"There is a significant segment of the population that chooses
to drink below premium, and those are the guys we really want,"
said Ms. Vives, who took over Keystone a year ago after working on
the high-end Peroni import, a move she likened to moving from
"biscotti to beef jerky." Keystone is "glad to get the volume and
windfalls that we got in 2009," she said. But "I'd rather focus our
effort [on] ... the people who are going to stay loyal," adding:
"We have to hitch our wagons to those people."
To do that, Keystone is doubling down on a strategy that has
made it one of the biggest ad spenders in the below-premium
segment. The brand will become a sponsor of the WWE pro-wrestling
franchise, while continuing its "Always Smooth" national TV
campaign that debuted last year. The campaign's star is Keith
Stone, a laid-back everyday-hero character meant to appeal to the
brand's target audience of men aged 21 to 34, who prefer T-shirts
and worn-out hats to fancy clothes and who drink cheaper beer and
are damn proud of it. The brand's agency is Publicis Groupe's
Saatchi &
Saatchi, New York.
Still, Keystone will be hard-pressed to lock in gains made in
the economic downturn. Shipments grew 16% in 2008 and 14.3% in
2009, making Keystone Light the 10th-biggest beer brand by volume,
and the fifth-largest sub-premium beer, according to Beer
Marketer's Insights. The top-selling below-premium brand is
Anheuser Busch's Natural Light (the No. 5 overall beer brand),
which grew 0.6% in 2008 and 2.7% in 2009. But as the economy
improves consumers are returning to mainstream light beers -- and
the narrowing price caps "may accelerate the consumer's decision to
trade up," noted UBS in a recent report.
In 2010, Keystone's growth slowed to 2.2%, while Natural Light
fell 3%. And the slide is continuing this year. Case sales of
Keystone Light grew less than 1% in the year ending March 20 and
Natural Light sales dropped 4.6%, according to SymphonyIRI, which
measures grocery sales not including Walmart or liquor stores. The
average price for a Natural Light case jumped 59 cents to $14.57,
while Keystone Light was up 56 cents to $14.
Executives can cope with the volume losses -- as long as they
move consumers into their own premium brands. Anheuser-Busch has
been especially aggressive, making it a goal to reduce the price
gap between its subpremium and premium brands to 15%, down from the
historical average of 25%. (The gap between Bud Light and Natural
Light grew as high as 40% in 2007, according to a recent UBS
report.)
In September, A-B accelerated its price hikes on subpremium
brands and "consumers traded up," and it "benefited brands like Bud
Light, benefited Budweiser," Carlos Brito, CEO of global parent
Anheuser-Busch InBev, said on a recent earnings call. Still, he
noted that "we were not able to compensate in the premium and above
segments what we lost in the value and price," he said. But "that's
the pain you suffer the short-term when you're trying to do
something that's great for the company."
One long-term risk for the big brewers is competition from
increasingly aggressive and cheap-priced bottom feeders, which see
potential gains as big subpremium brands hike prices. Beer 30, by
Melanie Brewery Co., added more than 100 distributors last year to
about 300 and is now sold at Walmart in seven states, said Jeff
Ciesco, the brewer's sales manager. "We do not invest in marketing
and media like the big boys do," he said, noting that the brand's
biggest selling point is pricing. Beer 30 is selling for an average
of $11 a case, according to SymphonyIRI.
Keystone nearly tripled its measured media spending in 2010 to
$7.4 million. The investment is still a fraction of the $145
million spent on Miller Lite, but a lot more than the $1.5 million
that A-B spent on Natural Light. Keystone's plans this year include
advertising on repeat episodes of Fox's "Family Guy" -- a bit of a
coup for a beer brand, for which age sensitivities can make it hard
to appear on animated programs, even if they are targeted at
adults.
Keystone is also aligning with beef jerky brand Jack Links on a
partnership that promotes "Canhole," in which consumers are urged
to toss bags of jerky into holes that can be cut out at the top of
Keystone Light cases.