Imports are growing in the U.S. beer market, even while overall sales are down, but import growth is uneven. Some players are strong, others losing share. Indeed, many see the import market as segmented into different opportunities, depending upon the type of beer and origins. Innovative new products and packs have enlivened the category. No one can ignore the influential American craft movement and the forces that are driving it, specifically, a craving for diverse offerings and experimentation, especially among the Millennials.
Imports enjoyed decent sales in 2013, despite a generally moribund U.S. beer market; overall domestic beer volume was down 1.9%, according to Boulder, CO-based Brewers Association. However, the top 10 leading import brands were up 4.2% in 2013, according to Beverage Information Group’s Handbook Advance 2014. But a few strong players carried the category. Overall, the imported beer category increased a modest 0.4%.
“There was some mixed performance in imports in general,” notes Ryan Verschoor, Tenth and Blake’s director of imports and cider. “In the mainstream category, some of the big brands are in decline and others in growth.”
Five of the top 10 brands enjoyed positive growth, three up in double digits, according to Beverage Information Group research. The key player is Crown Imports, with three of those leading labels, all Mexican imports: Corona Extra (up 2.2%), Modelo Especial (rocketing 18%) and Corona Light (3.0%).
“We have had some significant success this past year, across our Mexican portfolio,” notes Bill Hackett, president of Crown Imports. Last June, Victor, N.Y.-based Constellation Brands acquired ownership of Grupo Modelo’s U.S. beer business from Anheuser-Busch InBev for some $4.75 billion. That transaction included full ownership of Crown Imports, the brewery in Nava, Mexico, and license to import, market and sell Corona and the Modelo brands. “Across the category we have five of the top 15 imported brands,” says Hackett. Besides those three brands, the Crown portfolio includes Pacifico and Victoria, also from Mexico, and Tsingtao from China.
Like the U.S. beer business as a whole, the import market is hardly homogenous; it is segmented into several classes, and plays to different consumer sets and drinking occasions.
“There is a dichotomy happening in the U.S. beer market industry: the high end, which includes imported and craft beers that seem to be gaining favor across consumers, while the premium domestic and subpremium seem to be losing favor,” notes Hackett. He adds, “There is a changing dynamic within the import category.”
“There is a definite split in imports,” concurs Jeffrey H. Coleman, president and CEO of Paulaner HP USA. “Almost half of the import category is from Mexico, beers that have more in common with premium domestics, than they have with British ales, Belgian lambics or German lagers. Key brands for Paulaner HP USA are German producers Paulaner and Hacker-Pschorr, the British Fuller’s Ales and O’Hara’s, the Belgian Fruli and the Italian Birra Dolomiti. Paulaner HP USA enjoyed solid growth last year, says Coleman. The Paulaner brewery is at peak capacity; new brewery construction, slated for completion in spring 2016, will double capacity.
Verschoor at Tenth and Blake sees the import market segmented into three broad areas. “The first is the big mainstream category, which is where the bulk of the volume is and the big trend is really around Mexican imports at the moment,” he says, adding, “I think that is going to broaden to a Latin American-influenced space.” That expansion would admit opportunities for Tenth and Blake’ South American brands Cusquena, Cristal and Aguila. The second segment encompasses superpremium imports, says Verschoor, offering the company’s Peroni Nastro Azzurro and Pilsner Urquell brands as examples. “The difference between the two is the mainstream category is mainly a share fight, but in the superpremium import space most of those brands are growing because it is a growing segment.” The third import arena is specialty imports. “I guess you could call them imported craft beers. Consumers are uncertain whether they are crafts or imports, which has created a gray area that is interesting.” He cites the company’s St. Stefanus brand as an example. “It’s never going to be a massive opportunity but it is a profitable one.”
“We consider ourselves as a subset of the craft beer category, so what’s happening with us is somewhat similar to what’s happening to domestic craft,” declares Lanny Hoff, senior vice president, manager of brands at Artisanal Imports, Inc. The Austin, TX-based specialty importer has a portfolio of about 40 brands, craft brews from Britain, Germany, Belgium, Czech Republic, Asia and Brazil.
“Right now, the interest is in the specialty imports, not the typical imports,” says Jake Jacobson, beer manager at Heritage Wine & Liquor in Centennial, CO. “Belgian styles are seeing the biggest growth for us.”
Beers from two regions of the globe are enjoying great popularity among U.S. consumers—Latin America, particularly Mexico, and Belgium.
“Mexican imports are selling great for us, Corona, Dos Equis, Modelo,” exclaims Justin Giuliano, general manager at Winchester Wine & Spirits, in Winchester, Mass. He notes that Heineken and Stella Artois are also popular in the imports aisle.
“The Mexican segment is really driving the import business as a whole,” says Hackett at Crown. “We spent a lot of time, energy and dollars over the years building Corona Extra as a brand that represents relaxation, beach, sun and fun; that’s the messaging we continue to drive home with our creative,” says Hackett. The number-three brand in the category, Modelo Especial, exceeded 50 million cases last year. “We think it will continue to grow at double-digit rates.” Crown’s president attributes much of Modelo’s success to the brand’s popularity with Hispanic consumers, as well as generating awareness and interest among general market consumers. After testing Corona Light on-premise in a draft format, the company has expanded the draft program to 35 incremental markets. “We saw benefit in both on- and off-premise in package business because the draft drove awareness of the brand, and consumers started looking for the beer in the packaged format, which generated a strong halo effect for the brand.” Pacifico (up 4.5%) and Negra Modelo (3.6%) fill out Crown’s range of beers in the top 15 imports. Victoria, which is in select markets across the U.S., will be expanding into new markets in 2014.
“Growth is driven by rising demand for beers of Mexican and/or Latin American origin, driven in turn by the expanding influence of Hispanic culture of all stripes throughout the marketplace,” says Doug Campbell, brand director for Guinness.
“For us, the Mexican beers are doing well,” says Greg Eccles, owner of Tops Liquors, Tempe, AZ, and a certified Cicerone. Corona, Dos Equis, and Modelo seem to be gaining share, he reports, noting that proximity to the Mexican border might be a factor. Tops carries almost a 1,000 different beers and boasts 27 cooler doors. “The older guys are still buying their tried and true brands, like Heineken. Stella is also going strong.”
Stella Artois is Anheuser-Busch InBev’s top performer in the U.S. import market. The Belgian lager grew 16% last year to over 20 million cases. The brand recently spun off Stella Artois Cidre as an entrant in the small but rapidly growing hard cider category. Other AB-InBev imports include Presidente from the Dominican Republic and St. Pauli Girl from Germany.
“Belgian beers are growing, which are held in high regard, quality-wise,” notes Eccles. “A lot of the same customers who buy craft beer are buying the Belgians too. They consider the beers microbrews from Belgium.” The retailer has separate sections for imports, Belgian and craft.
The other heavy hitter in the top 10 brands is Dos Equis, the Mexican brand, owned by Heineken USA. “Total Heineken USA portfolio volume grew 2.9% in 2013, driven by Dos Equis, Strongbow, Tecate Light and our popular Beers of Mexico variety pack,” reports Scott Blazek, senior vice president of sales.
Mexican imports sell well at Heritage, says Jacobson, and he adds, Mexican craft beers, such as Cerveza Cucapa, are starting to gain a small foothold as well. Belgian brews, however, are such a big seller, that the retailer devotes an entire cooler and section to the country.
The 8% Gorilla
The rapid rise of American craft beer has had an impact upon the U.S. market, imports included. Certainly, there is much discussion and hand-wringing about the ramifications of craft and changing consumer habits, specifically, a decided penchant for experimentation and diversity of choice. However, despite year over year double-digit increases—18% in 2013, according to the Brewers Association—American craft volume is just a drop in the beer bucket at less than 8% of U.S. beer volume. That’s less than half of imports’ share of the market. And there may be some synergies between the two segments worth exploiting.
“There’s no question that the shine is off the imports, and consumers are focused on American craft, particularly the Millennials,” points out Coleman. “The favored brand of Millennials is called diversity of selection.” He sees a proliferation of styles and skus to meet young adults’ demand for variety. Paulaner offers six styles in the U.S. market; Hacker-Pschorr sells five styles, Fuller’s has ramped up its offerings to nine. “The diversity of selection is there.”
Also taking a page from the craft playbook is a limited-edition line of unfiltered, cellar-style beers from Hacker-Pschorr in half-liter, flip-top bottles. After successful runs of the beers in Europe and Canada, the first of the series, Herbertus Bock, is now debuting in America, to be followed by three more subsequent specialty bottlings this year. “We’re taking a bit of positioning from craft with these more specialized, seasonal styles,” says Coleman. On the Paulaner side is a Best of Munich sampler six-pack, to satisfy the consumer demand for variety. The company is already on the third production of that variety sixer, which is “selling phenomenally;” the company will finish the year with another variety pack called Toast to the Holidays. Fuller’s Ales is releasing more styles to the U.S. market to consumers thirsty for variety; new this year are Bengal Lancer IPA, Black Cap Stout, Chiswick Bitter and Organic Honey Dew.
Guinness is also playing the seasonal card that has worked so well for American craft brewers. Last fall, the company released the limited-edition Guinness Red Harvest Stout, a mild, sweet ale in a nitro can. Additional seasonal launches are planned for the near future, says Campbell, “to introduce new tastes and experiences for consumers.”
“Most of our drinkers come from the craft beer pool,” says Hoff at Artisanal. “Obviously, we’re trying to hit the same part of the shelf. A lot of our beers have higher price points, but American craft brewers have been pushing that envelope, which is great because it broadens the market for everybody.” The brand manager also sees synergies between craft and specialty imports. Consumers who try a domestically brewed tripel, will often investigate the origins of that style by sampling “real” tripels brewed in Belgium, Hoff posits.
Who the customer is for imports and how brand loyal they are depends a lot upon the type of import. Mainstream imports still count on faithful consumers, albeit getting older. Specialty imports face the same fickle customers craft brands do.
“For the superpremium imports, our average consumer is older than they were 10 years ago,” philosophizes Coleman. “Of course the mean age of Americans is getting older, so that’s not necessarily a bad thing. And the mature drinkers tend to have more brand loyalty than the 21- to 30-year-olds.”
At Crown, Hackett believes, “I would say that brand loyalty has diminished because consumers are looking for more choices. Selection is more occasion-based—at least for general market consumers. On the other hand, many of our consumers are Hispanic and they are very brand loyal.”
“I think the core consumer for imports has stayed roughly the same,” says Verschoor, “but because we are seeing a premiumization in beverage alcohol in general and certainly in beer, the consumer set is expanding. The target group is getting bigger and that’s great news for everybody in the import business.” Craft consumers, he adds, are very experimental, however, there is less of that experimenting with imports. “Within imports, particularly prestige superpremium imports, people tend to stick with brands that say a lot about who they are. So there is some badging and emotional decision-making in choosing an import. There’s more loyalty with imports and I think that will continue.”
“Experimentation cuts across nearly all consumer segments,” says Campbell at Guinness. “There is simply more variety available in our category today than there ever has been. However, that is not to say that brand loyalty is un-influential.”
Flavor in Favor?
One tried and true method to extend brands’ reach is with flavors. That tactic seems to work best when it is in accord with tradition, such as the fruit and spice flavored Belgian beers or Mexican michelada drinks.
Take Crown’s Modelo Chelada, for example, based upon the michelada, the product was introduced in key markets last year, and is now going national. “It’s very authentic,” says Hackett, “the best way to describe Modelo Chelada is it’s a beer Bloody Mary.” Modelo Especial Chelada is a blend of Modelo Especial mixed with tomato flavors, salt and lime, which comes in a ready-to-drink 24-oz. can.
Similarly, Heineken USA is extending its Dos Equis line with Dosarita, a ready-to-serve lager margaritaade with agave nectar. “The flavored beer/beer mixes segment is one of the fastest growing beer segments,” says Blazek, adding, “indicating that consumers are more open to experimentation and variety beyond regular beer.” The company is also launching Desperados and Amstel Radler (see sidebar).
“As long as brewers maintain high standards of quality as they experiment with new and different flavors, we think the consumer stands to benefit,” says Campbell at Guinness. “We will continue to experiment as well.”
For its part, Paulaner HP USA markets Fruli, a 70% Belgian white ale, 30% strawberry fruit juice blend. “I believe there is a place for flavored beer,” says Coleman. “The validity is how you do it, using real fruit not extracts. There is a fine line before beer becomes alcoholic soda pop,” cautions the CEO.
One Size Doesn’t Fit All
There have been a number of innovations on the packaging side of imports.
Fuller’s moved this year from six to four-packs, which keeps the price under $10 so it appears more affordable to consumers, says Coleman, while taking a small price increase. Additionally, updated labels and a proprietary bottle shape are being introduced.
Last year, Pilsner Urquell launched some limited-edition cans that played up the heritage of the brand of 172 years as the world’s original pilsner. “Those cans have been on fire; they are up 60% to date. They are buoying the brand in general, making noise among craft drinkers,” exclaims Verschoor.
To maintain Pilsner Urquell’s quality from the brewery to consumers in the U.S., the company turned to using refrigerated shipping a few years ago. “This year we are going to add some petrol to that fire with the bold step of packaging the brand in a brown bottle.” The darker bottle, which protects against harmful light, will launch around the middle of this year. “We have an absolute commitment to quality with Pilsner Urquell and the brown bottle is a huge step forward in maintaining that quality,” says the director of imports.
“On the packaging front, we are launching Heineken in an 8.5-oz. Slim Can format,” reports Blazek. “Heineken is the first upscale brand to offer the 8.5-oz. cans, a format that is outpacing other sizes at retail and is especially popular among multicultural male consumers.”
Cinco de Mayo is a key holiday for Mexican beers. This year the date fell on a Monday, so Dos Equis conducted a campaign to start the holiday on Friday through to Monday. Starting in April, the Dos de Mayo campaign featured new “Most Interesting Man in the World” TV and radio spots airing nationally. Dos Equis also gave its traditional Lager and Ambar bottles a makeover with limited-edition label designs inspired by its Mexican heritage. The timing also coincided with the launch of the Dos-A-Rita line extension.
To debut its summer seasonal, Newcastle is pumping up the packaging of its Newcastle Bombshell Blonde Ale this summer, by featuring a lovely swimsuit-clad “bombshell” blonde on its packaging. Available from April through July, Bombshell is brewed with Cascade, Hallertau and Northdown hops, which helps balance the light-colored golden ale’s light aroma and bitterness with toasted malt for a smooth, clean finish. Other Newcastle seasonals will appear throughout the year.
In 2014 one of the big initiatives for Tenth and Blake is the launch of a “Seasons” campaign for Peroni Nastro Azzurro. It is the number-one beer brand in Italy, and is considered as a “style brand,” like Versace and Prada, explains Verschoor. Just as fashion brands have fall, winter, spring and summer collections, Peroni will have its seasons. The campaign will be in priority markets of New York, L.A. and Miami, with out of home, print and TV advertising, which will “talk about Peroni as Italian style applied to beer.”
Both Corona and Modelo Especial are supporting the World Cup this year with targeted advertising. A sweepstakes summer promotion involves Corona, Corona Light and Modelo Especial. Where legal, consumers search out codes on our 12-, 18- and 24-pack cartons and enter online to win prizes. The messaging is in both English and Spanish, a first for the brands. The promotion is aimed at driving consumers to retail outlets. “We’re constantly looking to engage our customers with promotional packaging and utilize opportunities to engage during the key summer selling season,” says Hackett.
This spring, Tecate and Tecate Light, cervezas con carácter, kicked off a national shopper marketing program across thousands of retail locations, which included a sweepstakes, cross-merchandising offers and thematic point-of-sale materials. The “Gear Up” campaign centered on an easy-to-enter, text-to-win sweepstakes that gave consumers the chance to win summer grilling gear, including Tecate Light can-shaped grills, rolling coolers and Tecate camping chairs.
Guinness is continuing its global campaign, “Made of More,” which launched last year. This summer will mark the second year of the Guinness International Champions Cup, a competitive soccer tournament with eight top teams facing off in 12 cities across the U.S. in July and August.
On the Horizon
“The exciting thing is we see a continued acceleration of the superpremium category,” says Verschoor at Tenth and Blake, which bodes well for the future of the import category.
“We have the best momentum going since Crown Imports was formed some six years ago,” notes Hackett, adding, “We have to continue building on this momentum, and we will.”
“The beginning of 2014 has been challenging in Northern U.S.; the cold and snowy weather was the big story,” relates Hoff at Artisanal Imports, but he is positive about the remainder of the year. “The more good breweries there are, the more beer drinkers there are who are on that journey of discovery,” he says. “And the more people who are going to be knocking on our door to try our beers.”
Heineken Firing On All Cylinders
By Cheryl Ursin
Beer is under attack,” declared Nuno Teles, HEINEKEN USA’s Chief Marketing Officer to an audience of over 1,500 HEINEKEN USA distributors and employees at the company’s annual National Distributors Conference, held this past April in Houston.
But while Teles and other global HEINEKEN USA executives laid out their thoughts on the beer market in general, including the results of the largest consumer-behavior study the company has ever done, they also outlined their own battle plans.
Teles pointed out that the upscale segment of the beer market is up 5%, while mainstream brands are down by 2% and value brands are down by 5%. While Heineken is the strongest brand in the upscale category, he declared, “Everyone wants to be in that market. We need to fight for our upscale category.”
Meanwhile, spirits gained on beer, by almost 1% in 2013, especially during an important drinking occasion: when the New Millennials (consumers aged 21-27) go out, on-premise, at night. “We are taking back the night from spirits,” declared Dolf van den Brink, HEINEKEN USA’s President and CEO.
One of the company’s responses: Desperados, a lager blended with tequila barrel-aged beer. “Desperados speaks to the New Millennials. It is inspired by spirits, while it is also an imported beer,” said Raul Esquer, Desperado’s Brand Manager. First introduced in France in 1995, it has gone on to capture 4% of the beer market in that country. “Desperados has the potential to be the ‘Red Bull’ of the flavored-beer market,” said Esquer, who pointed out that the flavored-beer category in general is growing quickly in the U.S., up by 25%. Desperados launched in the Southeastern U.S. in April and is on track to go national in the first months of 2015.
HEINEKEN USA is also having good success with another flavored-beer offering, Amstel Radler. Radler is made with 60% lemon juice and 40% beer.
HEINEKEN USA continues to push at the envelope with Strongbow, its hard cider product. “Cider is an exploding category,” said Scott Blazek, Senior Vice President of Sales, and Strongbow is one of the brands in it. “Strongbow can reach consumers and occasions that beer can’t,” said Charles Van Es, Senior Brand Director, Portfolio Brands. “It appeals to both men and women. Half of its new consumers come from outside beer. It can expand the category, and take from wines and spirits.” Strongbow is leading with a new flagship liquid, Strongbow Gold Apple Hard Cider, made with both sweet and tart apples, which is entering markets alongside its extension, Strongbow Honey & Apple Hard Cider.
HEINEKEN USA’s Newcastle Brown Ale has, despite being a relatively small brand, continued to make a big splash with its “No Bollocks” theme. Its spoof of Superbowl ads – the Superbowl ad it would have made for the big game, if it could have afforded to (ifwemadeit.com) – garnered 11.5 million views online and out-trended the Superbowl itself on Facebook at one point. The British brand also celebrates, not the Fourth of July, but July 3rd, Independence Eve, as the last day of British rule.
Finally, the company’s core brand Heineken will spend a record amount on media in 2014, having won more advertising awards on a global level, including 15 Cannes Lions, than any other food & beverage company in 2013. The Heineken brand will be taking over the summer by running not one, but two, new summer marketing programs and introducing their revolutionary new Brew Lock keg technology at select on-premise accounts.