Beer industry blames itself for falling behind

Beer industry leaders have blamed a multi-year slump on everything from the economy and weather to anti-smoking laws in bars. But one top executive is bluntly suggesting that the industry itself is the problem for failing to out-market the spirits category.

“The days of beer guys knocking each other around and not worrying too much about spirits and wine is over, and it’s frankly been over for a long time,” MillerCoors CEO Tom Long said in a speech to hundreds of beer distributors gathered this week in Las Vegas for a meeting of the National Beer Wholesalers Association. “We’re going to have to look at those competitors and as an industry take on the challenge of brand beer. Make no mistake: our success over the next five years depends on that.”

The last three years have been brutal. In the 52 weeks ending in late August, the number of beer cases sold in stores was down 1.5% from the year earlier, according to Nielsen, while spirit volume sales were up 3.2% in the year ending in mid-September. By year’s end, experts are forecasting beer volume to be down some 2%. That would mark the third year in a row of a decline, which hasn’t happened in 50 years, Beer Marketers Insights President Benj Steinman noted in a presentation to distributors, who met at Caesars Palace for their annual convention and trade show. “If we have yet another year of 2% decline, it will be a lost decade,” he said. “We’ll be back to where we were 10 years ago.”

Mr. Long, who took over as CEO in June, suggested advertising is playing a role in the rise of spirits, with more brands spending liberally on TV, moving into a medium that beer used to have to itself. He even took the unusual step of showing off several sprits ads from brands such as Captain Morgan and Smirnoff — hardly the presentation you expect at a beer conference.

“Spirits advertising has been praised by lots of folks and I think rightly for its ability to connect with its target,” he said. “It’s apparent they have read the beer-marketing book and they’ve been borrowing pretty liberally from it.” He also cited spirit line extensions and new flavors, as well as new brands. “Look at Grey Goose,” he said. “This brand was created right out of thin air. French Vodka? Who would have thought such a thing?” he added. But with a “relentless sales effort” and clear positioning, “they created a whole new price tier in vodka and Grey Goose took flight.”

“Maybe not enough beer commercials are talking about the relevance of the beer and what the beer is about and too many [are] about the joke,” said Frank Politano, VP-sales and marketing for Kohler Distributing Co. in New Jersey. “I think the consumer is looking more about, ‘What’s my experience?”

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