Beer Business Blues

The media, both consumer and alcohol industry trade, has been chocked full of stories about the decline and potential demise of beer.

In addition to stories in Beer Business Daily, Buffalo Trace Newsletter and others, notable consumer publications have also had much to say on the subject over the past two weeks. Check out these headlines:

The Atlantic: Why Are American Drinkers Turning Against Beer?

USA Today: 6 sobering reasons why beer makers should worry.

Slate: The Stunning Collapse of Beer in America

Now it’s my turn. What’s the problem? Why is it happening?

What’s the problem?

It all started with the Gallup poll on what Americans drink and prefer. The annual survey revealed two startling facts. First, Americans who drink alcohol are equally likely to say they drink wine and beer most often (35/36% for each type). No big deal, right? But if you go back to 1992, it was 47% for beer and 27% for wine. So, since 1992, beer as a beverage of choice has significantly declined.

Gallup chart

The second problem, and the driver of the overall situation, is that young adults’ booze preferences have shifted away from beer toward wine and liquor.

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Why is it happening?

I’ve read dozens of explanations in the press and perhaps as many as hundreds of ideas from readers of this blog. So far as I’m concerned, the reasons have to do with 1) too many choices in and out of beer and 2) changes in alcohol drinking demographics and attitudes.

Let’s start with number two and use liquor as an analogy. When I entered the spirits and wine business in the late 1980s, there were enormous earthquake-like shifts in drinking patterns. The whiskey preferences of the Mad Men era had given way to the surge in white spirits, led by entry level drinkers no longer interested in mimicking the behavior of the past. So, whiskey went away for a while and has only recently begun to return.

In short, changing demographics result in changing values and attitudes and now its beer’s turn. It’s a mistake to assume that the drinking preferences of the past will continue with a new generation.

But wait, there’s more. The real culprit in shifting preferences away from beer is that there are too many choices. From outside the category, the spirits and wine manufacturers have been concentrating on innovation for a decade or more, while the beer players are only now beginning to play catch up. Many products in wine and spirits have fun, lightness in taste and flavor going for them. To a large extent they have moved into the beer space.

Inside the beer category, it’s been the craft people who have shifted tastes and preferences while the big players have clung to the trends of the past. Get over it, big boys, it isn’t about light beer and imports anymore, it’s about crafted beer with unique taste and interesting pedigrees.

Speaking about choices, I can’t help but wonder whether the dizzying array of beer packaging isn’t also an important factor in turning off the consumer. How many choices in ounce sizes do I need? Is it necessary to have pack sizes that run from a 6 pack to 30? No wonder the prices keep going up.

Beer market declines have been going on for some time and are likely to continue. Bottom line – the mainstream beer manufactures need to wake up and smell the malt.

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Who Stole the Vodka? Better Question – Why Bother?

Tsars-Bottle-6-1-2012-webBuffalo Trace Newsletter had an article last week about the theft of $1.1 million worth of vodka (752 cases) from a customs warehouse in Miami.

According to a number of news reports including CNN:

“The men were caught by the cameras loading… several boxes containing Spirits of the Tsars Golden Vodka, a Ukrainian-made vodka that features 24-carat gold on its label that retails for between US$250 in the off-trade and $1,200 in the on-trade.”

The product is “golden,” not just because of the label. It is an amber color aged in Cognac barrels for three years.

A number of observations come to mind.

According to the label, this is not vodka but a vodka specialty – “vodka infused with grape wine brandy and natural flavors with caramel color.” At $250 a bottle, the closest you get to Cognac is the barrel? “Golden” vodka, thanks to caramel coloring? Where are you when we need you, PT Barnum?

Most thefts of liquor generally involve product placement under the raincoat or “slippage” out the back door. That’s why you see expensive products in lock boxes, behind the counter or with a “chastity belt” around the cap. But these thieves punched a hole in the wall of the warehouse directly to the area where the vodka was stored. They win the award for brazenness as well as stupidity. Who is going to buy the vodka? Their sales are small, so an appearance of these goods will be noticed.

Somewhere in the basement of a garish McMansion, sits a retired oligarch who ushers his guests into a special wood paneled room where they sip this golden elixir while admiring a stolen Picasso. Really?

The response from the company was to offer a reward worth $5,000. At $1.1 million, 752 cases, means it’s worth $1,462 per case. As CNN put it, “if you use that reward to buy the stuff at some South Beach nightclubs, you could buy about four bottles of it.”

The chincy reward makes me wonder. But then again, the name of the game in the booze business is depletions of stock – through the front door preferably but any other way might also work.

Anyone with information about this theft is urged to stop laughing.

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Maker’s Mark: Lessons Learned

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Maker’s Mark is an iconic brand with fiercely loyal consumers and, thanks to social media, they’re not afraid to speak up (make that holler) when the company decided to mess with the brand.

Last week, the company announced that, to “meet demand” they would lower the alcohol content. They explained it to Wine and Spirits Daily by saying that the brand is encountering shortages and among the solutions (including lowering the age, raising the price) they chose lowering the proof from 90 to 84. The outcry among their consumers was deafening with “watered down” the rallying point.

This week they announced that the decision would be reversed.

Maker’s and Beam made a number of errors. First, their explanation of lowering the proof to meet demand was seen as BS, with industry cynics shouting that their real motive was taking the tax savings (approximately $1.5 million) to the bottom line. I don’t buy that. It’s not worth it for a million case brand to take the “goodness” out for a buck. They either should have had a better rationale or spent more time than they did talking to their consumers about the decision.

So, they made a PR mistake.

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