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A Blueprint for Beer

You don't need to read tarot cards to see into beer's future. Just look at wine's past.
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If you want to understand how the beer industry in America might develop over the next couple of decades, there’s a book you should read: American Vintage: The Rise of American Wine, by Paul Lukacs. Read it with a beer in your hand, something like a Weyerbacher Double Simcoe I.P.A., which is so hoppy, it’s almost hallucinogenic. You’ll soon see the uncanny parallels between the wine world of 30 years ago and the beer business today.

Back then, a few big producers dominated U.S. winemaking with cheap, well-made, and unexciting jug wines. Imported wines that were similar to domestic products sold strongly as well: Lancers, Mateus, Riunite. Wine was perceived as a drink for snobs or dipsomaniacs. (Drunks used to be called winos, remember?) Then came the shock of the Judgment of Paris, the 1976 wine-tasting event where, for the first time, wines from small American producers publicly trumped those from Old World makers.

Fast-forward to now, and consider beer: Anheuser-Busch, SABMiller, and Molson Coors own about 80 percent of the market with commodity-priced light lagers. Brews like Corona and Heineken—similar to domestic offerings—hold about 15 percent, and the specialty brewers have less than 4 percent of the market. Meanwhile, higher-end import and craft beers are wowing critics, but proponents of keg-registration laws and beer-tax increases seem to hold beer responsible for underage binge drinking. To cap the comparison, American-brewed beers are besting European beers in international competitions in a variety of categories.

Two different drinks, two different markets, similar enough to be intriguing. If beer follows the path that wine did, what developments might we see in the next 20 years?

Market Composition Will Change
It may seem ludicrous at this point to think of light beer being overthrown by pale ale. But it would have been an equally outlandish call to pick chardonnay over undifferentiated jug Chablis in the 1970s. The wine market, in the course of about 15 years, went from being dominated by cheap jug wines and fortified wines like Thunderbird to focusing on varietals and the character of the grapes rather than their yield of juice and sugar (and, therefore, alcohol).

A similar change may be underway for beer. Craft and specialty beers are showing the strongest growth in the alcohol beverage market, with sales in supermarkets expanding by 17.8 percent last year, compared with growth of 10 percent for wine, 6.6 percent for spirits, and only 2.4 percent for beer overall. Craft beers are also gaining the attention of food writers and chefs, just as the American varietal wines did in the 1970s and 1980s. It’s a change that will accelerate as more establishments see the chance for increased sales and expand their beer selection, exposing drinkers to a wider variety.

Prices Will Rise
One reason you should expect to pay extra for craft beers is they tend to use more hops or malt—or both. But there’s more than simple ingredient costs at work. Craft beer—or “worthmore beer,” as SABMiller’s marketers have taken to calling it—sells for more simply because people are willing to pay more for it. Consumers regard it as something special relative to mainstream beer, so its perceived value is higher. As with wine sellers before them, no one in the beer sales chain wants to see that perception change.

Big Breweries Will Change Their Tunes—and Product Lines
Customers will no longer be mollified by superficial changes in mass-market beers and will begin demanding better choices. Some breweries may refuse to embrace the new beers and become marginalized, but others will see the future and adapt, as Gallo did on the wine time line. Gallo saw how things were going, jumped into the varietal game, did well, and remains a major force in American wine.

It’s too soon to tell whether the “big three” brewers will take the Gallo path, but there are some early signs. Anheuser-Busch is floating out some trial balloons, including regionally available beers: Ascent 54, a classic Bavarian-style dark wheat beer that’s delicately sweet and chocolatey, is brewed at the company’s Fort Collins, Colorado, facility. Molson Coors has their Blue Moon line of craft-type beers, which had some success when introduced in the mid-’90s. Coors continued to brew the Blue Moon Belgian White, and despite next to no promotional support, it was recently discovered by consumers, who have lifted it to a commanding position in specialty beers. SABMiller is pushing their Czech-based classic Pilsner Urquell while trying gimmicks like Miller Chill, a light beer with a dose of lime flavor and salt.

There Will Be Fewer Frogs and Bikinis
The best thing about this trend is that it will change beer’s image. In a widely quoted 2005 interview in the Wall Street Journal, Miller Brewing C.E.O. Tom Long, then the company’s chief marketing officer, said, “People will tell you that beer is not sophisticated enough or stylish enough to compete with wine and spirits. Why do they think that? Well, I believe it’s because we told them to.” Recalling years of tight bikinis, talking frogs, performing dogs, and frat-boy antics, you have to agree with the man. We can expect to see more advertising that focuses on the beer itself, not just lowbrow entertainment linked to the brand name.

That was the key to the wine revolution, and it’s crucial to the nascent beer revolution: people enjoying the drink based on its flavor and character, rather than its effectiveness as an alcohol-delivery device, a party accessory. You pay more for these new wines and beers, and you get more: more flavor, more variety, more prestige, more value. It’s the classic “better beverage” sound bite used by marketers of upscale beer, spirits, and wine: “Drink less, drink better.”

Of course, beer isn’t wine: It’s more perishable, and it’s not as dependent on year-to-year growing conditions as wine is. The cuisine associations are different; folks think wine with French and Italian, beer with British and German. But if I were a marketer for the Brewers Association, the craft brewers’ trade group, I’d sit down with a copy of Lukacs’ book and start making notes for my own.

 



 

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