The cyclical nature of any business across any industry is nothing new. There is an ebb and flow to all markets and some segments will always be heating up while others are cooling. No one segment really enjoys being “king of the hill” in perpetuity. That said, it doesn’t mean you should sit on your hands when yours is the segment rolling down the hill and picking up steam. We’re talking about the current state of the beer segment of the beverage alcohol industry, and what you as a beer producer can do to offset the trends boosting wine and spirits at the expense of “chilled suds”.
Fresh off attendance at the 80th NBWA convention in Las Vegas last week, your illustrious GreatVines crew can tell you that the predicament for brewers right now was the hot topic among conference attendees. To illustrate, check out what they said in the issue of Beer Business Daily published at the conclusion of the conference. (We’ve excerpted the key passages for convenience.)
Under the heading of “An Industry in Decline”, BBD writes, “This is perhaps the most important number to come out of the convention from Heineken USA chief Ronald den Elzen: We’ve lost 35 million barrels of beer in the last 20 years, accelerating losses in the last ten years… Wine and spirits are not sitting still and marijuana is being legalized in many states. We have to act now and we have to do it together.”
The post goes on to find likely reasons for the decline in beer sales noting the expansion of wine and spirits sales into pro sporting events where beer was once king. They also call out the “liquor is quicker” tendencies of millennial consumers which the article dubs the “shot generation”. Younger consumers seem to favor the higher ABV of spirits and who also perceive wine and spirits as lower calorie options on a drink-by-drink basis. Adding to these dynamics is the encroachment of legalized weed which is peeling off a percentage of alcohol customers.
BBD offers this prescient insight: “Our take: Look, there are two things here that aren’t talked about much. One is that beer has taken pricing up faster than wine and especially spirits. Young consumers aren’t stupid — they’ve done the math and a handle of Tito’s is cheaper per unit of ethanol than a case of premium beer.”
So back to the point: what can beer suppliers do to blunt the effects of their turn at the bottom of the cycle? One big thing is to refocus their approach to pricing. GreatVines Price Management and Optimization solutions are designed to help suppliers implement disciplined pricing through broad visibility into pricing actions and results. With a keen sense of where the disconnect lies, savvy producers can leverage this solution to drive pricing workflow standardization/alignment across all markets based on a data-driven assessment of where they’ve recently priced themselves out of market share. This solution can also provide the visibility needed to optimize volume/profit scenarios and capture the spread between distributor and retail costs for more effective competitive pricing.
At the same time, brewers will have to adjust product lines to better comport with the tastes of a younger generation of consumers. Those already taking such steps are seeing the payoff. Consider that in the current depressed environment for barley pop, Michelob Ultra is on FIRE due to its focus on marketing a beer pitched toward the calorie conscious consumer. Craft producers are producing more “session” brews with lower ABV to close the gap in that regard too.
GreatVines can’t help with product development in any significant sense. However, it is supremely well-equipped to aid in trade marketing, critical to changing consumer perspectives and improving on sales execution and metrics that can help shorten the amount of time the beer segment spends in the wilderness.
For some truly innovative ideas on how to capitalize on the GreatVines platform in pursuit of renewed fortunes, speak to a GV representative today and take a platform demo.