Dissecting Imported Beer

Imported beer has enjoyed cachet in America since our earliest days. Bass Ale reached America from England in 1779. George Washington was especially fond of porter, the English style that grew to great popularity in 18th century London, only dropping his English sources out of loyalty to the new country. In the 19th century, new-style Bohemian pilsner beers set a standard that America’s beer barons sought to match, eventually giving rise to distinctively American pale lagers.

Following the consolidation of American brewing companies in the 20th century, imported beers became the best opportunity consumers had to sample styles beyond the dominant domestic beer style. To some American drinkers, the “imported” tag represented quality, sophistication and variety not associated with domestically-brewed beers.

And yet, even as the number and volume of imported beers has grown, the “imported” label has lost much of its utility. Certainly, all imported beers share the fact that they originate outside the United States. But these days, to observe that a consumer prefers “imported beer” tells us about as much about his drinking habits as his ownership of an imported car tells us about what’s parked in his garage.

The import category makes up about 15 percent of the American beer market. Beyond sales figures for the top fifty or so brands, numbers may be too small to permit rigorous analysis of the sort we see applied to beers of domestic origin, which can be parsed into premium, sub-premium, super-premium, flavored malt beverages, craft and the like. But conversations with importers, marketers and retailers suggest that a world of variety exists for both beers brands and beer drinkers within the monolithic category “import.”

Mexican Dominance

The growth of the imported beer category is, more accurately, the growth of Mexican beer. Of the top-ten brands, half are from Mexico (All figures come from The Beverage Information & Insights Group). More tellingly, across the 50 top-selling beers, Mexican brands grew by 5.5% in volume in 2013, while over the same period, European imports and Canadian imports each fell by 3.7%.

The leader in this successful category-
within-a category is the former Crown Imports of Chicago, now the Beer Division of Constellation Brands. A 2013 deal saw Anheuser-Busch InBev purchasing the remaining half of Mexican Grupo Modelo, and Constellation acquiring the Grupo Modelo brands for exclusive distribution in the United States—in the process becoming this country’s third-largest beer company.

Constellation’s portfolio is made up entirely of Mexican beers (with the exception of Tsingtao from China), and includes Corona, the number one-selling import, and Modelo Especial, the fastest growing Mexican brand, at 15.6% volume growth.

According to Constellation, two important demographic trends lie behind the appeal of Mexican beer: the growth of the Hispanic population in the U.S. and the coming of age of the Millennials, with some overlap among so-called “multiculturals”—generally Millennial-aged non-whites.

Jim Sabia, Chief Marketing Officer of Constellation Brands Beer Division, noted that soon two out of five new legal-age drinkers will be Hispanic. Despite the possibility that other Latin American beers might appeal to this audience, Mexican brands enjoy the advantage of a long history in the United States.

“As this group grows, we can gather these consumers into our franchise,” Sabia says. “This isn’t a new phenomenon for us. Modelo Especial has been growing by double digits for the last 20 years.”

The marketing challenge for Constellation is to differentiate its brands—which include four pale lagers and one low-calorie pale lager—both from one another and from the stylistically similar leading American brands, such as Budweiser or Coors.

“We position our brands; some are emotionally positioned and some are rationally positioned,” Sabia says. “Think about Corona Extra. We ask consumers to ‘Find your Beach,’ the state of mind that Corona can get you to. But if you think about Corona Light, we talk about the fact that it only has 99 calories, but 18 IBUs. So we talk more about the rational-functional benefits of Corona Light, where with Corona we talk a lot about the emotional benefits.”

Negra Modelo, a more full-flavored brand, is being promoted as a great complement for food. “We are finding some consumers who would like a more complex beer, who are craft drinkers but also like Negra Modelo,” Sabia says. However, he stressed that Negra Modelo, despite being the darkest of Constellation’s beers, displays the easy drinkability of the whole portfolio. “That’s the way we make our beers; they have a lot of taste upfront, but they finish very cleanly.”

As for any comparison to domestic pale lagers, Sabia insists that the chemistry is different. “Just because they’re the same style does not mean their taste profiles are similar,” he says, pointing to higher IBUs and greater complexity Mexican beers.

Constellation is not the only player in the Mexican beer market. Heineken USA goes from strength to strength with Dos Equis, based largely on the continuing appeal, even eight years after its launch, of the “Most Interesting Man” ad campaign—a program catchy enough to have generated Internet memes. “By inspiring consumers to ‘Stay Thirsty’ and create their own personal legend, Dos Equis has delivered an average of 16 percent annual growth for the past three years and continues to gain share in the growing Mexican import category,” says Steve Ward, VP of National Accounts.

Heineken USA has also introduced Desperados, a European lager with Latin American influence. With tequila and barrel-aging notes, “Desperados is targeted toward the on-premise, nightlife, party experience with the drinkability of beer and the image of spirits,” according to Ward.

Anheuser-Busch InBev, pivoting after the sale of the Grupo Modelo rights in the U.S., is introducing the similar-sounding Oculto, described on the label as “blended with beer aged on tequila barrel staves” and blue agave. Despite the clear bottle and Day of the Dead graphics, this beer with a Mexican profile is not actually Mexican-brewed. Oculto joins Montejo, a Mexican pale lager A-B InBev began importing into limited markets this fall.

 

European Prestige

So-called “Euro lagers”—generally richer in flavor, more distinctively hopped and brewed with all malt—are the beers Americans compared favorably with domestic adjunct-brewed lagers in the heyday of imports. Strange now to see many of these European brands (Heineken, Amstel, Harp) losing numbers, but whether to lighter Mexican lagers, more flavorful craft beers or to spirits and wine is not clear.

Heineken, which first entered the U.S. just days after the end of Prohibition, became the top import before being supplanted by Corona in 1997. Despite negative growth recently, “Heineken Lager is back in the black over the last three months and continues to strengthen performance as share of total beer increases,” according to Heineken USA’s Ward. Despite the much-discussed growth of craft beer in recent years, Ward believes that imports are the “hidden success story in the beer category,” explaining, “With national, mass appeal and higher loyalty and repeat purchase rates as compared to the regionality and trial-only nature of crafts, the segment has been able to drive volume through a sustainable growth model.”

The notable exception within the cohort of European beers is Stella Artois, the fifth-largest-selling import, which grew by 19.4% in 2013. Imported by A-B InBev, the brand has always emphasized quality and, frankly, snob appeal, ever since its early campaign in Britain with the tagline, “Reassuringly expensive.” The marketing once stressed French origins. Now, however, Belgian beer is popular among specialty beer drinkers and, with Stella and Hoegaarden, A-B InBev has the only Belgian imports among the big sellers.

Brian Bowden, VP Spirits, Beer, Tobacco and Beverages for BevMo!, a 155-store chain in Arizona, California and Washington, calls Stella Artois “one of the anomalies.” He says, “Stella is doing fantastic for us, and across the board. We’re seeing that in Nielsen reports. I think the attraction of Stella is the way it’s promoted as an upscale Belgian beer. In reality, it’s a lighter-style beer that everybody will enjoy.”

 

A New Way to Parse Imported Beer?

Four years ago, MillerCoors established 10th and Blake, an “independent yet connected company,” to handle both their craft and imported brands. The new approach grouped together beers that shared a similar appeal, rather than a similar national origin—a commonality that some retailers on- and off-premise have also exploited.

Communications Director Mark Rasmussen says, “10th and Blake was created with the understanding that craft and imports—particularly prestige imports—behave differently, and require a different type of selling and marketing and merchandising than mainstream domestic beers.”

With this approach the Molson brands, MillerCoors’ more mainstream Canadian imports, remain with the company’s mass-marketed domestic brands. 10th and Blake handles the prestige or specialty imports, notably Peroni Nastro Azzurro, Pilsner Urquell and Grolsch, along with the Leinenkugel and Blue Moon brands (American-made beers in the specialty vein). The brands all benefit from the idea that “in order to sell craft beer and prestige imports, beer education is paramount.”

Even within the 10th and Blake portfolio, the brands fall loosely into two camps. Speaking of Peroni and Pilsner Urquell in particular, Rasmussen says, “If you were going to put these brands into buckets, it would probably be ‘style’ versus ‘sensory.’ Peroni was founded in the sixties, when “Made in Italy” was this badge of quality and style. From a sales and marketing standpoint, we target beer drinkers in more stylish, upscale accounts,” an approach that echoes the positioning of other European lagers.

Pilsner Urquell, by contrast, leads the other cluster of brands—the “sensory” cluster—that share more of a specialty beer focus. “Pilsner Urquell is the beer that defines a style. It behaves just like a craft beer does,” Rasmussen says. “If you put it in a craft beer account, the velocity numbers are very high. If you put it in a non-craft account, is performance will be average.”

 

Retail Rethinks Import Classifications

Some retailers are also rethinking the monolithic view of imports. Kevin Schulke is the Senior Category Manager for Price Chopper, which operates 136 stores in six Northeast states. Like the MillerCoors / 10th and Blake distinction, Price Chopper treats its Canadian beers separately. “For our purposes, we consider the Canadian brands not to be imports,” he says. “We consider them to be part of our premium class because of the way they are priced here; they’re priced the same as Miller, Bud and Coors.” Given the proximity to Canada, the Canadian brands are important to the chain, with a share of about 7 percent.

Over the past year, Corona and Heineken sales have both lagged at Price Chopper, pulling down numbers for the whole import category (excluding Canadian). The Hispanic population is relatively small in most areas served by Price Chopper, with the exception of Connecticut and the lower part of New York, “There is substantial influence of the Hispanic population there,” Schulke says. “They’re certainly getting more of the Mexican beer share there than are more northern areas.”

With import sales for the chain at 13 percent and craft sales in the mid-20s, Schulke acknowledges that some specialty imports are doing well. “I think that’s the sweet spot for imports, those that can distinguish themselves as something different, because clearly the consumer is looking for better quality,” he says. “An import should be in a position to make that statement as easily as many of the craft brands can.”

On the other coast, the BevMo! stores cater more explicitly to the specialty beer shopper. Brian Bowden say,s “What we are seeing and what we’re pushing is not the mainstream: the Coronas, the Heinekens, the Becks of the world. Our consumer is leaning more towards the Belgian beers. If they’re doing some of the Mexican beers, it’s a little bit different, more Bohemia or Negro Modelo.”

BevMo! offers more obscure beers. “For us, these beers are a little bit more fun to promote and play with,” Bowden says. “It gives the consumer something to go out and hunt and find, and experiment with. What we are doing now with imports and craft is we’re mixing it up with food pairings – have a beer with dinner versus a glass of wine.”

This approach influences store layout, he adds: “We set up craft beers by style, and imports by country. Then we put the domestics kind of in the malt beverage section.”

The big imported brands appeal through elaborate marketing that the smaller brands don’t have—or perhaps don’t want. “With these other beers like the Belgians, you hardly see any kind of advertising; it’s all word-of-mouth,” Bowden says. “When you’re talking about the upscale imported beers, those consumers are going back and forth between the imports and craft. It’s a more educated consumer, and I think that’s why they’re doing well.”

Once imported beers and their supporters are recognized for being as diverse as domestic beers and their supporters, this segment of the beer market should make a lot more sense.

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    […] stores and chains. Mexican beers hold 8 percent of the country’s beer volume and as noted in this piece, two out of five new legal-age drinkers will soon be […]

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