Drinks companies muscle in on low-carb boom
In a bid to tap into the phenomenal boom in low carbohydrate diets in the US, brewers and other drinks manufacturers have been launching low-carb variants and amplifying low-carb claims for existing products. But while the short-term growth has been prodigious, if the boom is not sustained drinks companies may have cannibalised their core products with faddish variants. Philip Fine reports.
Many key players in the US drinks industry have been trying to crash the low-carb party currently making sectors of the country's food industry giddy with sales. The drinks producers have seen the statistics: 15% of Americans (32m people) are now following high-protein reduced-carbohydrate plans such as the Atkins Diet; sales of high protein foods are up and high carb products like potatoes and pasta are falling. And over 800 new products that make low-carb claims have been introduced in the last three years.
With such rich pickings to seize, it will come as little surprise that this party has turned into something of a dust-up among beer makers who are trying to elbow each other out of a market that is still attracting a growing number of health-conscious Americans.
The trend was first seized upon by Anheuser-Busch, which launched what is now the most popular low-carb beer, Michelob Ultra, in October 2002. But the shelves are getting crowded. Coors launched its Aspen Edge and Miller teamed up with Skyy Vodka, to introduce Skyy Sport. And there are more: Rolling Rock's Rock Green Light, F.X. Matt's Accel and Karlsberg's Rhinebecker Extra Low Carbohydrate Brau.
But it has been Michelob Ultra that has gone home with the most consumers, capturing an incredible 2.2% of US supermarket beer sales, according to the latest available figures from December. "That quadrupled our projections," said Rick Leininger, director of the Michelob brand.
Some of the low-carb beers differ very little from their light beer counterparts, allowing a brand such as Miller Light and Heineken's Amstel Light to take advantage of this vague terrain and tout the low amount of carbs in their unchanged product. What this also means is that Michelob Ultra has not only taken away drinkers who were consuming Miller Lite and Coors Light but it also cannibalised one of its own sister labels, Bud Light. Leininger admits that this has been happening but is not worried. "We cannibalised about 50%. But the other 50 had to come from somewhere."
Analysts Mark Swartzberg and Mark S. Astrachan, writing in a recent report for Legg Mason Wood Walker, confirm the positive news for Michelob's parent company Anheuser-Busch, saying that bringing on a new brand, even one that has taken some of its own consumers, has been a positive development. "The combined volume is greater than what it would be in the absence of Michelob Ultra," the analysts said.
But they do warn that if the current popularity of low-carb beer proves to be a temporary spike, other now-growing competitors may then win out, resulting in a case where "Anheuser-Busch may have tripped up its own giant, Bud Light, while aiding the awakening of a sleeping giant, Miller Lite."
That said, the low-carb craze may prove to be easier on the larger companies, like Anheuser-Busch and Coca-Cola, given their ability to offer a wide range of drinks: low-carb or not. "From 100% juice to soft drinks, we have something for everybody," said Coke spokesman Ray Crockett, when asked about the low-carb products, further dividing an already segmented market. "You have to pay attention to what consumers are telling you," he says.
So, Minute Maid is launching three new flavours of Minute Maid Light, an
expansion on their current Lemonade light fruit drink. The new flavours, Mango Tropical, Raspberry Passion and Guava Citrus, like the lemonade, are designed to capitalise on a light juice drink market that has seen 35% growth despite only holding an 8% share of the juice drinks category.
As for other drinks, low-carb leader Keto, available in 7,000 supermarkets across the US, offers several low-carb powdered varieties from cocoa to pink lemonade, while the Baja Bob brand offers six types of margarita mixes, as well as Pina Colada and Bloody Mary mixes.
Spirits have also been getting in on the act, with companies such as Phillips Distilling, promoting their UV vodka, reminding consumers that high alcohol drinks in the form of vodka, gin, tequila and whisky all have zero carbohydrates. And some have been cross-marketing with the diet drinks sector to keep mixed drinks carb-free. Indeed, 63% of Americans recently polled by Diageo incorrectly believe that wine and beer are lower in carbs than spirits like vodka, tequila, gin and Scotch whisky.
Shut out of the low carb craze, however, have been the orange juice makers because of the natural sugars in the oranges used to produce the juice. This has even led officials with Florida's citrus industry to publicly complain about low-carb diets. But Tropicana seems to be trying to skirt around the issue, with its Light 'n Healthy orange juice. Two patents are pending on the process that removes some solids from the juice, adds water and a no-calorie artificial sweetener.
The party may come to an end, however, in the next few months, when the US Food and Drug Administration (FDA) plays the returning parent. Groups like the Grocery Manufacturers of America have been lobbying the regulator to come out with an actual definition of low carb, something that does not exist and has allowed many to revel in an unchaperoned blow-out.
Eric Brook, who follows the drinks industry as managing director of Deutsche Bank's Global Consumer Group - Food & Beverage, thinks that could potentially be a blow to the beer industry. "How much would that suck?" he asks rhetorically. "They spend all this money on low-carb beer and then the FDA comes out
with a threshold lower than their beer." Leininger says he is not worried but he does say that a ruling like that will force him to meet with his legal department.
Brook says low-carb is not a flash in the pan and has lasting power due to Americans associating the products with healthier living. That should make the low-carb craze last longer than the very short dry beer era, which happened to be the last time US beer makers were fighting like this.
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