The Voodoo Ranger franchise now accounts for 65% of New Belgium’s business. New Belgium Brewing CEO Steve Fechheimer has laid out that fact during a Brewbound Brew Talks meetup in September, and he again highlighted the shift in the Fort Collins, Colorado-headquartered craft brewery’s priorities during the National Beer Wholesalers Association’s (NBWA) annual meeting last week.
Fechheimer joined Molson Coors president of emerging growth Pete Marino and Diageo Beer Co. president Nuno Teles in a conversation on premiumization and brand building with Beer Marketer’s Insights editor Benj Steinman.
Fechheimer stressed the importance of brand building, which he admitted craft brewers haven’t done a great job of in the past. New Belgium has built three brand pillars — Voodoo Ranger, Fat Tire and Fruit Smash Hard Seltzer — that it is putting all of its money, focus and attention behind, Fechheimer said. The tricky part, he said, is winning hearts and minds while also getting those consumers to pay a little extra to have the association with those brands. For New Belgium, the “huge shift” was making the Voodoo Ranger family of primarily IPAs its top focus, which he said is “driving profitability and growth for everyone.”
In an effort to focus more on its priority brands, New Belgium discontinued around seven brands, including The Purist, The Hemperor IPA, Glütiny Pale Ale, Dayblazer, Mural, Fat Tire Belgian White and Citradelic, which at one time did around 100,000 barrels, Fechheimer noted. Those brands — although they accounted for about 10% of the company’s business — weren’t ones New Belgium believes it can premiumize and thus, the company pulled the plug. The move has opened up additional marketing dollars to invest in the company’s priority brands.
New Belgium doubled its marketing spend in 2021 and it’ll double that spend again next year behind its key brands, Fechheimer said. He added that the company is getting to “breakthrough levels of spend.”
Fechheimer also flagged “warning signs” he sees despite some breweries and wholesalers posting “good financial years” during the pandemic, In particular, those include that spirits are continuing to outgrow beer since he joined the industry in 2009 (Fechheimer came to New Belgium from Beam) with an average delta of 3% and that widened during the pandemic.
Premiumization matters to 21- to 29-year-old consumers, and beer companies need to do a better job of appealing to them with those products, he said. As craft brewers have lost share to spirits, they’ve turned to beyond beer offerings for growth, Fechheimer said.
Despite two strong lead brands in Boston Beer’s Truly and Mark Anthony’s White Claw, they haven’t brought everyone into the category. For New Belgium, Fruit Smash is a way of reaching the two-thirds of newer legal-drinking-age consumers who aren’t drinking hard seltzer regularly.
Diageo Beer Aims for $1.5 Billion in Sales by 2025
Diageo Beer Co. has a goal of reaching $1.5 billion in net sales by 2025, and Lone River Ranch Water will be a big part of meeting that goal, Teles said,
Teles called Lone River founder Katie Beal Brown an example of resilience after making the first shipments to grocery chain H-E-B in March 2020 as the pandemic was beginning to take hold in the U.S.
Getting to the $1.5 billion mark will come on the back of the core business, being “consumer centric” and expanding into new growth areas, such as Lone River, Teles said. Lone River is recruiting 30% of new consumers to the malt category — consumers who would typically go to spirits, he added.
As for Guinness, the core brand is growing, and the company will launch non-alcoholic Guinness Zero in the U.S. next year. The recently announced Guinness Chicago taproom is expected to open ahead of the St. Patrick’s Day holiday in 2023.
Even as companies innovate, Teles admitted that wholesalers and retailers are not in need of additional SKUs. Instead, they need “more sales per SKU,” more “critical mass” and “more value,” he said. While offering fewer but bigger innovations, they need to be rooted in consumers’ desires, he added.
Molson Coors Not Turning Back on Beer, Bullish on Seltzer
Molson Coors’ transformation into a beverage company does not mean the company is turning its back on beer, Marino stressed. He called it “a humongous part” of the company’s “past, present and future.”
Still, beyond its top lager brands — Coors Light and Miller Lite — Molson Coors is putting its energy into new brands such as non-alc energy drink Zoa in a partnership with “The Rock” Dwayne Johnson, its hard seltzers Topo Chico and Vizzy, La Colombe Coffee, and Superbird ready-to-drink canned cocktails.
Molson Coors remains “bullish” on hard seltzer, despite the deceleration of the segment, Marino said. He added that the segment is “not going away.” Steinman noted that Molson Coors’ seltzer portfolio — Vizzy and Topo Chico — has made the company the second largest share gainer in the segment. Those products will go through beer wholesalers, Marino said.
With Zoa, Marino said Molson Coors is off to a fast start in a $20 billion industry that has proven it “can be disrupted.” The company isn’t looking to “steal share” in energy drinks, “but expand the category,” he added. He praised Johnson’s work to promote the brand via his social channels, including constant promotion on Instagram. Zoa’s potential is “incredibly high” and it’s already the “fastest growing new energy brand,” Marino said.
Overall, Molson Coors is focused on fewer but bigger innovations, Marino said. Nevertheless, he believes there remains room for “well-differentiated, unique brand propositions,” whether that’s Zoa Energy or Five Trail whiskey.
M&A Not Off the Table
Asked about mergers and acquisitions, Marino said he’s met with about 200 brand entrepreneurs over the last 18 months. So Molson Coors is at least listening, but the company is also looking to build or partner, as much as it is to buy.
After acquiring Lone River earlier this year, Diageo Beer is open to a combination of acquisitions that drive incremental business, Teles said.
As for New Belgium’s parent company Lion, its acquisitive aspirations are well known. But as New Belgium grows 15% this year, that “changes priorities,” Fechheimer said.
Romancing the Consumer in the On-Premise
Beer needs to do better with its on-premise presentation if companies want to premiumize. Spirits has developed rituals that add romance that is lacking with the draft beer experience, even with a few notable exceptions such as a pint of Molson Coors’ Blue Moon Belgian White with an orange slice perched on the rim.
One way of bringing the romance is through “experience and theater,” which Teles said Diageo is doing with a new machine that pours the “perfect pint” of Guinness from a can.
Own-premise outlets such as New Belgium’s taprooms in Fort Collins, Asheville and San Francisco also add to the romance of the brand and help drive premiumization — despite being expensive to operate, Fechheimer said. He called them “critical” to brand building as they draw hundreds of thousands of visitors annually.
Teles noted that the Guinness Open Gate Brewery in the Baltimore area has drawn more than 1 million visitors. The Maryland brewery and taproom has provided a halo effect in the off-premise, with purchasing in the state three times higher than the national average, Teles said. He believes the benefits of a Chicago taproom can be even bigger once it opens.
Marino emphasized how own-premise outlets offer “real time feedback.” That feedback is one of the reasons Molson Coors has decided to take Blue Moon Moon Haze Hazy Juicy Pale Ale national.