Trading up is in the eye of the beholder.
(What’s trading up? More on that at the bottom.)
SABMiller’s CEO this week told the press that emerging markets are the key to continued growth as consumers there trade up to higher value brands and increase overall beer consumption as an “aspirational” alternative. The report:
In a presentation to the Consumer Analyst Group of New York conference, SABMiller Chief Executive Graham Mackay said his company’s “broad exposure to the global beer industry will underpin future growth.”
He said there is “far greater” opportunity in the developing world as consumers trade up from lower quality, cheap beer, into modernized mainstream products and then on into what it refers to as “worthmore” brands.
Consumers are also moving into beer as an “aspirational mainstream alternative to cheap spirits, or other types of local indigenous alcohol,” Mackay said.
The problem that Miller and other industrial brewers have in the United States is that consumers are trading up from their products rather than to their beers.
That’s one of the reasons behind various efforts to improve beer’s image that Anheuser-Busch entusiastically supports (and Miller doesn’t put money behind).
The notion of trading up received considerable attention two years ago, from Fast Company to Business Week after publication of “Trading Up: The New American Luxury” by Michael Silverstein and Neil Fiske.
One of the premises of “Trading Up” is that consumer spending is polarizing. In order to trade up in a category she really cares about, an avid cyclists might save money by trading down in some that don’t matter to her like her brand of toothpaste or beer. That’s why Costco is the No. 1 wine vendor in the country – we’re not talking the stuff that comes in jugs – while also selling generic paper towels in bulk.
Trading up isn’t about simply moving from beer that costs $2.99 a six-pack to $7.99 craft beer.
“The competition includes all mood elevators,” Silverstein said. “Quality vodka substitutes for better beer more than it does for Bud. The beer companies need to deliver innovation on taste, nutrition, health, energy, and celebration.”
So if you can’t compete with [fill in the name of your favorite small-batch brewer] then I guess to find a Third World brewer you can compete with . . . for now.