It’s hard to find a headline about the U.S. beer business these days that isn’t all doom and gloom, especially when it isn’t related to the craft segment. However, the world’s largest brewer wants the public to know that the mainstream beer market is doing just fine.
That was among the key takeaways at a recent media day at Anheuser-Busch’s St. Louis brewery. Once the worldwide corporate headquarters when A-B was a standalone company, the St. Louis site now serves as the base of operations for the U.S. unit of AB InBev.
Despite the volume losses in recent years—with the notable exception of 2012—the macro U.S. beer business is still highly profitable.
Beer, noted VP of national retail sales Chris Williams, has a 10 percent better operating margin than the average consumer packaged goods category. For every dollar invested in beer, he added, there’s a more than eight-fold return.
Even though the lion’s share of category growth has been coming from the high-end, Williams was quick to point out that 62 percent of high-end growth is coming from the top five beer suppliers in the U.S. And, the top four breweries account for about 80 percent of above-premium growth. “What this says,” Williams offered, “is that the beer category is about brands. This is not wine.”
Get the Balance Right
The A-B team touted its Balanced Portfolio Approach (BPA), which the company describes as a shopper-centric analysis that helps educate retailers on the importance of the entire beer category, not just certain specific segments.
A common mistake among marketers is to assume a consumer is always going to buy from the same price segment. “Shoppers shop multiple segments,” said C.J. Watson, A-B’s VP of category management. “There is no ‘value shopper.’” The consumer who shops frequently in the value segment will trade up to premium and above-premium tiers, depending on the usage occasion. The same is true for the shopper who typically buys craft or imports. They’ll often go premium or value. “Segments are not shoppers,” Watson pointed out. “We have to break those apart.”
It’s more about pinpointing particular need states and shopper occasions, asserted VP of trade marketing Sanjiv Chhatwal. Some of those occasions are drink-led, while others are food-led. And those occasions segment further, as drink-led occasions can encompass anything from visits to a neighborhood pub to dancing at an upscale nightclub. On the food-led side, a consumer might go anywhere from TGI Friday’s to a high-end fine dining establishment.
A-B’s portfolio is varied enough to play in a variety of price segments. At the value end, it offers brands like Busch and Natural Light. Budweiser and Bud Light, of course, lead in the premium space. Above premium, it boasts imports that InBev brought to the table like Stella Artois and Beck’s. AB InBev’s acquisition of Goose Island in 2011 gave the company a credible craft performer.
As any beverage brand marketer can attest, executing at retail is both an art and a science. A-B draws significantly from the latter—at least in the name—for one of its latest initiatives targeting on- and off-premise venues. Its Retail Lab quite literally set up shop—or, more accurately, shops—at A-B’s St. Louis offices, replicating experiences at each of the major channels.
The setup for beer’s largest channel, convenience, sought to optimize the limited space inherent in c-stores. For instance, hanging racks are attached by suction cups to cooler doors to create a little extra shelf space and visually merchandise products. A-B also has been testing digital displays with cellphone connectivity that enable merchandisers to easily switch back and forth among messages tailored to specific day parts.
It’s applying similar technology, as well as QR codes, to help romance its products in the package liquor channel. The company also highlighted a draught growler pour station for markets where legal. Also in the package liquor section, A-B teased its Draftmark innovation, a mini draught system that enables consumers to take the draught experience home. The system, which is compact enough to fit on a refrigerator door, holds about a gallon of beer, dispensed from replaceable cartridges.
In the grocery portion of the Retail Lab, cross-promotion with partner products—such as snacks and soft drinks from PepsiCo—was the name of the game. The concept applies beyond the center store, as A-B played up cross-merchandising opportunities in meat, produce and prepared foods areas.
Finally, in the on-premise, “Driving check size is what we’re all about,” noted VP of on-premise sales Josh Halperin. One particular area of on-premise innovation that A-B’s been exploring is interactive tap handles. A possible application would be ideal for a sports bar: If a local team scores a run, the tap handles light up signaling a spur-of-the-moment drink special. Restaurants are a natural fit for the company’s Brew Appetit initiative, which promotes beer-food pairing at the point of sale and aims to be as inclusive as possible. “If we get the day boat scallop eater to drink beer, but we lose the burger eater,” said Halperin, “we’re not doing our job.”