Beverage Insights from the Inaugural USBevX Conference

By Allison Levine, Foodable Contributor

Times have changed for the beverage industry. The growth and proliferation of wine brands, craft beers, and spirits offer consumers more of a selection than ever before. Whereas in the past a consumer could be tagged as a “wine person” versus a “beer person,” today’s customers have a repertoire. The wine drinker now enjoys a cider by the pool and a cocktail before dinner. The beer drinker may enjoy a glass of wine with dinner and a glass of scotch afterwards. Wine is being enjoyed at Super Bowl parties and other sporting events that were traditionally seen as beer venues. And now, craft beer and cocktails are being paired with food. 

Everything has been mixed and remixed, and what we drink has as much to do with our mood as it does the occasion. This is the new normal. It is a complex market, one of constant change, and for those of us working in the industry, we are trying to understand not only what the “new normal” looks like, but also how to work within it. This was the topic at hand at the first annual USBevX Conference in Washington, D.C. in February.

Wineries and beverage brands come to the U.S. looking for importers, distribution, placements, and press. But there is so much more to this — it’s not enough to just market your products. It’s time to stop doing things the way they’ve been done before and to start thinking out of the box — it’s time to be creative. We live in a world where there is so much choice and so much competition. 

A Look at the Numbers

At the USBevX, Jon Collins, Nielsen CGA Specialist On-Premise, offered a number of statics

  • There are 12,309 fewer neighborhood bars today than a year ago
    • We have lost 1 in 6 bars in the last 10 years
    • The same has happened with British pubs and French brasseries
  • There is a 40 percent increase in U.S. restaurants in the last decade, not counting fast food chains
    • 85 percent of these restaurants are independently owned
  • 57 is the average number of products (distinct brands) on the back bar
  • 85 percent of customers will happily take the guidance from the bar/waitstaff 
  • 11 is the average number of flavored vodkas on the back bar
    • The number of citrus vodkas on the back bar are equal to the total number of gins
    • The volume of flavored vodkas is down, but the number of brands is up 6 percent
    • Flavors are an over-served category and consumers are beginning to get flavor fatigue
  • There is only a 0.6 percentage year-over-year growth of craft beer and yet it seems like it is everywhere. However, craft beer growth is plateauing and losing volume to local brands. This slowness of growth of craft is coming from larger national brands. Small brands combined represent less than 15 percent of the category but have grown 20 percent. There’s just not a lot of room for expressions.
  • Rum and tequila contribute 75 percent to overall spirits value growth in the past year
  • 82 percent of customers will try a wine while out at a restaurant and then look for it at the grocery store
  • 35 percent of wine drinkers also purchase craft beer, up from 26 percent in 2012
  • 40 percent of millennials say they drink beer, wine, and spirits. Only 4 percent say they drink only wine.
  • 10,292: number of new wine, beer or spirits items tracked by Nielsen over the past two years
    • There are many new products in the high-end category 
    • In wine, there is a growth in higher-end red blends
    • In beer, there is growth in craft beer
    • In spirits, the majority of new brands are whiskey brands
  • $10.7 billion gained from high-end alcoholic beverages over the last 4 years shows that people are trading up
    • Mainstream brands are still important though, representing more than half the market share
  • 50 percent of high-end spirit drinkers are also purchasing craft beer, up from 40 percent
  • 550 percent dollar growth rate of grapefruit beer and grapefruit spirits are up 62 percent as we starting to see similar flavor trends across platforms
Instagram, @brewdogofficial

Instagram, @brewdogofficial

Based on the statistics, the question is: How can a brand stand out and make a difference? This is where the idea of challenger brands come in. As per Mark Barden of EatBigFish, challenger brands are ones that have “big ambitions that significantly exceed their resources and they are prepared to accept the implications of that gap.” Brands we are familiar with today that have challenged the normal are companies like AirBnB, Method Products, and Warby Parker. These are brands on a mission to redefine a category. Says Barden, there are five things challenger brands need to do:

  1. As a brand, you need to have fresh insight. Embrace intelligent naivety and learn from those with experience. It is okay to borrow ideas from over there and apply them to over here. Flip convention and see what you find. 
  2. It is important to find “fame” by creating a dramatic thought leadership. An example is the soap company Method, which questioned why there was no stylish dish soap.
  3. Conviction is a key belief. In the sea of change with which we live, one must be clear with what you stand for. The values of a brand are of utmost importance. It is more than what we buy, but what we are buying into. For example, the outdoor company REI followed their ideas and closed on Black Friday, encouraging people to go outside. Not only were they following their core ideal, they also garnered an immense amount of positive press coverage which boosted the brand.
  4. Brands must think about creativity and invention. We need to take a “can/if” attitude as opposed to saying, “we can’t, because we don’t have x.”
  5. Challenger brands may not have the funds for big campaigns, but they find more resources and create abundance with what they have. An example is BrewDog, a brewery that created images with bottles stuffed in taxidermy animals. These ads got people talking about craft beer and drove free publicity. BrewDog started its brewery with a crowdfunding model and now has a show on Esquire TV.

Overall, a few key points were observed. The first is about choice. Choice is a good thing, but so many choices doesn’t necessarily make things better. When there is so much choice available, how do people make decisions? Perhaps they default back to the mega-brand they are familiar with or they turn to the person behind the bar or standing at their table. This leads to the second observation: Staff education is of key importance. Not just the buyer, but their team can be an army of advocates for a brand. Unfortunately, there is a lack of knowledge among many staff and this means that brands need to get into restaurants, bars, and stores to educate. Lastly, the concept of local is very important to drinkers, and this will continue to grow. For example, three of the top 10 craft brands in the Washington, D.C. area are local products. This idea of local connects the brand to the drinker and can impact purchase decisions. Authenticity was another hot topic, as customers are looking to connect with brands, their stories, and what they stand for.