Does Heritage Trump Origin in Beer Brands?

Imported From Here: Suds Marketers Move Production Closer to Distribution

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Red Stripe beer might be the "the taste of Jamaica," but Diageo soon plans to make it at a U.S. brewery operating in three landlocked states. And while Beck's touts itself as "the world's No. 1 German beer," Anheuser-Busch InBev is moving production to the American heartland in St. Louis for its U.S. consumers. Even Foster's, which MillerCoors markets as "Australian for beer," is really a U.S. brew -- made in Texas, not Down Under.

Imported beers -- which rose to popularity beginning in the 1960s on the notion that beer made elsewhere was better and different -- are becoming decidedly more American. Big brewers are moving production stateside in search of cost-savings and flexibility even as the brands keep their foreign catchphrases. The shift follows the trend of other industries, like cars (see sidebar), where increasing domestic production by foreign companies has blurred the definition on what exactly is considered an "import."

"Import beers have definitely lost the cachet they once had," said beer historian Maureen Ogle, author of "Ambitious Brew: The Story of American Beer." "If you are going to sell an import beer in that category, what's really going to matter most is catchy advertising rather than point of origin."

But the debate is far from over. Pure-play importers like Heineken USA and Crown Imports are holding firm in their belief that place still matters, with both saying they have no plans to move production stateside. "If you play in the import segment, you need to be an import," said Laurent Theodore, U.S. VP-marketing for the Heineken brand. Consumers buying Heineken beer are "buying the place of origin," he added.

Indeed, the importer -- which has moved to more image-based ads in recent years -- is returning to its Dutch roots, with plans next year for limited-edition packaging called "Amsterdam 1873," which will emphasize the brand's place and date of birth, and a new TV campaign called "Credentials" that will play on similar themes.

Mexican-brewed brands like Crown 's Corona and Modelo Especial, meanwhile, still think they have a leg up with Hispanic consumers. And they might be right: Origin is still important for new and undocumented immigrants, who view beer as a patriotic symbol, said Robert Schmidt, a demographer and graduate faculty member at University of Nevada Las Vegas who studies beer trends. "Loyalty to that beer is like loyalty to the flag," he said, although it becomes less important the longer immigrants are here.

Brewers making the move to the states are calculating that the financial upside of local brewing outweighs any potential marketing risk. Indeed, beer executives say marketing will even be enhanced, because by lowering fixed costs such as shipping, companies can free up more money for brand building.

Beer "is heavy and it is in glass, so anytime you have something heavy, it's expensive to ship and glass breaks," said William Earle, president of the National Association of Beverage Importers. "If you can move ... closer to the consumer, you are likely to reduce those two variables." Also, domestic production eliminates the "vagaries of monetary policy," he said, such as a weak dollar raising costs for imported goods. At the same time, with domestic-beer sales in a slump, there might be excess capacity at U.S. breweries, which could induce even more imports to move here.

A-B InBev will move Beck's production for U.S. consumers to St. Louis by early next year. "We made this decision after talking extensively with our consumers, who tell us they aren't concerned about where the beer is produced as much as how it's produced," said Andy Goeler, VP-imports crafts and specialties, noting that the formula won't change. In June, the brewer shifted production of Bass English Ale to upstate New York. And Kirin, a "Japanese-style pilsner" sold by AB InBev in the U.S., has long been brewed in Los Angeles.

Liquor giant Diageo will contract with LaCrosse, Wis.-based City Brewing to make Red Stripe for its U.S. consumers beginning next year, while keeping production at Jamaica-based Desnoes & Geddes for sales in Jamaica, Brazil, Canada and Europe. City Brewing runs breweries in Pennsylvania, Wisconsin and Tennessee. Diageo, which announced the move last month, said it will "enable greater investment in the brand in the U.S." But at the same time, Diageo said Red Stripe's "personality will continue to embody the Jamaican culture that has always been its inspiration."

Foster's has stuck with its "Australian for Beer" ads even though the brand hasn't been imported from Down Under since 1993. MillerCoors moved brewing to Fort Worth, Texas, two years ago and before that the brand was made in Canada.

Geographical lines are even being blurred for domestic beers. Consider A-B InBev-owned craft brewer Goose Island, which this summer moved production of "312 Urban Wheat Ale" -- inspired by its hometown Chicago area code -- to upstate New York. Boston Beer Co.'s Sam Adams "Boston Lager," meanwhile, makes batches in Pennsylvania and Cincinnati. Coors Light, whose ads plug "Rocky Mountain cold refreshment," is not just brewed in Colorado, but in states such as Ohio and Virginia.

In the past, such marketing drew attacks from competitors claiming false advertising; the beer wars are littered with examples of place-of -origin battles. One of the biggest fights came in the 1970s when Miller purchased the American rights to Lowenbrau, brewing its own version in the states. But Miller only noted the true Milwaukee origin of the German-inspired beer in fine print, prompting a Federal Trade Commission complaint from Anheuser-Busch, which charged that Miller was "duping consumers by passing off a domestic beer as an import," Ms. Ogle documents in her book.

These days, such complaints are rare; the worst criticism that brewers face is probably hypocrisy, since so many are brewing brands all over the place. Even Heineken makes its flagship brew locally in some places, including Mexico, Vietnam and Thailand. Why there? Mr. Theodore said the import stamp means less in emerging countries, which take pride in the "ability to produce Western brands at the highest-quality standard."

Brands are also taking pains to ensure that formulas are the same all over, unlike Miller's Lowenbrau, which exposed itself to claims that it contained ingredients, such as corn grits, not found in German lagers, according to Ms. Ogle's book. Consider Foster's: Although it's made in Texas, ingredients like hops are still imported from Australia. And the brand sends weekly samples of the beer back Down Under for testing by a brewmaster and taste panel, the company said. "It's a lot cheaper to ship hops and barley to the U.S. than it is heavy liquid in class containers," said a MillerCoors spokesman.

And consumers either don't seem to care, or don't know, about the brand's true origin. Foster's sales trends have been improving steadily since 2010, according to the company.

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