Big Beer Invaders on the Crest of a Killer Wave
They’re riding high and looking for new beachheads to conquer. By Priscilla Estes Illustration by Harry Pulver, Jr.
In case you hadn’t noticed, imported beer sales are riding a huge wave. In a year of otherwise calm growth of 1.5% for the entire industry, many imported powerhouses caught big breakers; Corona was up 21.3%, Labatt Blue hung ten at a 13.5% growth, and Amstel Light logged in a heavyweight 15.4%. And other big Kahunas kept building as well: Traditional segment leaders like Beck’s and Guinness continued strong, steady growth, while new powerhouses from Mexico such as Tecate, up more than 16%, and Modelo Especial, up 28% surged ahead. (Source: Adams Handbook Advance 2000.)
What accounts for this intoxicating surge in import sales, from 8.3 million barrels in 1992 to almost 18 million in 1999? (The Beer Institute/U.S. Department of Commerce.) Cheers polled the field, from operators to importers, who boiled it down to five simple reasons.
1. It’s the Economy, Stupid
“It’s a more global economy today, and the U.S. is the largest open market in the world. Why wouldn’t European brewers take a crack at it?” asks Tom Potter, CEO of Brooklyn Brewing Company and the Craft Brewers Guild distributors (Brooklyn, NY, and Boston).
“The economy is strong right now,” seconds Doug Wittrup, manager of beverage operations for Metromedia’s Bennigan’s, which features 55 to 65 different beers at many of their more than 260 locations. “People have some extra dollars and they’re trading up to what they consider to be high-quality beers.” Imports as a category make up more than a third of Bennigan’s beer sales, an “extraordinary ratio,” says Chris Barnes, manager of communications and media relations. He adds, “Since we’re an Irish-American grill and tavern, Guinness is a very strong player.”
“Extra dollars” combined with consumer optimism play a role in imported beers’ success says Brad Hittle, group director of Mexican brands at Labatt USA. Hittle says, “There has been an increase in discretionary income. Plus, we’re seeing a surge in the 21-to-25- year-old base who have never experienced a negative economic environment. When the recession of ’91 occurred, they were 12! There is optimism in this group and a desire for good quality products.”
“People are drinking less but drinking better,” adds Ron Christesson, director of marketing for Gambrinus, importers and marketers of Corona. Pat Droesch, director of beverage for Brinker International, says he also sees people paying more for beer but drinking less in Brinker’s restaurants, which include Chili’s, Romano’s Macaroni Grill, On the Border Mexican Cafe and six others. “If a customer is only going to have one or two beers, he’ll go for a heavier or bigger beer,” says Droesch, noting that imported beer sales have increased at their restaurants, where they match the type of beer to the restaurant concept.
How did consumers get comfortable with pricy imports? Some say that microbeers helped pave the way for import growth.
2. Microbrews Pioneered the Way
Craft beers gave consumers the luxury of choice, says Ron Christesson of Gambrinus: “People realized they don’t always have to drink Bud, Miller or Coors.” Bennigan’s Doug Wittrup adds, “The craft beer movement really promoted understanding flavor profiles and what a true quality beer was. It’s a natural move for the customer to trade over to imports.”
Droesch at Brinker says crafts’ occasional consistency problems drove customers to imported beers: “Consumers started looking at import brands as a category to fill that consumer niche.”
Christesson concurs. “People reached for an import when the craft beer scene overheated. The bigger imports have always offered stability and a safety factor.” Brad Hittle from Labatt USA adds, “All it takes is one bad trial experience at $7.99 for a microbrew six-pack, and consumers want to go back to something they can trust. That’s how imports have benefitted.”
On the opposite side are those who think imports paved the way for micros. An unlikely proponent is Brooklyn Brewing’s Tom Potter, who says, “In our private moments, we admit we got into making beer in the first place because we loved imported beer.”
In the same vein, Irish-born Tom Moran of W. J. McBride’s in Oberlin Park, Kansas, says, “The main players like Guinness, Bass and Newcastle have always been readily available. They led the way for micros and crafts, which opened up the bars to independent brewers.” (W.J. McBride’s is one of the Guinness-supported Irish-themed restaurants.)
Moran sites another reason for the success of imports: travel.
3. The World Keeps Getting Smaller
W.J. McBride’s Moran says, “People are traveling more. Beers they enjoyed overseas are now readily available in their own local. That’s a big part of the popularity of imports.”
Others say the same. Christine Dwyer, beer buyer and bar manger for Manhattan’s The Ginger Man, says, “People had a Hoegaarden or a Stella Artois in Europe, and are delighted to find it back home.” The GingerMan carries 65 drafts, of which half are imports, and 100 kinds of bottled imports.
“Corona is a top seller. People ask for it before they open the beer menu,” says Dwyer. Erik Most, bartender at U.S. Beer Bar in Chicago, says, “Travel really gets people interested in imports. Like my roommate just got back from England and is drinking Newcastle. There’s no stopping him! We sell a lot of Corona and Amstel Light; the guys drink it with a shot.” (Eleven of U.S. Beer Bar’s 23 draft selections are imports.Go figure.)
But familiarity can breed contempt, says Irish-born Oonagh Concannon, beverage manager of Jack’s Cannery Bar, an English pub in San Francisco’s touristy Fisherman’s Wharf. “European tourists don’t want a Budweiser because they can get that over there now. A German customer will often prefer an English beer, like Newcastle, which we sell a lot of, rather than a Budweiser or a German beer.” About a third of their 80 bottles are imports; Guinness sells best from their 120 taps.
British beers are back, says Gordon McIntyre, 12-year bartender at Seattle’s 91-year-old Athenian Inn. An influx of British tourists on the direct flight from London to Seattle may account for this, McIntyre admits. Guinness and Bass also figure heavily in their drafts, and the Athenian carries 200 to 300 bottled imports. McIntyre admits, “I do sell a lot of the top 10 imports. My best sellers are Dos Equis, Corona, Beck’s, Heineken, Molson Ice and Amstel Light. But that’s probably because they’re marketed better.”
Which leads to reason four: good marketing creates brand success.
4. Good Marketing
The bigger imported beers have marketing down pat, as well as an innovative outlook, says Potter from Craft Brewers Guild.
“The Big Three see the market as largely stagnant and growing very slowly, so their strategy is to win share from each other. The imports seem to be more concerned about trying to win new converts into the beer category; it may be a wine drinker trying Bass Ale for the first time, or somebody in their mid-20’s whose habits aren’t set. Their ads are often more clever, more inviting to women and people who aren’t going to just drink beer while watching sports on TV.”
Corona’s “Vacation in a Bottle” is a prime example of advertising success. “Over the years, we stayed the course in our vacation, fun, sun and beach positioning,” says Christesson of Gambrinus. And obviously, it has paid off. Corona Extra has grown double digits for at least five years (reaching an impressive 47% in 1998). Advertising dollars have undoubtedly helped. According to Christesson, “Our joint national advertising budget [from Gambrinus and Barton, Corona’s two marketers and importers] for this year is $25 million, up from $22 million last year,” not including the $14 to $15 million spent in individual markets.
Advertising and beefed-up field sales play a large part in Labatt Blue’ success, says Bryan Semkuley, director of Canadian brands. “We made a substantial investment in advertising in 1998, increased it dramatically in 1999 and stepped it up in 2000. We also physically have more people on the street selling Blue.”
A 1995 decision to re-target the brand toward Mexican Americans sparked double-digit growth for Labatt’s Tecate, says Brad Hittle, group director of Mexican brands. “We focused on first-generation Mexican-Americans. Our positioning is about Mexican pride.” A Hispanic ad that features “man on the street” interviews in Mexico has pulled especially well. Hittle says they also raised Tecate’s price, after a study showed Tecate’s low cost cheapened the image.
And now for the fifth and final rule of import success: don’t forget promotions and discounts.
5. Promotions and Discounts Work!
Both Bennigan’s and the Brinker restaurants take advantage of discounts and seasonal promotions from the top imported brands. Brinker’s Droesch says, “If somebody buys a Corona Light instead of a Bud Light, I’m thrilled! It’s a couple of extra pennies in my pocket.”
Tecate relies heavily on promotions in the field, including soccer tie-ins and on-premise visits by the Mexican brewers. Hittle says their write-you-own Corridos contest contest is especially successful. “Corridos are Mexican ballads,” explains Hittle, “and customers write them in the bar. It’s a very effective grassroots promotion.”
Eric Most at U.S. Beer Bar runs a Bass and Harp promo every week, as well as monthly import specials of his choice. “It really brings people in,” he says. Bill Sneeringer, bar manager at KClinger’s in Hanover, Pennsylvania, says they take advantage of distributors’ offers. And it works for them. “Our import sales are way over half of our domestic sales.” Out of 450 bottles, KClinger’s features 220 imports, and 23 of their 39 taps pour imported beer. Guinness, Bass, Pilsner Urquell and Paulaner Hefe-Weizen are big sellers, says Sneeringer.
Promotions and discounts aren’t everyone’s answer. Labatt Blue’s Semkuley says, “We discount, but discounting is a short-term solution. We’d rather focus on brand equity building.” Note that Blue’s price point is already relatively low for an import–higher than Bud but lower than Corona—perfect for the trade-up drinker.
“We don’t rely on price discounts,” seconds Concannon from Jack’s Cannery Bar. “We think it’s more important that the bartender be familiar with the beer.”
Price discounts don’t figure into Hank Benoit’s strategy, either, at his two Vortex bars in Atlanta. Benoit says, “Basically, the best way to get people to try imports is to offer them! You should point out that a single imported beer is a lot cheaper than a six-pack of it. And make sure you keep the imports fresh. Don’t let stuff sit on the shelf.” Vortex features more than 100 bottled imports and 36 drafts, with Bass and Guinness the top pullers.
Another non-promoter is New York’s Ginger Man. Bar manager Dwyer says, “Why do price promotions? Our policy is that you are welcome to have a taste of anything on draft.”
The results are in: Corona Extra, Heineken and Labatt head the heard for imported beer sales in America. How did they stay the course and gallop past the rest? Here’s the scoop, straight from the horses’ mouths.
Corona Extra, #1: “You don’t grow the imported business by saying, ‘OK, I think I’ll try some imports’,” says Ron Christesson, director of marketing for The Gambrinus Company, Corona’s east coast importer and marketer.
Solid reasons back Corona’s gains: “Over the last eight or ten years, the economy has grown, unemployment is down, people have more disposable money, and we have an aging population so people are drinking less but better. This combination is driving the marketplace opportunities for craft beers and imports.” Christesson adds Corona’s success is an enigma to a degree. “It’s not a product based on anything but its cachet and image: enjoyable, refreshing, safe, a vacation in a bottle. Corona is a unique, drinkable product in a very unique package. The consumer has added the lime, which gives it another point of distinction.”
Heineken, #2: “It’s All About the Beer,” quotes Russell Kuck, director of national accounts on premise for Heineken and Amstel Light.
“We started that campaign in the latter part of 1998 to cut through the noise the consumer is blasted with. The retailer has plenty of choices about what to put on tap. You need a marketing story to carry the brand through.”
Kuck says they’ve been successful in marketing Heineken as a beer for many occasions, not just special ones. “I can’t share specific demographics, but we do have a very broad customer base, a strong African American market as well as Hispanic and Caucasian. We are perceived to be well worth the price. We don’t do price promotions. We want to maintain equity in the brand.”
Labatt Blue, #3: “Our greater percentage growth is coming from our non-core markets,” says Bryan Semkuley, director of Canadian brands for Labatt USA. (Core markets for Ontario-brewed Blue include the northeast and Michigan.) “Probably the two biggest factors in Blue’s growth are, first, the larger investment in advertising, which generated awareness for the brand. And second, the investment the organization has made in the field sales. We’re making the consumers more aware of the product and have made the brand available through a sales effort. That’s kind of how it’s supposed to work!”