Big brewers miss out on growing demo

Canada's major brewers have been slow to follow the consumer trends that have been shaping product innovation in other categories, according to one brand innovation consultancy. As a result, they are missing opportunities outside their core demographic of 19- to 24-year-old males.
Jake McCall, partner at Second Sight Innovation, says consumer demand for added value, benefits, and delivery of an experience around products has led
to two trends - the blurring of lines between categories and a growth in
'premium' products. These trends are particularly evident in the food and beverage industries.

Canada’s major brewers have been slow to follow the consumer trends that have been shaping product innovation in other categories, according to one brand innovation consultancy. As a result, they are missing opportunities outside their core demographic of 19- to 24-year-old males.

Jake McCall, partner at Second Sight Innovation, says consumer demand for added value, benefits, and delivery of an experience around products has led

to two trends – the blurring of lines between categories and a growth in

‘premium’ products. These trends are particularly evident in the food and beverage industries.

Recently, for example, Kellogg has moved into meal replacement with the introduction of products such as the Vector nutrition bar. Bottled water and sports drinks are becoming ‘health’ drinks by adding vitamins, herbal and nutritional supplements. Plus, consumers are also willing to pay a premium for perceived value or a ‘hand-crafted’ touch, says McCall.

While the beer industry hasn’t kept up with this evolution, he adds, the distillers are the innovators in the beverage alcohol market, bringing in cooler and ready-to-drink products targeting beer’s traditional 19-to-24 core group with party atmosphere advertising. According to Toronto-based Spirits Canada, the spirits cooler business has grown at a rate of 45% to 50% annually in the past few years. That’s in contrast to the performance of domestic beer brands, whose sales by volume decreased by 0.6% in 2000, according to the Ottawa-based Brewers Association of Canada.

And while both Molson Breweries and Labatt entered the alco-pop market in 1998 with malt-based lemon-flavoured beverages – Tornado from Molson and Boomerang from Labatt – it has been with less marketing support than the distillers.

‘The average consumer used to be one demographic and one psychographic but today there are so many choices,’ explains McCall. ‘Consumers are saying, ‘I can get the basics anywhere, so can you please turn this into an experience?’ Brands aren’t just about function anymore, they’re about entertainment.’ That entertainment comes from the product itself and not the marketing buzz created by a brand, he says. For food and beverages, it can come from colour, texture, sound and taste.

McCall also views the beer industry as very niche because of the major brewers’ narrow focus in marketing primarily to 19- to 24-year-old males. Brewers are missing opportunities by not addressing different demographics and the product benefits of beer.

Rob Guenette, CEO of Toronto ad agency Flavour (previously called Wolf Group Advertising), says the beer category has been in long-term decline, not because of an outdated product but because of lifestyle changes. Guenette, a former beer-marketing exec with Molson Breweries of Canada, believes

that targeting 19- to 24-year-old males by encouraging brand adoption is smart.

‘The strategy is all about brand conversion, because brand choices in beer are made early in life,’ he says. ‘If you get a young drinker early, they tend to stay with you. It’s really about the heavy male drinker because that’s where the volume is and that’s probably where it will remain.’

Guenette adds that brewers have looked at product initiatives, and new demographics, such as women. ‘[But] if it doesn’t return profit to shareholders, there’s no way it’s going to make it into the marketplace. That’s just the reality.’

This ‘niche’ marketing approach by the big brewers is interesting, says McCall, because beer – which has been around about 6,000 years – was originally ‘the staff of life’ for those of all age groups and social standings. It provided much of the nutrition missing in diets.

Beer today is still made with grains and, contrary to popular belief, when it comes to calories, there really isn’t much difference between beer, wine or spirits. In fact, The Brewers Association of Canada is currently working on programs to communicate benefits and explode the myths around the perceptions of beer’s caloric content. A test ad campaign in Lethbridge, Alta., will roll out to other parts of Canada this year, but likely won’t be national.

‘We’re careful not to characterize beer as a health food [in ads], but we deal with some of the misconceptions,’ says Sandy Morrison, president of the Association. ‘We found that a lot of people as they cross over into their 30s begin to be more concerned about weight management … and the perception is a glass of white wine has less calories.’

He adds that the Association’s research data shows that while the 19-to-30 age group in the 1980s represented 20% of the market, today it represents 18%, and in five years that number is expected to slide to 15%.

For his part, Bob Chant, director of public affairs for Labatt Breweries Ontario, says his company is gradually changing its focus to target a wider demographic range. For instance, Chant says advertising for Carlsberg and Bud Light is slanted to slightly older males as well as females. Labatt is also addressing an older segment of the population, with non-traditional initiatives such as Beer TV, an 11-part series seen Sunday on Global. Labatt sponsored production of the programming, which looks at beer varieties and brewing techniques in Europe and Canada. Beer TV began airing last year and the series is now in its second season.

He says the company is investing in the premium and import part of the business – it lists brands like Stella Artois, Sol and Guinness in its portfolio – with programs that reinforce quality, as well as the importance of product knowledge and serving techniques. ‘People are actually starting to understand and treat beer in a way that a lot of people have treated wine over the past 20 years,’ he says. ‘Since the variety of beer styles has broadened, consumers have become sophisticated.’

Indeed, according to Statistics Canada, imported beers increased market share by 25% to capture 8.9% of the Canadian beer market in 1999-2000, while domestic beer market share slipped for the sixth straight year.

Chant adds, ‘[This side of the business] doesn’t have as much of a demographic skew to 19- to 24-year-old males as our large mainstream brands do.’

However, Jim Brickman, president and founder of Brick Brewing Co. of Waterloo, Ont., is surprised that the two big brewers, Molson and Labatt – which control 90% of Canada’s beer market, while craft and microbrewers hold only 4% and imports 6% – haven’t unveiled more innovative new products. ‘The big brewers have vast resources and do research on an ongoing basis that’s supposed to tell them what the next consumer trends are. They have it all available to them but it’s how they interpret it.

‘What they’re interpreting is let’s keep the taste profile ‘friendly’ with wide appeal and attach some image to it as the point of difference.’

But while young adults today may be happy with ‘friendly’ beers, when targeting the 35-plus market, a product experience must be offered, says Brickman.

‘There’s a captive audience just waiting for innovation. [Consumers are] willing to experiment and I think that’s the important thing.’