Domestic Beer Bounces Back

They threw the Hail Mary during the 2006

Super Bowl, and it turned the game around. The Patriots? No. Actually, it was the Brewers. The Brewers? Wait. Wrong sport.

But the right ad.

It’s been two years since Anheuser-Busch decided to go long in its role as the domestic beer industry leader, trying to rally the brew team from behind in the polls by footing the bill for an umbrella campaign to raise the profile of all things beer. The offensive, called “Here’s to Beer,” arrived in the wake of a widely-reported poll that showed wine to be the alcoholic bever­age of choice among Americans in 2005.

Here’s to Beer started in February, 2006 with an ad that featured beer-centered toasts in doz­ens of languages and ended with a reference to a Web site, Anheuser- Busch fronted the money for the push after its competition refused to ante up.

“On initial launch, Here’s to Beer was en­dorsed by the Beer Institute, but it was paid for by Bud,” says Bob Lachky, the Executive Vice President of Global Industry Development for Anheuser-Busch. “There were some comments thrown back that we were trying to just drum up more sales. Well, you’re darn right we’re trying to build business. If we grow the pie, everybody’s slice gets bigger.”

Since that time, with Anheuser-Busch provid­ing the bulk up front and a deep lineup of craft beers at the skill positions, the beer industry has staged a comeback. The same Gallup Poll that put beer on the defensive has shown it, once again, to be the most popular alcoholic refresh­ment in the country for the past two years.

“The gap of growth between beer and wine and spirits is slowing down,” says Roman Shus­ter, an analyst with the consumer insight fi rm Euromonitor. “Beer is retaking share.”

Nevertheless, the story of domestic beer is still evolving. As if reflecting the multinational approach to beer appreciation as shown in that kickoff commercial, it was, initially, a growing collection of imports that was the big story; in 2007, it was crafts and microbrews: the big houses, particularly A-B, had not yet gained momentum. Sure, beer edged out wine in 2006, but it did so astride the shoulders of the grow­ing importance of products like Heineken, Hei­neken Light and Corona.

Last year, the story was all craft. The tiny – less than 5 percent – but potent taste leaders continued to lead the buzz among retailers, with sales in that segment growing to nearly $700 million, all told, according to the Wall Street

Journal. Three-quarters of those sales benefi ted independent brewers (the largest is the Bos­ton Beer Co.) while 25 percent were big-three owned brands like Blue Moon and Red Hook. Even as interest in mainstream imports declined (that segment slowed considerably in 2007), crafts continued to grow.

This year, with a weakened dollar infl ating wine prices and a recession making the martini something of an anachronism, it could be time for consumers to dig into the meat of the do­mestic category. Big brewers are aiming advertis­ing dollars at sprucing up the image of premium brands, with the intent of luring consumers downstream, using tributaries of craft beer to build the share of Bud and Miller.

“We are focused on our core,” says Lachkey. “Because of the nature of our size, it’s crucial for Bud and Bud Light to be growing for our whole­salers to be selling the extensions. We don’t want them to get distracted be getting too many ideas out there. The volume potential is moderate compared to Bud and Bud Light.”

The diversity of craft brewing has been great, Shuster acknowledges, but if the category is to continue to grow, “the credit really should go to Bud, Miller and Coors for stepping up their ad­vertising for their core brands. Prior to 05 and 06, domestic beers really looked all alike to the consumer,” says Shuster, of the consumer insight firm Euromonitor. “And you had Heineken re­ally promoting itself as a chic European brand, Corona on the beach, and the domestic brewers saw that. So the domestic brewers had to really figure out how to fi nd their market again.”

Differentiating between Miller, Bud and Co­ors, he says “really gives consumers the oppor­tunity to identify with the brand. From 2001 to 2005, beer just wasn’t exciting enough. The brewers fought back and reformulated the way they brought the product to market.”

But the battle back pitches these brands not with a follow-the-pack mentality, but as something that uses craft beers’ popularity as a springboard. The big brewers are emphasizing their expertise and care. Coors – whose fl agship brand showed real growth last year – has a new Web site focusing on its heritage; Budweiser is now touted as the “Great American Lager.”

Certainly, the big brewers have broadened their portfolios to include offerings like regional specialty brews like Bud’s Devil’s Hop Yard IPA, traditional offerings like Miller-owned Leinenkugel’s, and fast-growing styles like the wheat beer exemplifi ed by Blue Moon. Even the light side – typically the best selling part of the big houses’ portfolios – is getting a new sheen: Miller is expanding its light beer portfolio to include high-end styles like White and Amber, while Bud continues to market its Select line as a high-end product.

Nevertheless, the big brewers’ real push isn’t from sub-brands, which together comprise perhaps one percent of the total domestic beer market. It’s in premium brands like Budweiser, Miller Genuine Draft and Coors Banquet. Mi­chelob will also get the focused advertising treat­ment, playing on its long tradition as a higher- end product.

The big brewers are giving the impression of optimism. So who is to thank for this turn­around? Is it just the sparking of interest in beer via a Super Bowl commercial and a marketing web site? In assessing the revival of the category, the credit doesn’t belong to Here’s to Beer alone, Lachkey admits, but also the re-activation of beer as a high-end product.

“Clearly, I think the craft phenomenon has been fantastic,” he says. “They’ve been working at it for so long, minus the hiccup in the mid- 90s, and the craft brewers really led the way in bringing new drinkers to the category.”