The Lowdown on Low-Carb

Like so many trends, low-carb has enjoyed its heady days and at long last has begun to cool down. But as savvy marketers of beer, wine, spirits and non-alcoholic beverages know full well, it’s not going to disappear.

This Atkins-inspired, one-time craze leaves behind a legacy — a sizable group of people who remain committed to consuming fewer carbs. This translates into a niche profit opportunity for retailers and suppliers.

Anheuser-Busch’s Michelob Ultra actually began the trend of low-carb beverages, and had huge initial sales in the marketplace.

Indeed, research indicates that Americans are showing signs of finding the golden mean in their eating and drinking habits. According to The NPD Group’s 19th Annual Report on Eating Patterns in America, “It appears that Americans are beginning to find a balance between the need for convenient, inexpensive meals and their expanding waistlines,” said Harry Balzer, vice president of The NPD Group.

“It seems the whole low-carb phenomenon is kind of on the wane,” noted David Henkes, principal and executive director of the Adult Beverage Insights Group for Chicago-based Technomic, Inc. “We’re seeing that in food as well as in beverages, where the interest seemed to peak probably six to eight months ago when everybody was jumping on the bandwagon. That’s not to say it won’t exist as a niche phenomenon.”

“In general, the low-carb trend has plateaued,” agreed Anishka Clarke, Beverage & Tobacco Analyst for Standard & Poor’s. “It’s still something that food and beverage manufacturers are aware of and taking into account with their products and future marketing plans, though. When it comes specifically to beverages, we see companies taking advantage of some of the positive aspects of spirits. For example, I believe spirits producers will take advantage of the fact that their products may have zero carbohydrate content, and that their labeling can now include that they have zero carb content,” Clarke said.

Indeed, low-carb-inspired cocktails are now springing up on drink lists, in a variety of books and publications and in suppliers’ merchandising materials. And the ever-growing cocktail culture is increasing awareness of zero-carb spirits.

Michelob Ultra Starts Trend

Still, the major low-carb beverage alcohol players, at least in positioning, are the beer producers. It began with the debut of Anheuser-Busch’s Michelob Ultra, in the fall of 2002. The new brand boasted 2.6 grams of carbohydrates and 96 calories, an apparent no-brainer for beer consumers who also obsessed about their waistlines. By by the end of 2003, the brand had sold 41 million 2.25-gallon cases to become the 10th best-selling beer in the U.S. And although the rate of Ultra’s growth has slowed, A-B says the brand is doing just fine.

Meanwhile, after Ultra exploded on the market, Labatt USA (now InBev) followed with Rock Green Light, which claimed 2.6 grams of carbohydrates and less than 92 calories. And the brand shipped 1 million cases after its first three months on the market. Soon, however, Ultra’s phenomenal success was met by a formidable challenge from SABMiller, which began trumpeting that the venerable Miller Lite, while low in calories, was also low in carbs. The ad campaign, begun more than a year ago, turned into a tremendous success, and was countered by A-B’s own ad campaign exclaiming that Bud Light was also low in carbs.

LIVEprdROCKRolling Rock’s Rock Green Light used a low-carb proposition to drive a successful launch for the much smaller brand.

According to Rob Olejniczak, marketing director, Miller Trademark, Miller is using the low-carb angle, “as a springboard from which to talk about our products’ attributes with consumers. We’re capitalizing on Miller Lite’s product benefit by simply pointing out the facts: that Miller Lite has 96 calories and 3.2 grams of carbs.”

“This ‘Amazing Facts’ ad campaign has simply been about Miller Lite facts,” added Erv Frederick, vice president, Trademark Marketing, Miller Brewing Company. “Because there has been a lot of focus on carbs, it’s important for us to let consumers know that there’s a significant difference between Miller Lite and the other mainstream light beers.”

For its part, Coors came out with Aspen Edge low-carb beer last spring, hoping that it would not cannibalize sales of Coors Light, the company’s sales engine.

Still, “carb-mania is beginning to subside,” noted Olejniczak,”but carb-consciousness and the demand for great taste will stay with us for a long time, and we’ll manage our brands accordingly.”

In fact, in October, a new Miller TV campaign zeroed in not on carbs but rather direct taste comparisons between Miller Lite and Bud Light, and between Miller Genuine Draft and Budweiser.

Opportunity for Others

“Today we all know at least a few people who’re on low-carb diets,” said Yuri Kato, the publisher of www.CocktailTimes.com. “I think people realize what we drink is as important as what we eat.”

MOJITOSpirits companies are beginning to make consumers aware of the zero-to-low carb content of their products. For example, a Mojito contains just 4 grams of
carbohydrates.

Aside from the profitability of low-carb drinks, he reasoned, the trend also gives the industry “an opportunity to educate consumers about distilled spirits. People know that beer contains higher carb (content) than wine or spirits, but not a lot of people know that the majority of distilled spirits contain zero carbs.”

A ruling issued by the Alcohol and Tobacco Tax and Trade Bureau (TTB) last April, said that the term “low-carbohydrate” could be used in the labeling and advertising of alcoholic beverages containing no more than 7 grams of carbs per serving. The ruling prohibits false, misleading or implied statements that consumption of low-carb alcohol may play a role in maintaining a healthy weight or in weight reduction.

Standard & Poor’s said soon after the new ruling that it expected spirits and wine manufacturers to take advantage of it, as beer companies had already done. In an industry survey published in early September 2004, S&P’s noted that, “spirits companies, whose products for the most part have no carbohydrates, can devote additional resources entirely to marketing without having to invest in reformulating. Similarly, wine companies can also take advantage.”

In fact, last April, Diageo Chateau and Estate Wines (DC&E), part of Diageo, announced that three of its wine brands — BV Coastal Estates, Sterling Vintner’s Collection and a new brand offering, Century Cellars — all met the definition of a “low-carb” alcohol beverage as recently established by the TTB.

DC&E began producing point-of-sale materials, including bottle neckers and in-store displays, informing consumers that the three brands did, in fact, meet the new TTB guidelines. Also included in the point-of-sale information is other macro-nutritional information, such as fat, protein, calories and serving size. For example, materials for BV Coastal Estates 2002 Chardonnay include the fact that the wine contains 3 grams of carbohydrates, 124 calories, 0 grams of fat and less than 1 gram of protein per five-ounce serving.AspenEdgebottle

Coors Brewing got into the low-carb game last year with Aspen Edge.

“We have not developed any specific products that are low-carb,” noted Zsoka McDonald, director of media relations for Diageo North America. “We have been educating consumers about the low-carb nature of some of our products. We did an education campaign across several of our spirits brands last year. There were some events around the Super Bowl, and a bit of advertising about the low-carb nature of some of our products like Tanqueray, Smirnoff, Cuervo, Crown Royal, and Johnnie Walker.”

The firm’s research shows that consumers “want to know what is in the food and beverages they are consuming in general,” said McDonald. “Consumers are more concerned about carbs and other macro-nutrients. So we’ve actually gone a step further and supported some of the consumer groups that have called for labeling on alcoholic beverages.”

Educational work needs to be done. According to a survey conducted by Ipsos Public Affairs, a leading global survey-based market research group working on behalf of Diageo, 63 percent of Americans did not know that spirits like vodka, tequila, gin and whisky are lower in carbs than wine and beer. These spirits, according to Guy Smith, Diageo’s executive vice president, “have no carbs.”

Lower-Carb Wines

Industry insiders are divided about how well low-carb wines will be accepted. Thus far, most of the attention has been garnered by Brown-Forman, which has rolled out One.6 Chardonnay and One.9 Merlot. Both are named after the number of carbohydrates per five-ounce serving. Each is produced by California-based StonyBrook Vineyards.

Brown-Forman Wines debuted One.6 and One.9 nationwide last year, hoping to establish low-carb wines as a viable niche on retailers’ shelves.

Low-carb wines are produced from blends that are naturally lower in carbs. A lot of variation can be found in the carbohydrate levels from different regions and even from micro-climate to micro-climate. The One.6 Chardonnay is light-bodied, fresh and crisp with a hint of melon and citrus fruits. The One.9 Merlot is smooth and medium-bodied with flavors of cherry, blackberry and traces of oak, according to the company. A six-ounce serving of the One.6 Chardonnay has 1.9 grams of carbohydrates and a six-ounce serving of the One.9 Merlot has 2.2 grams of carbohydrates.

“It’s one of those no-brainers. When there are other (brands) doing exceptionally well, wine should be participating as strongly,” says Andrew Varga, global brand director at Brown-Forman Wines. B-F, perhaps best known for Jack Daniel’s whiskey, owns several wine brands including Fetzer and Bolla, and markets others including Korbel and Michel Picard.

The low-carb idea was hatched before last fall’s harvest. Winemaker Cara Morrison crafted the wines by choosing the right varietals and “fermenting them as dry as you can” to cut the sugar, Varga said.

One.6 and One.9 wines are available in retail stores throughout the U.S. and sell for $9.99 to $11.99 for a 750 ml bottle. Among major national retail chains carrying the brands are Albertson’s, Safeway, RiteAid, Target, and Wal-Mart.

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