Retailers use beer evolution to win Millennials

The Millennial generation continues to make its mark on businesses eager to win favor with these 80 million consumers who like what they like and seldom settle for anything else.

Wal-Mart Stores and other retailers like Dollar General have said they want to be there for this generation and having the beer they prefer is one step in the right direction, according to Jason Long, CEO of Shift Marketing Group.

“With Wal-Mart’s recent profit misses, they need to find quick an effective tactic to drive in-store traffic, and the beer category seems tailor-made for that effort,” said Long. “If Wal-Mart simply stands still and doesn’t expand their focus on beer, they’ll quickly lose share to Dollar General and Family Dollar who are getting into beer in a big way, which makes Wal-Mart’s strategy somewhat defensive in nature.”

Latriece Watkins, divisional merchandising manger for adult beverage at Walmart U.S.,  said over the past year the retailer noticed Millennials and other shoppers in their large boxes didn’t find it convenient to walk to the back of the store to purchase their adult beverages.

She said they instead opted to make those purchases at convenience stores and smaller-size retailers, which led Wal-Mart began to pull the adult beverages out into action alley and other more visible displays. Watkins said shoppers took notice and sales increased.

Last month, Duncan Mac Naughton, chief merchandising officer at Walmart U.S., said the retailer was picking up marketshare in adult beverage categories after it adjusted prices and added to the mix of private labeled brands.

“As a result our second quarter market share in adult beverage is up, 90 basis points, Mac Naughton said.

Long said retailers know beer is perfect for cross-merchandising with products such as grills, snacks & summer items and exposes consumers to products they wouldn’t have otherwise seen.

BEER EVOLUTION
Beer giants like Anheuser-Busch InBev and MillerCoors have seen firsthand how young adults walk past their strong brands that have dominated American tap handles and supermarket shelves for decades, reaching instead for craft beers, wine and spirits.

Watkins said Millennials have been the major catalyst behind the flavor profile changes shaking up the beer industry in the past couple of years. She said the younger generation has helped to boost wine and spirit sales in recent years taking share away from beer.

Watkins said it’s not just spirits and wine taking share from the major beer giants. A run-up in demand for regional craft beers have also become popular with Millennials. She said Wal-Mart carries a wide selection of regional beers at competitive prices, as well as an expanded line of adult beverage blends unveiled in the past year from the largest traditional brewers.

Long applauds Wal-Mart’s push into craft beer saying it is a big deal and could have a lasting impact – either good or bad – on the craft beer industry in general.

“Not only will Wal-Mart drive more traffic, they’ll likely drive new traffic from consumers who hadn’t considered Wal-Mart a beer destination beforehand,” he said.

Last year beer sales totaled 48.8% of the total alcohol market. The share has slid from 56% hit in 2000, according to U.S. Distilled Spirits Council. A recent report from IRi Symphony reported the U.S. beer market over the 52-week period ending Oct. 6 totaled $29.8 billion in sales.

Craft beer accounted for 6% of the market with sales of $1.79 billion, and those sales rose 18.5% from a year ago. “Progressive adult beverages” such as Mike’s Hard Lemonade, Cayman Jack and Twisted Tea rang up sales of $1.55 billion accounting for 5% of total market sales, up 30% from a year ago.

The IRi report found traditional beers under the Bud Brand still controlled a lion’s share of the market with $8.45 billion in sales, but it was one of several brands to lose share to Samuel Adams, Blue Moon and Pabst, all of which posted low double-digit gains in sales over the past year.

No one would argue the diversity found among the large Millennial demographic.

Angela Ryan, owner of Fayetteville-based McBride Distributing Co., said a trend she sees among the 21-27 age group is toward "retro" beers and beverages. Old school is cool – again.

"They like the good old red, white and blue Budweiser and PBR (Pabst Blue Ribbon)," Ryan said.

Not only does the retro have a cool element, but it's also cheaper than many of the flavored beers, flavored vodka and other sweet drinks, she said.

The IRi data confirmed Pabst has picked up marketshare in the past year, while Budweiser sales declined roughly 2%.

FLAVOR SELLS
The biggest beer brewers are cashing in on those who want more flavor choices and are willing to pay for it. The Bud Lime beer drew in $424 million in sales, up 314% year-over-year.  Anheuser-Busch InBev executives noted in a recent earnings release that it continues to lose market share in its Bud Light brands and the entire premium light segment remains under pressure.

At the same time, consumers reached for the progressive adult beverages Straw-Ber-Rita and Lime-a-Rita products from Budweiser. The company said these two Ritas achieved a combined market share of 80 basis points in the quarter. Joining the Rita family, ready for the holiday season will be Cran-Brrr-Rita, a seasonal addition to the portfolio.

MillerCoors, the No. 2 beer brewer in the U.S., also said it is benefiting from its craft beers under the Redd’s, Leinenkugel’s and Blue Moon labels.

“Our strategy to grow share in the high-margin and fast-growing above premium space is driving excellent sales mix,” said MillerCoors Chief Executive Officer Tom Long, during the recent earnings call.

Leinenkugel’s Summer Shandy expanded nationally and increased double digits. In  2013, Summer Shandy is the single largest driver of craft volume growth, accounting for nearly 10% of total craft industry growth, according to Nielsen.

In addition, Leinenkugel’s Orange Shandy has made a promising start and is outperforming initial expectations. Blue Moon Belgian White grew mid-single digits in the quarter, continuing its run of 72 consecutive quarters of growth. Batch 19 volumes grew 275% as it continued to expand nationally, Long said.

Redd’s Apple Ale has quickly become one of the fastest growing beer brands in the United States. Redd’s Strawberry Ale was introduced in the third quarter and has had a strong start, gaining incremental shelf space for the Redd’s franchise, according to Nielsen.