“The craze for alcopops is rapidly fizzling out as popular brand Bacardi Breezer’s sales slump leading Thomas Hardy Services to close its bottling factory in Tiverton with the loss of 80 jobs.”
— Sunday Express, London, UK, Nov. 12, 2004
The British call them “alcopops,” we call them malternatives, while marketing mavens of the beer biz insist on “flavored malt beverages.” Flavored malts, ciders, coolers, hard lemonades, teas, root beers and so on, a whole gamut of beer-strength potions, have sprung up, tasting like anything but beer. They were riding high for a few years, despite a couple of spectacular failures among products that were rushed to market. Almost every new flavor seemed to boost them higher.
Now their prospects seem to be on the rocks. “The alternatives? Not selling at all,” says Patrick Droesch, vice president of beverages at Brinker International, parent company of Chili’s, On the Border, and Romano’s Macaroni Grill. “Smirnoff Ice continues to decline. We still carry it in our stores, but it could be only for the rest of the year.”
Tim Johnson, director of purchasing and beverage operations at Champps Entertainment, Inc., agrees. “They have dropped off considerably,” he says. “We still offer two or three of them. The Smirnoffs are out there, pushing flavor of the month. What’s going to be the new Peachtree? We don’t emphasize it. We do require Smirnoff Ice, but not what flavor. That’s a local choice. I thought cider would take off, but it never did. In a couple spots it’s doing well. In Los Angeles, in our Irvine location, it’s taking off, and in the upper Midwest it does well. But the South? The Northeast? Nothing. It just never caught fire.”
Malternatives on-premise may be weak, but reports of their demise may be premature. “It’s actually a moving target,” says Eric Shepard of Beer Marketer’s Insights. “Malternatives are slightly on the rise again with the introduction of new flavors: the Smirnoff Twisted V line, and some of the new Mike’s Hard flavors are doing well. But as a whole, the category is being propped up by these new introductions.” Shepard indicated that the category was not rising as steeply as it had, but modest increases are a completely different story from steady declines.
The “core” malternatives Smirnoff Ice, Mike’s Hard, Bacardi Silver, and the much-maligned pioneer, Zima are showing double-digit drops, anywhere from 16 percent to 46 percent down from the previous year’s sales. The broad swath of imitators is also down.
The pattern seems to be a familiar one. An innovative new brand comes along and catches fire due to its novelty and smart promotion. Imitators (or re-positioned precursors, like Zima and Two Dogs) spring up and ride the wave. But the hot fad dies of its own heat as trendsetters look for the next new thing. The trend declines swiftly, and wholesalers are left with aging pallets of the last new thing.
Malternatives would seem to be that familiar pattern, except for the sparks of the new flavors, Shepard says. Why are these brands, the same thing only different, catching the eye of the drinkers? “The new brand thing is a pendulum,” Shepard says. “A lot of ice beers and dry beers came out in the early 1990s, then things shifted back to the core brands. Now it’s new brands again. It’s a reaction to what producers think consumers are looking for. And…people may have gotten bored with beer, too. The marketers pick that up.”
MICHELOB’S ‘HOME RUN’
Bored with beer? Say it ain’t so! It wouldn’t seem that way with the huge growth in low-carb beers like the ground-breaking Michelob Ultra. “There is no question that Michelob Ultra hit a home run on that one,” said Johnson. “There are a few others that came back and countered it. Miller Lite did, they did a pretty good job countering that, but the others were just too late. Aspen Edge was too late, and then there was a lot of talk about whether the name was right for a low-carb beer?”
Colleen Brennan, beverage manager for the O’Charley’s chain, agrees. “They’re still selling, Ultra particularly,” she says. But she notes that Ultra’s success didn’t come without a price. “It did cannibalize Michelob sales somewhat.”
Trade-off or not, Brennan sees low carb beers staying in the picture. “I think low-calorie, low-carb is here to stay,” she says. “There will be new products next year, it’s not going away. But at the end of the day, customers buy on taste. If you can get light with taste, that’s a bonus. Once people realize that most light beers are low-carb, they’ll buy on taste.”
Johnson went further. “We really did sell a lot of Ultra,” he says. “But it peaked about four months ago. As we got into the fall and people started wearing sweaters…counting carbs wasn’t as important anymore. People thought, ‘Hey, I’ll have a beer I can taste!’ and went back to their Fat Tire and Yuengling Porter.”
What effect have malternatives and low-carb beers had on the image of the core beer brands? Do they, by their success, imply that something is wrong with beer’s image, that beer can’t satisfy the 21-to-30 year old drinker’s wants?
WHAT DO CUSTOMERS WANT?
Bob Lachky, vice-president of brand management and director of global brand media for Anheuser-Busch, faced that question during a press conference at the launch of Anheuser-Busch’s new BE “energy beer.” (see sidebar). “Why aren’t these young folks just happy drinking beer?” asked Tom Daykin, a Milwaukee newspaper reporter.
“It is a good question,” Lachky admitted. “They are not [happy] because there is so much in our culture and our society which speaks to individuality, to experimentation. If you studied the sociology of what is going on in our country, there is a real move for people wanting to put their stamp on being an individual and you have seen it impact every industry. People used to say, ‘I am a Budweiser drinker.’ or ‘I drink wine.’ People don’t say that anymore. They say, ‘Well, depending on my mood and depending on the time of day, depending on whether I am after a softball game or if I am out on a date with somebody I am really trying to impress, maybe I’m switching around with what I want to drink.'”
However, Lachky emphasizes that it’s not that people aren’t drinking beer. “Beer is still the highest incidence of alcohol consumption for alcohol beverages versus distilled spirits and wine and that has historically been true for the last 30, 40 years. But variety and innovation is more of a factor than anything else…you can find that consumers may start out an evening with a glass of beer at 6p.m., could move into maybe a distilled spirit somewhere around 9p.m. and go to the clubs and try something else, maybe bottled water and maybe finish off with a beer later in the evening. The spectrum of drinks that people will come in and out of has changed so drastically in the last five years [that] it is more about individuality and wanting something different and not conforming.”
ATTACK OF THE COCKTAILS
But Brennan is not so sure she agrees with that, and points to another big trend on the scene. “There’s a rise in the cocktail culture,” she says. “That’s what is hurting beer, all the new cocktails and flavors. That’s cut into beer sales more than the malternatives. And, of course, vodka, rum, [and] liquor is naturally low in carbs.”
That’s what Shepard sees as well. “What’s driven spirits growth?” he poses. “Flavored vodkas. The spirits people woke up seven or eight years ago, realized the shotglass thing wasn’t working, and they got more innovative with their marketing efforts.”
Johnson isn’t worried about the impact on beer’s image. “The malternatives were marketed to the 21-to-30 year old drinkers, who generally haven’t acquired taste buds to handle the more full-flavored beers. I’m talking more about the craft beers, the micro segment. By their nature, the alternatives are marketed to that young group, so I don’t think they hurt traditional beer’s image. They are out there, and the malternatives are entry-level beverage alcohol drinks.”
Then he puts it in perspective. “You know, the late baby-boomers, my generation, our first drink was a Seven and Seven,” he says with a laugh. “We didn’t want to drink Canadian, it was too expensive, and bourbon was just too much, so we took the Seagrams 7 and put some fizz in it. That was our entry drink. The malternatives are that now. That age group tends to be a bit more explorative.”
To put another perspective on the whole malternative picture, take a look at overall category numbers. The third largest malternative in sales in 2003 wasn’t Smirnoff Ice, Mike’s Hard Lemonade, or even Zima. It was Bartles & Jaymes, the venerable Gallo brand that hasn’t had an advertising campaign in over 10 years. Facts like that help you keep your cool when things start to change so rapidly.
Energy Beer: the buzz with a ZAP!
I learned to tend bar from a man who would help himself to a cup of coffee topped off with Old Grand Dad at closing time. “Catch the buzz, stay awake to enjoy it,” he would tell me.
That’s the idea behind three new beers: BE, Moonshot, and Mobius, which are ‘enhanced’ with caffeine and other rejuvenators. BE (pronounced “B-to-the-E”) is an Anheuser-Busch product, a beer infused with caffeine, guarana, and ginseng, and flavored with blackberry, raspberry, and cherry. Moonshot is a more straightforward beer with caffeine, from New Century Ltd., which brought us Edison Light beer. Mobius is a bit more New Age, a “European-style lager” embellished with caffeine, taurine, ginseng, and thiamine.
Moonshot is Rhonda Kallman’s inspiration. “I was tailgating at a Red Hot Chili Peppers concert,” she said, “and I’d been drinking Edison Light in the parking lot, and drinking caffeinated sodas, and I felt great. I suddenly thought, ‘I should bottle this.’ Look at Starbucks, look at Red Bull,” she said. “People say it all the time: ‘I need caffeine!’ So I called up our consulting brewer, Joe Owades, and he hung up on me! But I called him back and said, ‘I’m serious, I really want to do this!'” Moonshot is a straightforward light lager with a dose of natural caffeine.
Mobius is a new beer out of South Carolina, a light lager with an adventurous blend of stimulants, a virtual “nutraceutical” of energy and malt. The idea grew when Robert Spencer saw all the Red Bull cocktails young people were drinking. He thought a beer alternative to the thickly sweet energy drinks could be a success. Mobius is in very limited distribution for now, but Spencer hopes to break out into a wider market.
BE is “B to the E power,” a reference to powers of 10, as explained by Bob Lachky, vice president of brand management and director of global brand media for Anheuser-Busch. “B is the crown B Budweiser symbol,” he explained. “The E stands for something extra, the extra being caffeine, guarana and ginseng.”
Pat McGauley, A-B’s senior director of innovation and high-end brands, laid out the rationale for the new product. “We have created B-to-the-E for that 21 to 27 contemporary adult consumer, specifically in mind for those who are looking for that latest strength to keep up with their highly social and fast paced lifestyles, whether you are out there with friends at a club or at a bar after work with your colleagues. In fact, this is a new drink that is outside the boundaries of taste that you would expect from a traditional beer, especially from us or any other beer.”
Well…maybe, depending on how you define “taste.” Miller tried this kind of beer back in the mid-90s with Iguana Light, a beer flavored with the same guarana berry as BE, a berry with twice the caffeine of coffee and a sly, sideways reputation as an aphrodisiac. Iguana Light flopped in test markets and was discontinued.
The question is whether this is an idea whose time has come. The Red Bull boom, which shows no signs of slowing down, would seem to indicate that it has a good chance. But the shaky status of the other malternatives should warn you that if this idea’s time has come, it might be a short reign. –LB