musing

No thanks, we don’t want better beer

You may recall that SABMiller CEO Graham Mackay recently discussed how beer consumers in the developing world are “trading up” from lower quality, cheap beer.

Granted, we may be talking apples and oranges when comparing beer in the United States and developing countries, but you still gotta wonder if Norman Adami, president and chief executive of Milwaukee’s Miller Brewing (a subsidiary of SABMiller), got the “trading up” memo.

In examing the flurry of new products from Anheuser-Busch, the Chicago Tribune quoted Benj Steinman, editor of Beer Marketers Insights: “The beer industry has been declining for years,” and “(the) high-end is really where it is happening in the beer industry.”

Adami then seemed to disgree.

“The key determiner of success or failure for every major beer brand in America will be its ability to stake out a differentiated positioning,” he said. “It’s not that people want to trade up. . . . but they are looking for brands that are distinctive.”

You’ve got to give the guy credit. He’s saying Miller Genuine Draft – which is now being promoted as “Grown Up” – is already good enough. But to me “better” is distinctive. The same old beer, no matter how much you spend on marketing, is not distinctive.

Small, the New Big – and beer

The cover story of February’s Inc. magazine tells us “Small is the New Big,” a phrase that’s been batted around for the last year, meaning small can be part of a successful business model.

Given the recent success of small-batch breweries versus larger mainstream brewers it would seem that idea extends to beer.

Sure enough, the Inc. article is adapted from the book Small Giants, and one of 14 businesses featured in the book is Anchor Brewing. In the sidebar, author Bo Burlingham writes:

With another capacity crisis looming in the early 1990s, (founder Fritz) Maytag made plans to raise capital for expansion by taking the company public, but he pulled back at the last moment. “I realized we were doing the IPO out of desperation – because we thought we had to grow,” Maytag recalls.

“It occurred to me that you could have a small prestigious, profitable business, and it would be all right. Like a restaurant. Just because it’s the best around doesn’t mean you have to franchise or even expand. You can stay as you are and have a business that’s profitable and rewarding and a source of great pride. So we made a decision not to grow. This was not going to be a giant company – not on my watch.”

As a bit of background, here’s more about Small is the new big.

When it comes to beer there are practical reasons to wonder about small and big. Fred Eckhardt wrote a wonderful column for All About Beer magazine about 10 years ago where he asked “What is craft beer?”

Among the answers was one from author-brewpub pioneer Greg Noonan of Vermont Pub & Brewery:

“Craft brewed (should) mean pure, natural beer brewed in a nonautomated brewery of less than 50-barrel brew length, using traditional methods and premium, whole, natural ingredients, and no flavor- lessening adjuncts or extracts, additives or preservatives.”

Is that true today?

Miller beer disappears from truck

News item:

A semi-trailer loaded with Miller beer has disappeared from a trucking company in Washington County, Wis.

A load with nearly 2,000 cans and bottles of Genuine Draft, MGD and Miller Lite vanished from Millis Transfer in Richfield, Wisc.

Think they should search a developing country for somebody trading up?

(See previous post if you are confused.)

Where’s the up in trading up?

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.

Local beer for local people

Britain’s Society of Independent Brewers Association (SIBA) says beer sales by of member companies are projected to show a 15% rise over the last year.

Why have the independents been able to buck the trend?

“It’s all about local beer for local people. There is a definite demand for cask beer if the right opportunities are presented to licensees,” said SIBA chairman Keith Bott.

The story from the Morning Advertiser doesn’t discuss if a CAMRA campaign launched two years ago – Local Beer for Local Pubs – has had an impact, but doesn’t it make sense that people like to drink a local beer?

Another example of why it sometimes makes a difference where a beer is from, and it also matters where it is enjoyed.