The faster beer companies embrace segments that are connecting with consumers, the quicker the overall industry can return to growth, Mike’s Hard Lemonade president Phil Rosse told thousands of wholesalers during the National Beer Wholesalers Association’s (NBWA) annual convention in San Diego.
“I think that’s what’s ultimately going to give the industry its best chance to get back to growth,” Rosse said during a panel that also featured D.G. Yuengling & Sons Inc. COO Dave Casinelli and Dogfish Head Craft Brewery co-founder Sam Calagione.
Prior to the discussion, moderator and NBWA treasurer Brian Gelner cited beer’s decline in market share from 53 percent in 2010 to just below 50 percent in 2017. At the same time, spirits’ share has increased three percentage points to 35 percent. Possibly most concerning for beer companies is a 7.6 percent decline in per capita beer consumption among legal-drinking-age consumers since 2010.
Although beer volumes continue to decline as wine and spirits companies take share of total alcohol away from the beer category, “there are victories happening in the beer aisles,” said Rosse, whose company also makes the popular White Claw line of hard seltzers.
Consumers now desire more flavorful food products, Rosse added, noting “plain” potato chips are now just five percent of that product’s overall volume.
“In beer, you still have 75 percent of the volume in yellow beer — less flavorful products,” he said. “And I think that needs to evolve.”
In order to return the category to growth, Yuengling’s Casinelli said beer makers, wholesalers and retailers need to agree on their priorities and “stop spending resources and wasting time fighting each other.
“This industry spends a lot of resources internally fighting and challenging each other and we need to figure out how to channel those resources toward the growth of beer and category health,” he said.
Meanwhile, Dogfish Head’s Calagione said breweries need to focus on innovation and brand building while maintaining authenticity to reach younger consumers. He added that beer companies should try to appeal to wine and spirits consumers with culinary-inspired offerings such as his company’s own SeaQuench Ale, a session sour brewed with lime juice, lime peel, black limes and sea salt.
However, Casinelli believes there is still value in core lager brands.
“We’re disciplined, and we believe over time, we have the ability to evolve, but at the same time, bring value back to these brands that have a lot of equity, a lot of volume and a lot of scale,” he said.
The panel also touched on two other pressing industry issues: the growth of brewery taprooms and the industry’s struggles to reach female consumers.
Although 99 percent of Dogfish Head’s beer is sold through the three-tier system, Calagione stressed the value of building new brands in brewery taprooms prior to releasing them into wider distribution.
“At the end of the day, a single taproom brewery is essentially a brand incubator and ecosystem to create a brand that in this competitive environment you would not want in its embryo stage,” he said. “Let them hone a message.”
However, for wholesalers who believe their suppliers are too focused on direct-to-consumer sales, Calagione said they should discuss the issues and if they don’t like the answer: “You’ve got the ability to deemphasize them on you totem pole of priorities.”
As the beer category continues to evolve, Calagione believes there will be survivors and casualties, again referencing the so-called “smiling jaws of death” phenomenon. He explained that the bottom jaw is made up of taproom-focused breweries selling directly to consumers, while the top jaw includes the top 50 regional breweries focused on distributing to more traditional on- and off-premise retailers.
Calagione said “economic Darwinism” would lead to more closures, particularly among breweries that are not making high-quality products. Craft breweries that are not focused on the quality of their beers “deserve” to go out of business, he added.
To help illustrate his point, Calagione referenced the recent closing of a brewery near Dogfish Head’s Delaware headquarters. Calagione didn’t mention the business by name, but 16 Mile Brewing Company, which is located in the area, officially shuttered this week.
As for attracting more female consumers, Rosse said it starts from within. He said about a third of his organization is now made up of women, and it’s helped his company find a “sweet spot” with female consumers.
“You’ve got to be able to have the conversations in your own company with the female consumer to get their perspective,” he said.