Fizz in Beer Business Daily

By Ted Wright September 1, 2009

Beer Business Daily

 

September 1, 2009

 

A Sane Lone Voice Amongst the Chaos

 

Dear Client: 

In a sea of over-the-top articles last week bemoaning the brewers’ routine and modest Fall price increase, some with a pinch of demagoguery added, it was good to see that at least one in the mainstream press took the BBD view that prices are still lagging costs in the beer industry.  The piece written by David Niclaus of the St. Louis Post-Dispatch points out that the brewers have actually “smoothed out the effect on beer drinkers” since “g rain prices rose sharply between 2005 and 2008, and the brewers didn’t pass on the whole increase.”  Indeed, beer prices have “lagged the CPI for years at a time when the economy was doing well — from 1995 to 1999, for example, and from 2005 until early last year.”  This increase is much less than in year’s past (with several promo letters dealing back to last year’s deal prices) and is more about fixing the price gap between premiums and sub-premiums.    

 

WORD-OF-MOUTH VERSUS MASS MEDIA:  AN INTERESTING VIEW 

“But it is true that Heineken needs a killer ad campaign to at least get people talking about the brand again.” This is what I wrote last week regarding Heineken USA’s quarterly results.  I got one heated response from one word-of-mouth marketing expert, Ted Wright of Fizz .  He writes: 

“Harry, you knew I was going to jump off the top rope when you penned that line didn’t you. Ad campaigns sell beer? Really? We read how Heineken’s doing. How about Bud? Corona? Yes, every once in a while a broadcast campaign will give a brand a temporary bump (“Most interesting man in the world”) but add total the number of broadcast campaigns per year and divide that number by those that significantly raise volume over time and you’ll see that playing the Texas State Lottery makes more financial sense than broadcast beer marketing.

However, word of mouth marketing works like a charm every time and scales nationally. Just ask the folks behind Dogfish Head, PBR, Blue Moon or a variety of other brands.  Those brands that build on conversation between consumers and have authentic stories to share and grow year after year. BBD is constantly reporting on their impressive volume growth. Word of mouth marketing is where the American consumer is today. Those brands that take advantage of this fact will prosper.” 

Interesting take.  

 

MILLERCOORS MAKES EXEC CHANGES 

As reported last week, MillerCoors has hired ex-Diageo exec Alison Potts as vice president, revenue management and sales development-designate, effective September 1. She will initially report to Brad Schwartz, who will remain as vice president of revenue management and sales development through the end of 2009. After that date, she will report directly to Tom Long.   

Meanwhile, Brad will move to a job “implementing the critical MillerCoors Market Investment Model and 2011 pricing model design. These two projects require full-time focus that Brad is uniquely suited to deliver, given his strong leadership in these areas over the last five years,” writes Tom Long in a memo.  Brad’s work on freight and fuel and marketing funding earned “the trust and confidence of our system,” adds Tom.  Now he’ll turn his focus toward pricing.  “Brad will lead this 2010 and 2011 transformation project design full-time as he transitions day-to-day responsibility for revenue management to Alison.”

 

REGULATION WORKS, SAYS REPORT   

 

A white paper prepared by Public Action Management, PLC, a company that provides expertise in alcohol public policy, makes the case that U.S.-style regulation is crucial in preventing the problems that the UK is experiencing.  “Deregulation of alcohol has many dangerous and unintended consequences for society at large,” says the report, including “very high rates of youth intoxication; large increases in alcohol induced diseases including liver cirrhosis; and frequent public disorder and violence around pubs and nightclubs.”  The UK “has a cyclical history with alcohol problems….. Today’s epidemic in the U.K. follows the path of gradual deregulation to a point where society treats alcohol the same as any other product. All forms of alcohol–beer, wine and spirits–are sold almost everywhere and can be purchased 24 hours a day.”  

 

From 1980 to 2007, alcohol became at least 70% more affordable. “This was particularly true in grocery stores where four large supermarket chains gained 75% of the market and became locked in a price war driving alcohol prices ever lower.”  

 

The report says that the current regulatory structure (three-tier and state regulations) “prevents price wars, eliminates tainted alcohol and collects taxes. Drunk driving has declined, although too many people still die on American highways from alcohol-induced crashes. Enforcement has curbed illegal sales to underage buyers.  It is critical that Americans take the lesson from the United Kingdom with great seriousness. Unbridled and unrestrained free market forces, once unleashed, are very hard to control.”  

 

BEER BRIEFS: 

BRICK BREWING of Ontario says it is being taken to court by ABI, claiming its Red Baron Lime violates the trademarks and copyrights for Bud Light Lime.  ABI seeking an injunction and compensation from Brick from the Federal Court of Canada.   

TIM SCHOEN, 50, is leaving Anheuser-Busch to pursue other interests.  Tim served as vice president of global sports and entertainment marketing.   

TOYOTA SAID Monday it was developing anti-drunk driving equipment that would lock the ignition of a vehicle if high levels of alcohol are detected in the driver. The system features a hand-held breathalyser, equipped with a digital camera, that detects alcohol consumption and photographs the driver’s face for identification, and can send a message to fleet administrators.  The device is intended for fleet vehicles of government and companies. 

YOUR EDITOR will be speaking at the NBWA Convention this year in a talk titled “Behind the Headlines” on Thursday, September 24 from 7:30 to 9am.  Hope to see you there. 

JUST ONE month left to get the early-bird discount on the Beer Industry Summit, to be held February 28 to March 1, 2010 near Phoenix at the Wildhorse Resort.  Registrations are already way ahead of last year, so get your seat now.  More information here:  http://www.beernet.com/about_beersummit.php

Until tomorrow,  Harry


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