Last blog, I looked at the #takecraftback movement, suggesting this stunt is a great short-term marketing tool to highlight the issue of independent Craft versus Corporate beer. But beer is about bringing people together, and not about war. I propose a different approach for the long-term.
There is a strong move Craft beer can make and stay totally positive. It will hurt Corporate beer a lot more than PR campaigns and righteous indignation: prestigious and refreshing American Craft beer.
Before you dismiss the idea completely, I’m not suggesting cloning Coors Light. If the idea of trying to make a refreshing, very sessionable beer that still has great flavor is too unthinkable, I hear you. This may be an idea better executed by larger craft breweries that have already established undisputable craft brewing credentials.
And I’m not advocating going this direction exclusively. On the contrary, there will always be a market for the kinds of Craft beer being made today, as well as innovative new beers with increasing complexity, alcohol content and flavor intensity. There’s good reason Craft beer innovation has pushed the boundaries farther and farther away from Corporate Beer. It was the right move for the early Craft days, and still makes good sense.
It’s Getting Too Crowded In Craft’s Corner
I have been using the positioning chart below in my marketing class the last few years. It shows the major segments of the US beer market since Craft entered in the 1980’s in terms of Price versus Flavor/ABV and Refreshment/Sessionability.
Domestic beer (Big Three Corporate Brands, Old Regional and Economy Brands) and Imports anchor the southwest quadrant of the graph. They have not been very active with liquid innovation on mainline brands since the introduction of light beers.
Craft anchors the northeast quadrant. Craft has innovated aggressively with ever more flavorful/higher ABV beer, expanding the beer category increasingly away from Corporate beer. But in doing so, Craft brewers are increasingly competing with each other as they push the envelope away from substantial beer volume. The upper right end of the Craft envelope is far too exotic for many solid Craft drinkers, let alone those still exploring Craft. Importantly, more than four out of five beers sold in the US are still massively in the lower southwest corner of the graph.
Not only is Craft’s corner getting more competitive, its growth rate is slowing, too. Brewer’s Association date shows small and mid-sized Craft brewers are still growing. But larger regional brewers’ total production (the bulk of craft volume) was down nearly 1.1 million barrels in 2016 over 2015.
It looks like Craft could be reaching a saturation point. If so, Craft would certainly continue to attract business away from current Corporate beer drinkers. And Craft is sure to gather in more than its fair share of young adult drinkers turning legal drinking age. But we might have reached a point where supply is finally catching up with demand. In Denver, my home market, I’d argue supply exceeds demand. It is hard to find markets where driving new distribution for Craft will reach customers who don’t already have ready access to Craft. The low hanging fruit may be already in the basket.
A Different Innovation Direction
Refreshing, sessionable beer has been the target of ridicule by most US Craft brewers. But it makes sense to innovate in this direction as well.
The biggest reason is the marketplace reality. There’s nearly six times as much combined American light lager sold in the US as combined Craft beer. Why, after all these years of Craft marketing, disproportionate retail attention and consumer share of mind is Corporate beer still so big?
Lemmings? Not really. Habitual behavior, massive brewer marketing and lower price point? Of course.
Refreshment? Rehydration? Bingo.
Many Craft purists are quick to suggest those who still drink Corporate beer are just not that sophisticated, not that discerning, and perhaps just not worthy. But that’s an injustice to these people.
Beer provides three main physiological benefits: flavor sensation, “mood amelioration” (buzz) and refreshment/rehydration. Corporate beer owns refreshment, a key need for many beer drinkers on many occasions. Lack of refreshment is a barrier to Corporate beer drinkers converting to Craft beer, or increasing Craft’s share of their drinking.
Five in the Freezer
For example, I was in Dallas a few years back doing focus groups with construction workers. They told us about clocking into their job site at 6:30 am, with temperatures are already above 90F in July/August. By the time they clock out around 3:30 pm, it might be above 100F with nearly 100% humidity. And the sun beats down on them all day.
They roll off the job site around 3:30 pm, and roll into the nearest convenience or liquor store to each get a 12 pack of light beer. When they get home, five cans go in the freezer (not fridge!) while they drink one right out of the box. The next beer comes out of the freezer, and another goes into the freezer. They continue this through most or all of the 12 pack. The “five in the freezer” method fulfilled their expectations for a perfect beer. It allows the beer to form ice crystals, but not freeze completely into slush. This beer occasion is about refreshment and rehydration after a long day of hard work in the sun. They describe this as the perfect beer for that occasion.
No way most Craft beers will be a better beer for these guys at this time. Maybe later that evening, or maybe just chilling on a weekend with a few good friends. But very little in today’s overall Craft portfolio meets the need for refreshment and rehydration like an icy American light lager. The beer needs for someone getting off a job site in blistering hot Dallas are a lot different from someone leaving a computer job in a cubicle in rainy Portland. It’s not about inferior tastes or character. It’s about meeting the needs of the drinker and the occasion.
Maybe this is too extreme of an example. But with innovation, craft beer can leverage greater refreshment and sessionability to compete effectively in this space. It’s already happening to a degree. Recent introductions of Pils, session ales, and other more sessionable styles are gaining traction. My current favorite beer for refreshment/rehydration occasions is Tivoli’s Bohemian Girl Pilsner. It has plenty of refreshment, and yet lots more flavor than Corporate beers. And it’s very legit.
Here is the same positioning chart with the target space for refreshing, sessionable Craft beers added. Instead of only heading northeast on the chart exclusively, I suggest Craft brewers head west as well.
Clearly price is going to be a consideration. It’s going to be hard to replace a lot of Corporate beer at Craft price points. There are over 170 million barrels on the table in the southwest corner of the chart. These thirsty people are not going to pay $15/six pack for sure. But the opportunity is available for Craft beer to slide in above the Big Three and still price at a premium. Imports occupy most of this space today, and they’re commanding a premium. While Imports will always evoke their own mystique and interest, Craft brewers should be successful offering refreshing, prestigious American beer to the American drinker. The size of the opportunity would seem to be at least as much volume as current craft beer combined.
Again, it’s not about cloning current Corporate light lagers. It’s about innovating in the refreshment and rehydration space.
I have respect for brewers not wanting to go after this volume if it’s not in their artistic DNA. But the opportunity to reach and delight more consumers who would enjoy a well-crafted and refreshing beer is out there. The volume will come largely at the expense of Corporate beer, not fellow Craft brewers.
And it won’t be necessary to buy ABInBev any longer.
Now off to have a Tivoli Bohemian Girl Pilsner after toiling at my computer all day. All this typing is making me work up a sweat.
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