USA: Decreasing overall trend of beer consumption makes American brewers take action

The USA beer volume trends began to deteriorate in 2004, and worsened in 2005. The beer industry acknowledged this publicly and expressed its concerns about this situation, Marketwatch reported. Beer's share of the beverage market fell for the fourth time in five years in 2004, according to Beer Marketer's Insights, an industry tracker in Nanuet, N.Y. This was especially due to the fierce competition from other alcohol marketers, particularly distilled spirits

Moreover, a recent Gallup poll found that of the 63% of Americans who say they drink alcohol, 39% prefer wine, with beer coming in second at 36%. On top of it all, the low-carb diet craze, though waning, has also hurt sales of non-light beer offerings. And yet the nation's beer industry, reluctant to equate their product with liquor, has long resisted the idea that it's even in competition with wine and spirits.

Anheuser-Busch reported its third straight quarter of domestic volume declines, two weeks ago, with the summer drinking season in full swing. The same day, in an unusually blunt admission, the chief financial officer told investors that the company is "fighting for share of alcohol," and needs to "improve the image of beer and desirability of beer."

In a management shuffle one week later, the St. Louis-based maker of Budweiser, Bud Light, Michelob appointed Lachky, a Bud veteran, to a post that the company created "to enhance the overall image of the beer industry."

Besides pushing for "crucial" innovations in products, packaging and marketing -- typical approaches for consumer industries -- Lachky plans to take a somewhat more risky tack."We are going to get very, very vocal about the health benefits of moderate consumption of alcohol, especially beer," he said. "We have ceded this ground to wine and that is absolutely wrong. A Budweiser is just as good as a cabernet in terms of its health benefits."

With nearly 50% of the U.S. market, Anheuser-Busch may be suffering more than most of its peers. But Molson Coors SABMiller and other mass-market brewers have also been under pressure by current trends. And the impact is being felt further down the line.

Overall beer sales in the U.S.A grew less than 1% in 2004 and it "would have been slightly down if you take out the flavored malt beverages," said David Rehr, president of the National Beer Wholesalers Association"We have got the message and we are thinking about how to regain the offensive," he said. "We are in an environment where we know we have issues with growth and we are trying to figure out a way to get the trend lines up."

Key focuses include packaging and marketing efforts at bars and restaurants ,two fronts where the competition has been drinking Big Beer's lunch. Especially, value-added packaging, including everything from cocktail shakers to brandy snifters to decks of cards with a bottle, make for eye-catching store exhibits.

Anheuser-Busch took a big step in that direction earlier this week with the roll-out of "Tilt," a berry-flavored, caffeine-infused beverage with an alcohol content that ranges as high as 6.6%, compared to they typical 4% buzz factor.

Still, there is some good news elsewhere in the industry. Many imported and specialty beers continue to show growth. At Guinness, a unit of British spirits empire Diageo (DEO), volumes of its eponymous stout were up about 6% in the fiscal year that ended last June. At Constellation Brands (STZ), beer also remains a sweet spot. The company's portfolio of imports, which includes Modelo, Tsingtao and Corona, posted a 10% sales increase in the latest reported quarter.

The editor of Beer Marketer's Insights, Benj Steinman believes that the recent market share drops for the lower-brow brews may be somewhat overblown but agreed that "the time is now" to try and reverse them."I wouldn't characterize it as an emergency," he said "We are talking about an industry that is declining slightly rather than growing slightly. Beer gained share from 1970 to 1995 when it started losing it slowly and then losing it a little more rapidly." He added, "the industry was in a bit of a denial and now they are in the mode of trying to do something about it."

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