In his introductory address to The Beverage Forum 2013 Michael Bellas, founder, chairman and CEO of Beverage Marketing Corporation and co-chair of the conference, painted a picture of a future that will make today’s beverage world look “primitive and underdeveloped by comparison.”
Bellas’ speech set the future-focused tone for the rest of this year’s Forum, which celebrated its 20th anniversary at the
Conrad Hotel in Lower Manhattan when it was held over the course of two days in May. From Bellas’ speech on, there was one main theme that seemed to be on just about everyone’s mind: the rise of the millennial generation. Whether it was how to market to them or what beverages appeal to them, many of The Beverage Forum’s speakers had something to say about a demographic shift that may have even more of an impact than that of the baby boomer generation.
This year’s Beverage Forum Lifetime Achievement Award went to Harold Honickman, chairman, Pepsi-Cola Bottling Co. of New York, Inc. & Affiliated Companies, a man whom Bellas called “a visionary in the beverage bottling and distribution business.”
The Small Company of the Year award went to Washington State’s TalkingRain, whose Sparkling Ice drink, has been an enormous success with sales skyrocketing recently. And finally, Large Company of the Year award went to Anheuser-Busch InBev. —Andrew Kaplan
The Innovation Equation
AB InBev’s Edmond talks new brand execution.
Innovation in the beer market is a bit of a balancing act. So said Luiz Fernando Edmond, president, North America of Anheuser-Busch InBev, who also accepted AB InBev’s Large Company of the Year award.
“If you go back historically, in the past 10 years we have had years when we’ve introduced a lot of innovations and years we had nothing,” Edmond told Beverage Marketing Corporation chairman and CEO Michael Bellas in a Beverage Forum keynote interview. “The best years we had were when we introduced one or two big things [versus] a lot of small things. If you’re doing innovations just to tell people you’re doing innovations and it’s doing nothing for your brands, it’s better not to do it.”
Edmond added that the market can expect to see innovations coming out of not only the U.S. business unit, but globally as well. A recent innovation that has been performing well has been the company’s Bud Light Platinum brand. The brand debuted as the No. 14 beer brand on Chicago-based market research firm SymphonyIRI Group’s list of top beer brands across multiple retail channels.
But, Edmond cautions, “We don’t want to be extending the brands too much to the point where you’re diluting the base brands.”
As far as engaging millennials, “You have to engage consumers every day,” he said. “The job of a brand the size of Bud Light is to recruit consumers every single day.” —Jeff Cioletti
Hackett details the ride to becoming the No. 3 beer company in the U.S.
It’s been an interesting and ultimately, few would deny, rewarding year for Crown Imports and the company’s president, Bill Hackett, was more than happy to talk about it with Beverage Marketing Corp. CEO Michael Bellas in a keynote interview.
“This is something we never envisioned achieving,” Hackett said. “We have the opportunity to literally do whatever we want to in the beer space.”
He was referring to the final outcome of the regulatory roller coaster ride that ultimately made Crown the No. 3 beer producer and marketer in the U.S.
Early this year the U.S. Department of Justice (DOJ) put the brakes on Anheuser-Busch InBev’s acquisition of the remaining 50 percent of Grupo Modelo that it hadn’t already owned. A-B InBev and the DOJ agreed on a revised deal in April, which made Crown and its parent Constellation Brands the clear winners in the agreement. Crown became a wholly owned subsidiary of Constellation—it had previously shared ownership in a JV with Modelo. Constellation also took ownership of Modelo’s state-of-the-art brewing facility in Piedras Negras, Mexico and topped off the deal with an exclusive perpetual brand license in the U.S. to import, market and sell Corona and the Modelo brands Crown had already been marketing and the freedom to develop brand extensions and innovations for the U.S. market.
“When [the DOJ] came out with the lawsuit against the deal, we were all upset,” he said. “But it turned out they were our best friends. It’s a non-terminable license in perpetuity. Essentially we own these brands for the U.S. market and, by the way, we have a brewery.” —J.C.
Patrón’s McDonnell has a few tricks up his sleeve to lure millennials.
The keynote by Patrón Spirits president, international and COO John McDonnell marked a bona fide first in Beverage Forum history: Never before has someone kicked off their presentation with a magic trick. With the help of a colleague, he put cards with the words “innovation,” “millennials” and “technology” into a clear box, covered the box with a purple shroud, instructed the audience to shout “Patrón” and finally uncovered the box to reveal that that the cards had been “magically” replaced by a whole lot of dollar bills. “If we pay attention this morning,” McDonnell said, “we can all make a lot of money.”
And pay attention the audience did to a speech that intertwined the three themes placed into the box. He spent a fair portion of the session addressing the millennial market, itself a major theme of this year’s Beverage Forum. “This generation spends 14 percent more time interacting with their mobile device than any other age group,” he said. “We always have to make sure that our online communications work well not just on the computer screen but with a mobile device.”
McDonnell also demonstrated how the company has leveraged the likes of YouTube and Facebook to reach consumers who pay less and less attention to traditional advertising. —J.C.
The Price (Could Very Well Be) Right
PepsiCo’s Carey Pitches Hybrid Everyday Value
Albert Carey, CEO of PepsiCo Americas Beverages, touched on a pricing strategy which, if applied properly, could potentially be game-changing for the perpetually challenged carbonated soft drink category: Hybrid Everyday Value (EDV).
The idea stems from common holiday pricing practices among CSD companies. “We’re way too dependent on deep discounts of 12- and 24-packs during the holidays,” Carey explained. “We’ve also trained consumers to buy [CSDs] on deal only. We’ve trained the consumer to wait until the price goes down, then load up and fill the garage until the price goes down again. What has happened is this has made the economics very challenging, not just for us, but for retail. The question is, is there a way to moderate price on holidays, so you can afford to take the price down for more weeks of the year?”
During the 12 big holiday weeks of the year, the category does 50 percent of its business and the other half during the remaining 40 weeks, Carey pointed out to the audience.
“Just think about the warehouse rentals, the overtime pay and other costs when you’re loading up for these holiday periods, not to mention the morale of the sales people who don’t sell much during the other 40 weeks,” he added. “What if you took that [deal] price up a click and used that money to pay for more weeks of discounting and drop to a price [during those other weeks] that the consumer will actually react to?”—J.C.
From Venturing to Value
Coca-Cola VEB president Deryck van Rensburg tackles brand equity.
It’s been about five years since Coca-Cola North America’s Deryck van Rensburg took the stage to talk about the then-fledgling Venturing & Emerging Brands (VEB) business unit over which he presides. At that time the division was in the early phases of moving from idea to strategy and taking that strategy and executing against it. When the VEB president returned to address the Forum audience in late May, he explained that the unit has moved passed those initial stages and has entered a new one. “The phase we’re in now is one I would describe as moving from execution to significance,” van Rensburg said.
VEB is a sort of incubator for up-and-coming brands. Honest Tea was a brand it initially bought a minority stake in and ultimately acquired the rest. Other brands include Fuze and Core Power. —J.C.
Breaking Down Barriers
The director of drinktec highlights this year’s trade fair.
Petra Westphal, drinktec’s exhibition director, discussed what’s new at the trade show in September, including the Innovation Flow Lounge where, marketing meets technology. “We want to make sure that those two target groups talk to each other because in Germany 70 percent of new beverage products fail. This wouldn’t have happened if the marketing experts talked to technology experts.” —Andrew Kaplan
Keeping it Real
How do you get through to millennials?
What’s the one word for beverage brand marketers to keep in mind when trying to appeal to the increasingly important millennial generation? The panelists who composed the session “Meeting the Marketing Challenge of the Millennials” at this year’s Beverage Forum were quick to agree: authenticity. “It’s about how do you express yourself in a way that does feel authentic. You really have to walk the walk and not just talk the talk with millennials. That’s a very important aspect for them,” explained Chris Fehrnstrom, chief marketing officer, Constellation Brands, Inc. Joining him on the panel were Andrew England, executive vice president and chief marketing officer, MillerCoors and Brett O’Brien, senior vice president and general manager, Gatorade. —A.K.
A Crafty Mix
Artisanal distillers and brewers share the stage.
Craft brewing and distilling are revolutionizing the beverage alcohol marketplace and attendees at this year’s Beverage Forum were able to hear from the founders of four such companies on a panel titled: “Artisanal Brews and Spirits Address Consumers, One at a Time.”
Moderating the panel, Beverage World Editor in Chief Jeff Cioletti pointed out craft brewing was up 15 percent in volume last year, and about 17 percent in revenue, and over the past five years was up a total of about 56 percent, according to the Brewers Association. Furthermore, last year craft gained about 0.8 share points to reach about 6.5 percent of overall U.S. beer volume.
Craft spirits last year accounted for just under 1 percent of the market, or about 1.2 million cases. Cioletti estimated about 250-300 craft distillers currently exist in the U.S. Between 2010 and 2012, the segment’s grown about 71 percent in volume.
Sharing their experience on the craft brewing front were Gary Fish, CEO and founder, Deschutes Brewery, Inc. and Steve Hindy, co-founder, president & chairman of the Brooklyn Brewery. Fish explained that Deschutes has “been in a perpetual state of construction and growth” while Hindy told a story about how he came up with Brooklyn Brewery after years as a war correspondent in the Middle East. On the distilling side, Andrew Auerda explained the story behind Philadelphia distilling, which he founded in 2005, and David Pickerell, master distiller of Hillrock Estate Distillery, explained how to succeed in an increasingly competitive industry: “You have to do something that gives you a little bit of spin, a little bit unique. In the craft world it really helps if the distilled products represent the owner in tone, style and character.” —A.K.
Fuel for Thought
Entrepreneurs offer tips on what works.
It’s never been easy for a new beverage to become a success. But three that have done just that—and done so by successfully capturing the attention of the emerging millennial generation—shared their experiences. The panel was moderated by Brian Sudano, managing partner, Beverage Marketing Corp., BMC Strategic Associates, and included Kara Goldin, founder & CEO, Hint Inc.; Paddy Spence, CEO of Zevia and Ben Weiss, CEO & Founder of bai Brands, inc.
Spence shared his experience with Zevia, the first brand to use stevia in CSDs. In terms of millennial values, given the fast-paced technological world, Spence said, “There’s a real desire for simplicity and products that are back to basics. And we find that especially true in this carbonated soft drinks category.”
Added Goldin, “Millennials really want to understand brands that have stories and if you have a product that tastes great, even better.
And Weiss explained that sometimes the simplest tools work. For him, it was a $29 table from CostCo that allows for sampling of his beverage, bai. —A.K.
Word on the Street
The ever-popular Wall Street Panel returns.
Caroline Levy, managing director-Beverages/HPC, CLSA, moderated a panel of Wall St. vets who touched on the troubled CSD category. Mark Swartzberg, Managing Director, Stifel, Nicolaus & Co. Inc., said he thinks the price discipline that PepsiCo Americas Beverages’ Al Carey had previously spoken about was one potential “silver lining,” while Bonnie Herzog, managing director, Wells Fargo Securitites, LLC., added that from her experience pricing discipline had helped offset declines in tobacco. Asked about Soda Stream, John Faucher, managing director JP Morgan Chase, said, “I don’t believe this is a revolution. Do I think it can have a very, very slight impact on the market? Potentially.” —A.K.