Round-Up - NPD: Forget Craft Beer; Brewers go Crazy over Flavoured Malt “Cocktails”
By Tom Vierhile, Innovation Insights Director at GlobalData | 25 February 2015
Only this week, Anheuser-Busch InBev released another variant in its Bud Light Lime Rita range
The beer industry’s obsession with craft beer may have hit a peak of sorts with Anheuser-Busch InBev’s snarky Super Bowl ad mocking craft beer lovers as soft and undeserving of “brewed the hard way” beer like Budweiser. Controversy aside, large brewers now seem to be looking beyond craft beer as the next great growth opportunity by embracing new flavoured malt beverages (FMBs) proliferating in cocktail-inspired flavours.
Had enough of craft beer? It’s starting to look like some of the largest beer brewers may share the sentiment. Anheuser-Busch InBev’s new Bud Light Mixxtail takes inspiration from - and aim at - the cocktail arena, and could well represent the next great shift in alcoholic beverages. Debuting in bartender-friendly Long Island, Firewalker and Hurricane flavours, Mixxtail is clearly not craft beer. Moreover, the 8% abv packaged beverage is best served over ice – just like the cocktails it emulates.
FMBs like Mixxtail have been a rare bright spot for an industry caught off guard by the popularity of craft beers. While sales volumes of beer have declined at brewing giants like A-B InBev and MillerCoors, malt beverages have picked up some of the slack. A-B InBev’s cocktail-inspired Bud Light Ritas account for an estimated one-third of all FMB sales in the US.
Since the debut of Lime-A-Rita in 2012, the Rita franchise has expanded to flavours like Straw-Ber-Rita and Raz-Ber-Rita that are less summer-oriented to smooth out the brand’s seasonal sales curve. The success of this portfolio has A-B InBev raising its sights to try to capture 50% of the fast-growing malt beverage category in the future, according to a recent report in The Wall Street Journal.
Up for grabs is the Millennial consumer, a consumer that craves variety but demonstrates less loyalty to any particular alcoholic beverage brand or category than older consumers. Millennials are rewriting the rules. In spirits, Millennials have embraced flavoured whiskies to the point where nearly half of the growth in US whiskey sales is now coming from flavoured products. Sweeter and hotter flavours like cinnamon may turn off whiskey veterans, but there is no doubt they have opened up the market to younger consumers. One-time sleeper brand Fireball, a cinnamon-flavoured whisky from Sazerac that is said to “burn like hell” when going down as a shot (the preferred consumption method), has quietly become one of the top ten selling spirits brands in the US. According to market research firm IRI, Fireball sales increased last year by 106.4% to hit US$130.6m in retail sales through supermarkets, drugstores, mass market retailers, gas/convenience stores, military commissaries and select club and dollar retail chains. As recently as 2012, Fireball had sales of just over $17m through these same outlets.
Millennials love to experiment with new tastes and flavours. According to Datamonitor Consumer’s 2014 global consumer survey, younger Americans are more than twice as likely as older consumers to experiment with new ales and craft beers. 43% of consumers in the 25- to 34-year-old age group said they often experiment with buying new products versus just 21% of those 65 and older.
This behaviour was even more pronounced for pre-mixed alcoholic drinks and cocktails, where consumers in the 25- to 34-year-old age group were three times more likely than 65+ consumers to say they often experiment with buying new products.
Assuming these numbers hold up, this could be the start of solid long term sales growth in FMBs. Mega-brewers are responding accordingly: Fresh off double-digit sales gains from its Redd’s franchise last year, MillerCoors is adding new cocktail flavours to its Steel Reserve Alloy Series of FMBs. Margarita and Hard Pineapple are the additions – flavours likely to resonate with female consumers. A-B InBev, meanwhile, seems to be more focused on men with Mixxtail, a position that Alexander Lambrecht, VP of Bud Light, alludes to: “We believe Bud Light Mixxtail’s bold cocktail taste makes it the perfect pre-game in a bottle.”
This comment does leave FMBs open to criticism that the higher-octane products (generally 8% abv, versus around 5% for beer) could ramp up alcohol abuse. Just this sort of criticism has been lobbed at “strong” and white cider products sold in the UK with similar abv levels.
Regardless of how the abv issues shake out, brewers may be waking up to the reality that beer alone cannot overcome long-term changes in alcoholic beverage preferences. Distilled spirits and wine have eaten chunks out of beer’s market share despite the popularity of craft beer. The Distilled Spirits Council notes that beer’s share of the alcoholic beverage market in the US has dipped from 55% in 2000 to 48% in 2014. The majority of that lost share has gone to spirits, which has seen its share rise from 29% in 2000 to 35% in 2014.
Brewers are unlikely to tolerate share losses like this long-term, so look for more cocktail-inspired malt beverages in the future. But, also look for beer itself to get into the game with packaged products that pick up on the beer cocktail trend rising in bars and restaurants. Consumer support for beer cocktails is surprisingly high. Datamonitor Consumer’s Q4 2014 global survey revealed that 34% of American consumers in the LDA to 24 years-old group found the concept “very appealing”, as did 40% of 25-to 34-year-old consumers. Not surprisingly, just 13% of consumers aged 65 and older felt the same way.
Mixology skews towards the young, and that may be just the ticket for mega-brewers to get their mojo back.
The acquisition of South African Breweries' owner SABMiller is expected to be finalised by the end of 2016. However, antitrust clearance is still pending in South Africa....
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