The New Era of BeerFebruary 1, 2009 By: Michael Harrelson Night Club and Bar Magazine
After years of flat sales and then some gains the past two years, reason exists to be truly bullish about beer again. Never mind the slower performance of many iconic domestic brands in comparison to the demand curve for wine and some spirits. And no matter either that some of the imports long heralded as the saving grace of the beverage segment are losing their price point advantage to a weakened dollar.
Instead, the craft beer and microbrew segment grows, helping generate the long-predicted comeback of beer. The Boulder, Colo.-based Brewers' Association, which tracks all data in the craft beer category, defines a craft brewer as one producing less than a million barrels a year. The association finds that the craft sub-category's share is 5.9 percent of the beer market by dollars and 3.8 percent by volume.
Guests today demand variety in a beer list, crave flavor and love to drink local or unique brews. In certain select venues around the country, high-end beer sales can account for as much as 50 percent of the total house revenue earned from beer pours, reports Eric Shepard, executive editor of the industry's closely monitored Beer Marketer's Insights (BMI) newsletter.
While it's probably premature to predict that the days of cheap beer and everyman tastes in suds are gone forever, the handwriting is on the wall. The established brewers know this, and many are adjusting their portfolios to include a broader range of brews. More distributors, too, are bowing to the inevitable in terms of the beers they offer to their retail accounts.
Throughout the United States, entrepreneurs who had watched beer's role as a prime driver of revenue behind the bar slow are now happily reconnoitering the beer landscape and discovering fresh new profit potential –– often in their own back yards.
999 Beers on the Wall
It seems like only yesterday that any novice bartender could name all of the key beer brands off the top of his or her head without omitting any of the pilsners, stouts and lagers favored by the overwhelming majority of the establishment's customers. At present, the gamut of brews is nowhere near as easy to recite, thanks to a true renaissance of domestic brewing that is transforming beer as dramatically as super-premium and luxury brands forever changed the spirits side of the beverage industry.
The iconic domestic and imported labels –– from Budweiser to Miller to Heineken to Corona –– are still in huge demand on-premise and account for the majority of beer sales by dollar and by volume in the United States. However, the modern vocabulary of brew now encompasses relatively new brands such as Mayflower, Ipswich, Flat Tire, Dogfish, Cisco, Allagash, Smuttynose, Goose Island and literally hundreds of others produced by the growing network of craft breweries that have sprung up around the country.
The good news for operators is that there is more opportunity than ever to attract a whole generation of young consumers with their entire beer-loving lives ahead of them. Conversely, there are numerous ways to trade up older, more established customers who are not as set in their ways as some might suppose when it comes to their beer.
Yet just as with any important new consumer trend, there is a quid pro quo for proprietors looking for higher beer revenue and profits. More and more, beverage managers accustomed to having the big beer brewers and their distributors do their legwork for them are finding themselves on their own in terms of the way they promote and market beer in their establishments.
The Young Bucks Stop Here
For the better part of its more than half century of operation, Manuel's Tavern in Atlanta catered to a blue-collar crowd whose tastes ran to Budweiser, Miller, Coors and other iconic American brews.
"Thirty years ago, we sold Pabst Blue Ribbon and Andecker, which was an amber-colored lager based on a recipe from a Munich (Germany) monastery," says Manuel's day manager Pat Glass. "It is a shame that they do not make it anymore." These days, however, the younger, more diverse patrons frequenting the 328-seat bar and restaurant expect more from their beer than did their parents and grandparents, Glass says. And Manuel's meets these greater expectations with an assortment of craft beers that quench their more adventuresome tastes as well as their sense of discovery.
"The biggest shift in our beer sales is with the younger crowd," he explains. "They like to sample beer and try new things all the time. People are going to hefeweizens, wheat beers and flavored beers. It is much more competitive now. The larger brewers are feeing the pinch. We are still selling a lot, but they are giving up share."
Craft and regional brews that now possess coveted space in the single cooler or one of the six tap lines at Manuel's include Magic Cat No. 9, an apricot-flavored beer brewed in Vermont; Stone IPA from San Diego; local favorites Sweetwater 420 and Red Brick Brown; as well as seasonal offerings from Anchor Seam and small-batch imports from Hollander.
In lieu of the table tents, coasters, bar swag and mass media advertising typically offered by many of the large domestic brewers, Glass says his new craft and regional suppliers provide financial support for local festivals; logoed glassware and other grassroots efforts also promote brand identity.
By previous standards, the beer-marketing footprint is smaller, but sales at Manual's Tavern haven't suffered as a result. Despite its long-standing policy of moderate pricing for beer, the house typically reaps 25 percent more revenue on its craft sales.
"Roughly all of our beers are $3 to 4 dollars for 12 ounces," Glass reports. "A bottle of Budweiser goes for $3, and most of our craft selections sell for $4. If the bottles are larger, we go up accordingly."
The wide swing of the beverage pendulum back to quality domestic beer production is duly noted in independent bar operations such as d.b.a., with locations in Manhattan, Brooklyn and New Orleans.
At d.b.a., Ray Deiter, one of three partners behind the 78-seat neighborhood tavern concept that launched in Manhattan in 1994, credits the better brews and the way d.b.a. has introduced them to New Yorkers with driving the concept's success in the rough and tumble beer market of the Big Apple.
"We have seen some dramatic changes in how our customers relate to beer since we first opened," Deiter says. "We were told that it was crazy to try to sell high-end craft beers in Manhattan — especially in the East Village, because no one was interested in good beer. People there were accustomed to cheap beer –– $1 Buds and PBRs."
Despite the warnings from other venue owners, Deiter and his partners persisted. "My thought was that people in their thirties needed a place to go that was not blasting music. I had just gotten back from England at the time, and I saw firsthand the popularity of the English cask ales. So, I decided to give it a shot."
Initially, Deiter offered early American craft beers such as Sierra Nevada Porter and Pale Ale, but he soon added 10 tap lines and dedicated them all to high-brow brews such as Paulaner Pilsner, Batemans XXXB Ale, Guinness Stout and local favorites such as Brooklyn East India Pale Ale.
"My strategy is, I don't focus on brand," he says. "Our beer selections are based on seasonal availability. I carry the brewmaster series from Brooklyn Brewery, Anchor Liberty Ale, Six Points from Brooklyn, Stone Brewery beers from San Diego and stouts from Pennsylvania."
Deiter says he works diligently to build proprietary relationships with craft brewers in his region and in Europe, but he adds that his efforts pay off in terms of being able to get specialty beers and rare seasonal offerings for his customers.
"I definitely have access that others do not have, and that makes my neighborhood bar different from every other beer tavern in Manhattan or Brooklyn."
The silver lining to d.b.a.'s success with craft beer is the synergy he has discovered between better beer consumers and aficionados of single malt Scotches and 100 percent agave tequilas.
"There were people who thought of us as a tequila bar or a single malt whiskey bar," says Deiter, who carries more than 75 single malt Scotches at the d.b.a. venues. "We became all things to all people. I considered it a good neighborhood bar that had to have one of the best beer selections around."
Even now, 15 years after opening d.b.a., Deiter insists that he has not changed his marketing mantra one iota when it comes to the beer or the bar brand that made believers out of skeptical, spirits-prone New Yorkers. He resists pressure from beer suppliers to come into his venue and promote their products.
"I don't want to be beholden to anybody. If you start playing that game, you end up alienating customers," Dieter says. "Selling beer is not about being pretentious. We have Happy Hour, and we have fun. When beer distributors ask me how to get their beer into my bars, I tell them to brew good beer and make me aware of it."