As the category consolidates, it also fragments with craft brewers
It was the year of the much-anticipated corporate marriage between AB InBev and SAB Miller, creating the world’s fifth-largest consumer products company after Nestlé, P&G, Pepsi and Unilever, and ahead of Coca-Cola. The blended family owns seven of the BrandZ™ Beer Top 10 brands, and all but one of them rose in value, as the Top 10 rose 5 percent in total value, following a 3 percent decline a year ago.
The combined company matched complementary geographic and business strengths. AB InBev brought market dominance in Brazil and financial and production expertise. SAB added dominance in Colombia and, based in South Africa, provided strength on a continent with a fast-growing beer market, as well as its marketing prowess for linking brands to drinking occasions.
AB InBev, as the new entity is called, faces the daunting task of rationalizing and maximally leveraging a portfolio of over 500 brands, with global, regional, or local reach. These include its global premium group—Budweiser, Stella Artois, and Corona. Many country markets, including China, are moving to premium. The other AB InBev brands in the BrandZ™ Top 10 are Bud Light, Skol, Brahma, and Aguila.
Budweiser remained No. 1 in the ranking, based on its wide distribution in the US, its global presence, and promotion that generated volume gains in the UK, where an introduction of Bud Light is planned. As the official beer of the FIFA World Cup, Budweiser faces a major global sponsorship opportunity with the 2018 Moscow games.
Four of the BrandZ™ Beer Top 10 are AB InBev Latin American brands: Skol and Brahma are Brazilian, Corona is Mexican, and Aguila is from Colombia. Economic slowdown impacted financial results from some Latin American markets. But the concentration prompted other competitive acquisition activity. Heineken announced plans to purchase the Brazilian holdings of Japan’s Kirin beer. Heineken, along with Guinness and Coors Light, are BrandZ™ Beer Top 10 brands not owned by AB InBev. SAB Miller sold its stake in MillerCoors in the merger.
Majors acquire craft brands
As the industry consolidated, it also fragmented with the growth of craft brands. While craft beer was still a relatively small part of the market, it continued to grow, especially in the US, but also beyond, shaping the taste expectations of consumers, especially young people. Influenced by the tastes preferences of America’s multicultural population and the nation’s young people, US beers evolved in opposite directions, becoming both stronger, and more refreshing and sweeter.
This move to taste extremes, sometimes called the “vodkafication” of beer, challenged brands to keep up with the pace of change. The extensive range, referred to as the “wineification” of beer, increased selection, but weakened brand as a determinant of choice. Consumers developed repertoires of brands depending on the occasion.
To compete with craft beers, Heineken launched a brand called H41, which is made with a yeast from Patagonia. Heineken purchased a major stake in Lagunitas, a US craft beer producer, several years ago. Carlsberg also reinforced its position in craft by expanding its distribution of Brooklyn Brewery beers to the UK. It already distributes in some of continental Europe.
AB InBev planned to open a chain of pubs worldwide named Goose Island, after the renowned Chicago craft beer brewery and pub it acquired five years ago. Along with Las Vegas and Philadelphia, other cities named in the expansion include Seoul, Shanghai, Toronto, and London. And to satisfy young drinkers who desire the social experience of beer drinking, but not the effect of alcohol, Budweiser test marketed an alcohol-free beer called Prohibition in Canada.
With increasing competition from craft, and in inclination of consumers to select from a repertoire of brands, brands invested to differentiate in both on-trade and off-trade, attempting to create some clear benefit around the brand, such as taste or thirst-quenching.
Communication builds brands
Major brands have worked on-trade to create a premium impression, with glassware, for example, but also at retail with packaging innovations. In certain markets, Corona, a beer associated with fun, was merchandised with a free ice bucket. The brand launched a new campaign called “This is Living,” which associates the brand with experiencing life fully outdoors.
Stella Artois, which has ritualized the drinking experience with its chalice, also entered partnerships such as Wimbledon tennis to reinforce its premium positioning. It added an element of corporate social responsibility by advocating for access to clean water. In partnership with actor Matt Damon, Stella Artois donated money to the NGO Water.org for each chalice purchased. The campaign, called “Buy a lady a drink,” references the fact that, in developing regions of the world, women and young girls typically have the chore of collecting water, which often is contaminated.
In initiatives that help with global marketing consistency and exposure, Heineken renewed its sponsorship of Championship League soccer and entered a partnership with Formula One. With H41, the brewer told a story around ingredients. In contrast, Budweiser focused on heritage, particularly in its Super Bowl ad, which celebrated the emigration of founder Adolf Busch from Germany to America.
Skol, which ranks No. 1 in the BrandZ™ Top 50 Most Valuable Latin American Brands, sponsored concerts and emphasized enjoyment. Brahma connected the brand with carnival, soccer, and sex appeal. Coors Light, associated with the Rocky Mountains, launched a campaign called “Climb On.” Aimed at both men and women, the ads encourage people to climb their personal mountains and celebrate reaching the peak with a Coors Light.
Brands also added purpose to their brands with campaigns devoted to responsible drinking. Actor Helen Mirren delivered a memorable rebuke to excess in a Budweiser Super Bowl ad. Heineken launched a campaign in which millennial women sing about the qualities they look for in the men they prefer. Sobriety was high on their list.
Brand-building Action Points
1. Command leadership
Rather than reacting to craft, set the pace, improving taste and the on-trade and off-trade experience.
2. Be consistent
It is fine to have several marketing initiatives at the same time, as is often the case, but not coordinating them leads to confusion.
3. Reach millennials, but not only millennials
Brands know best how to reach young to middle-aged male drinkers, but reaching those drinkers alone leaves a lot of opportunity on the table. Potential consumers also include older drinkers who have more time and money, and curiosity about new experiences.
4. Beware of potential disruptors
These include alcoholic sodas and, in the US, even legalized marijuana.
5. Grow the category
Success will depend not only on the appeal of individual brands but also on the health of the category. Develop innovations and strategies to grow the market.