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Beer Experiencing an ‘Image Crisis

January 11, 2005

ST. LOUIS (AP) – Beer, the most popular alcoholic beverage in the United States, has an image crisis, analysts say.

While it is still the nation’s favorite alcoholic beverage, it continues to lose ground to wine and spirits.

Beer Marketer’s Insights, a trade publication, estimates beer accounted for 59.5% of the alcohol market in its peak year, 1995. That had fallen to 56.7% in 2003.

In 1999, the spirits industry had 28.6% of the market. In 2003, its share had risen to 29.7%. Wine went from 12.6% to 13.6%.

Final figuress for 2004 aren’t in, but it was “more of the same,” says Benj Steinman, president of Beer Marketer’s Insights.

Analysts who follow the alcoholic beverage industry don’t see it stopping soon.

“We believe there is an overall image crisis with beer,” says Smith Barney Citicorp analyst Bonnie Herzog.

As baby boomers age, they are more willing to buy wine and spirits. And wine and spirit companies are successfully targeting younger drinkers with advertising and promotions.

“Our wholesaler contacts have told us through a survey we conducted recently that beer has lost its ‘sexiness’ and ‘appeal to young consumers,’” Herzog says. “We continue to believe the road ahead is a long one for the beer industry.”

The spirits industry spent almost $100 million on broadcast advertising in 2004, compared with “almost zero” in 1999, says Frank Coleman, a senior vice president at the Distilled Spirits Council of the U.S. in Washington.

August Busch IV, president of Anheuser-Busch Cos. brewing unit, has said wine and spirits represent a threat to his company and the entire beer industry.

Miller Brewing. President Norman Adami said, “The single biggest threat facing the American beer business today is the possibility that we will allow the American consumer to get bored with beer.”

So what are brewers doing about it?

For one thing, they are spending more money on promotions, including what they call on-premise spending. That means mostly bars and restaurants, but also hotels, clubs, and concession stands.

On-premise sales, as opposed to store sales, account for only 25% of beer volume in the United States, but 48% of beer retail dollars, making it an important battleground.

Wine and spirits companies have promoted themselves aggressively in bars and restaurants, increasing sales, says Legg Mason analyst Mark Swartzberg.

Anheuser-Busch, brewer of Budweiser and Bud Light, has said it plans to spend an additional $30 million for on-premise promotions in fiscal 2005, a 150% increase.

Milwaukee-based Miller Brewing also has increased spending.

“Miller is spending about 40% more on advertising and promotion than 18 months ago,” Swartzberg says.

And a little generational rebellion must be overcome, Swartzberg says. Younger drinkers may choose wine and cocktails because their parents chose beer.

“Any given generation wants to be different than its parents,” he said. “It’s the natural ebb and flow.”




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