It’s hardly an overstatement to say that new products are the lifeblood of the beverage industry. And sometimes products produced from unlikely combinations of flavors and ingredients end up appealing to a sizable segment of consumers. This is the hope of a number of brewers, who have introduced several brands of flavored beverages in the U.S. during the past two years. While the jury’s still out on the growth potential of this new category of “malternatives,” sales of some are significant enough to suggest they’re more than a passing fad.
For years, this segment was a one-trick pony. Zima, introduced in 1993, was virtually the only product on the shelves that was an alternative to beer and wine or malt-based coolers. In the past year and a half, however, the category has expanded to include more than half a dozen major brands of brewed lemon alcohol beverages and several fruit-flavored malt beverages.
The lemon brew phenomenon got its start in Australia a few years ago when brewpub partners Duncan MacGillivray and David Pahl developed a way to capitalize on a neighbor’s complaint. Each year, the neighbor was forced to let part of his crop of lemons rot because, although perfectly good, they weren’t the right size. MacGillivray and Pahl used their knowledge of brewing and a family recipe for lemonade to come up with Two Dogs lemon brew. A hit in Australia, distribution quickly spread overseas; the brand is now available in more than 40 countries.
In 1995, Bass Brewers Ltd. saw the potential for a low-alcohol lemon beverage in the U.K., and launched its own version, called Hooper’s Hooch. Hooch was quickly followed by Two Dogs, brewed under license by cider producer Merrydown PLC, and more than a dozen other brands of lemonades, colas and ciders containing alcohol. Initial sales were phenomenal, resulting in product rationing to stores and pubs. Hooch became the U.K.’s most successful beverage alcohol launch in 10 years.
But the success of these new products brewed a storm of controversy in Britain over their appeal to underage drinkers. Dubbed “alcopops” in the press, the beverages were criticized by health and government officials for encouraging children to start drinking. The major brands, like Hooch, Two Dogs and Mrs. Pucker’s, took steps to more strongly position their products toward adults, in some cases even changing the product designation from “alcoholic lemonade” to “lemon brew” or “alcoholic lemon drink.”
Hitting The Market
As the furor died down in Britain and sales continued to be strong, producers turned their sights toward the U.S. market. Hooch went into test markets in San Diego and Miami in early 1996, and Two Dogs launched here in June that same year. Domestic brewers quickly began hopping on the bandwagon with their own versions, including Yellow Belly Lemon-Ale from Minnesota Brewing and One-Eyed Jack, distributed by Better Beverage Importers (BBI), of Newcastle, DE.
At one point, more than 60 labels were awaiting approval, including Yellow Jacket from Anheuser-Busch. Though several small brands have been introduced — and some already withdrawn from the market — the major domestic brewers have watched the business cautiously before jumping in. Miller Brewing toyed with a product called Wiley’s Twisted Lemon in test markets, but dropped it, and has no plans at present to bring it back. Even Bass took its time before rolling out Hooch. A wine-based product in the U.K., the product had to be reformulated with a malt base for the U.S. market and positioned more like a premium domestic craft brew. The brand finally launched in 19 markets last April and is building broader distribution this year, adding at least seven new markets.
“We’re working on how we can make it a viable category, distinct from beers and ciders,” said Andy Glaser, marketing manager for Hooper’s Hooch at Bass Beers America in Atlanta. “We have to educate both consumers and the trade.
“Our ability to establish the category,” he continued, “is based on the hypothesis that consumers are looking for an alternative to beer that’s good tasting, offers true refreshment and true value for the money. It also requires a significant commitment of marketing investments.”
With backing from Bass, Hooch is able to offer beefed-up marketing programs this year like the recent “Winter Rules” promotion that offered an off-premise “Hooch Party Guide” to top on-premise accounts in ski resorts across the country. Designed to offset some of what Glaser called “self-fulfilling seasonality” of these products, the promotion included a consumer sweepstakes trip to Vail, CO. The brand promised similar programs through all the major summer holidays as part of an aggressive plan to reach 1.5 million 2.25-gallon cases in sales.
Two Dogs, for its part, sold more than half a million cases by the end of last year and sees more potential ahead. It, too, is pumping up marketing plans this year in anticipation of increased competition and to help raise awareness of both the brand and what the product is all about.
“We’re doing radio ads to explain what we are,” said Nancy Berkowitz, vice president of marketing and sales for Next Generation Marketing, Two Dogs’ U.S. sales organization. “We want to let consumers know that it tastes like lemonade, but it’s made for adults. The ads also stress our Australian background.”
The brand has put an emphasis on merchandising and promoting the product’s mixability, even coming up with recipes for drinks like their Barking Margarita, a combination of Two Dogs and tequila. Coming this summer are even more promotions. “We have some fun things in store for people, things with a twist,” Berkowitz said.
One-Eyed Jack, another brand with essentially national distribution, also has been met with positive consumer response.
“Some of the bigger international brands have been surprised at how difficult it’s been,” said Craig Boggs, a partner in BBI. “They expected high numbers. We have a nice little business that’s growing each month.”
The brand’s focus has been on the essentials — packaging and point-of-sale. “This year, we’re going to redo our point-of-sale to smooth out its roughness and aggressiveness,” Boggs said. “We’re expanding our wearables line and doing more traditional p-o-s pieces that are more impactful for retailers. We’ll also have a heavy focus on tastings.”
WHAT RETAILERS ARE SAYING
Like anything else on store shelves, retailers said the success of these new alternative beverages will depend heavily on how committed suppliers are.
“When lemon brews came out, I thought they really hit on something,” said Brett Pontoni, store manager at Binny’s Beverage Depot, Schaumburg, IL. “They had solid sales and a viable product, but I’m not sure how long they’ll stay that way. It will depend on how they market and promote them. Their future lies in converting more non-beer drinkers. And how much I merchandise these brands will depend on how much the customer asks for it and how much I think the producer is willing to spend on it to drive it through. It’s obvious where my heart lies — I’m more likely to go with a brand that gives me support.”
Most seemed to think that at least the strong brands will grow the category.
“We’ve done surprisingly well with lemon brews,” said Keith Hansen, beverage buyer at Hi-Time Cellars, Costa Mesa, CA. “They’re moving off the shelf. I think it’s younger drinkers who are tired of wine coolers who are buying them.”
“The lemon flavor is strong,” said Larry LaScola, general manager of Bottle King, Livingston, NJ. “Stoli, Bacardi, Absolut and a number of liqueurs have a lemon flavor. Lemon seems to be coming on, so I think lemon brews will be here for a while.”
Malternatives are aimed at a target audience ranging in age from 21 to 35. But part of the reason they may not have caught on more quickly even with these young adult consumers may be confusion over what they are. They’re an alternative to beer, wine and other spirits. Yet they’re packaged and marketed like beer, have an alcohol content about the same as beer and have a malt base like beer, all of which may send confusing signals to consumers.
“These lemon brews are definitely not beer,” said Steve Goebel, president of Saxer Brewing, Lake Oswego, OR. Saxer brews a craft beer with lemon, called Lemon Lager, that tastes more like an old-fashioned shandy than the sweet lemon brews. “They’re not brewed like beer or lagered, like beer. There’s nothing wrong with it, but to the extent that the consumer doesn’t know the difference between the two, there may be some confusion.”
Though an alternative to beer, alternative malt beverages are marketed like premium or craft beers because that’s where the interest of the potential target lies.
“It’s a lifestyle thing,” explained David Morris, vice president of brand management at The Stroh Brewery Co. “They appeal to consumers who want to be part of the occasions where beer is consumed in moderation but who don’t like the taste of beer. Brewers have been trying to find alternatives for years.”
“There is some crossover among beer drinkers,” said Glaser. “There are some occasions — when you go to a barbecue or the beach with friends — when you want something more refreshing. But they also appeal to a large group of consumers, especially women, who often find beer too challenging.”
As good-tasting alternatives to beer, wine and other spirits, however, there’s little doubt these beverages hold the greatest appeal to entry-level drinkers. But it’s likely that major brewers have stayed away from the category not only because volume potential does not yet justify taking resources away from core brands, but also to avoid potential controversy. Anheuser-Busch, which already has taken hits in recent years for Budweiser ads that feature frogs, ants and alligators, probably isn’t looking for ways to give critics more reasons to snipe.
But the category as a whole hasn’t stirred as much controversy here as it did in Britain. One reason is the large number of low-alcohol products already on store shelves.
“We’ve always had low-alcohol alternatives to beer [and spirits] here in America,” said One-Eyed Jack’s Boggs, “like wine coolers, sangria and before that, fruit-based wines like Boone’s Farm.”
Producers also have been fairly careful, despite using cartoon characters on packaging, to position their products as alcohol beverages. “You have to make sure packaging and p-o-s clearly shows it’s an alcoholic beverage and the beer-like nature of the product,” Boggs continued. “As a marketer, you have to be aware that every [promo] piece and ad you create has a message that’s delivered to the right target. We had meetings with M.A.D.D. because of those concerns, and when we presented our packaging and materials, they weren’t nearly as concerned.”
Expanding The Market
Lemon brews aren’t the only alternative to have hit the scene recently, either. Flavored malt liquors are another hybrid that are finding a new niche among young experimental drinkers. In its first 12 months on the market, St. Ides five-flavor Special Brew line sold more than 5 million cases. Pabst is also seeing success with its flavored line of Olde English 800 Special Reserve.
So far, the higher proof (6% versus 4.7%) fruit-flavored malt beverages have remained separate from lemon brews through distinctive packaging. Sold primarily in larger single-serve packages, they’ve been merchandised most often with their parent brand malt liquors. But that may soon change as brewers of both flavored malt liquors and lemon brews compete more strongly for consumers.
St. Ides Special Brew, for example, is introducing 12-ounce bottles in six-packs this year, “which will open up some distribution for us and get us into the hands of new drinkers,” said Morris. “Now the consumer is a younger Gen-X drinker, and we want to move into the general market.”
Conversely, the brewers of alcoholic lemonades recognize that their success may depend on an expanding line of flavors. To hold the interest of an audience that has grown up on new age beverages, brewers are already rolling out new flavors. By the end of last year, One-Eyed Jack Raspberry Brew accounted for 40% of the brand’s total sales. Two Dogs is introducing a new orange flavor made with fresh orange juice late this month or early in April. Hooper’s Hooch, which already markets nine flavors in the U.K., is also considering launching additional flavors here this year.
Zima, which could be considered the originator of the category, launched with a flavor that couldn’t (and still can’t) be described to completely differentiate it from both beer and wine coolers. The brand faltered when it tried to introduce Zima Gold (another indescribable flavor) a few years ago, but has since been test marketing three fruit flavors in several areas of the country with mixed results. Zima itself is trending upwards, according to Coors, and may get a boost from these new line extensions as more consumers are drawn to the malternative category.
The very fact that these fruity new beverages are an alternative to beer could open the category up to a more mainstream audience.
“In one way, a product like Hooper’s Hooch could be considered an entry-level product,” said Glaser. “But it’s also being consumed by older consumers based on different occasions, so it has a broader appeal.”
“The whole craft beer idea opened up beer drinkers’ minds to new things,” Morris said. “More and different things are more accepted now. There’s a lot of opportunity there that’s part of the overall beer experience.”
The category should see good solid growth this year as larger brands expand distribution and gain new trial. Beyond that is still anyone’s guess.
“We see a fallout of brands that just can’t cut it, either because of poor product quality or lack of marketing,” said Berkowitz. “The category will grow, but the number of entries will decline. We expect good growth from Two Dogs.”
“Brands with quality and the right image for the target audience will survive,” agreed Boggs. “But in 10 years time will there be One-Eyed Jack and other lemon brews? I doubt it. Every generation has its alternative beverage. Then again, Boone’s is still around.”
Like anything else that seems hot, especially with young consumers who tire of things quickly, the best thing to do is hop on and enjoy the ride while it lasts.