77 million, according to Taylor Nelson Sofres' CMR.

Volume for alternative malt drinks is up 61%, compared with a 3% boost for beer. The beverages now represent 4% of the $8 billion beer category,up from 1.5% a year ago, according to Information Resources Inc.'s measurement of food- and drug-store sales. However, 20% and 30% volume drops for some leading specialties-Coors Brewing Co.'s Zima, Anheuser-Busch Cos.' Doc's Hard Lemon and RSL Spiked Beverage Co.'s Rick's Spiked Lemonade-suggest more fizzle than frenzy.

`too much hype'

Observers warn the drinks' girlish persona, higher cost ($7 a six-pack vs. $6 for Budweiser), sweet taste-and drinkers' inability to down many drinks at a sitting-will stunt long-term volume growth.

"As more and more come on to the market, there'll be a lot of hype, and if the products don't live up to the hype ... [people will say] `I don't like this category,"' said one distributor of beer, wine coolers and the new malts.

In addition to Diageo's Smirnoff Ice, Anheuser-Busch's Bacardi Silver, Skyy Blue from Philip Morris Cos.' Miller Brewing and Mark Anthony Brands' Mike's Hard Lemonade, shelves will be crowded with Diageo's Captain Morgan Gold, Coors' Vibe, two more Mike's flavors and the same number from United States Beverage's Hooch Hard Lemonade. Miller alone will roll out Stolichnaya Citrona, Sauza Diablo and a derivation of Brown Forman Corp.'s Jack Daniel's Tennessee Whiskey.

"It's a given that not everyone will be successful," said Benj Steinman, editor of Beer Marketer's Insights.

The distributor said an ad pullback would accelerate a sales drop and wondered if a recent federal ruling forbidding alt malts from using words like "rum" or "vodka" on their labels could suggest future restrictions. But it's the association with those spirits that give the brands extra cachet, and suggest alt malts will fare better than wine coolers did in the 1980s.

growing room

Malt marketers refuted the nay-sayers, suggesting the category is in its infancy and ultimately could reach 10% of the beer industry. "The beauty of this category is that it brings in new drinkers, people who really don't like the taste of beer," said Marlene Coulis, Anheuser-Busch's director of new products.

Morgan Stanley's beverage analyst, William Pecoriello, said specialty malts don't threaten beer. After interviewing more than 1,300 young consumers, he predicted alt malts could capture 1% to 3% of the beer market before topping out in 2005-but only if they attract young men who see no reason to switch. "For malternatives to grow beyond a large niche, they need to generate stronger repeat intention among young males."

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