BOSTON -- The environment for category managers of beer is getting a little more crafty.
That's because the term "microbrew" has evolved into "craft beer."
"The term is outdated," Jim Koch, president of the Boston Beer Co. here, told SN. "A microbrewery is a brewery that makes less than 15,000 barrels a year. Today, that means someone who's just starting up or somebody who's never been successful."
Koch, one of the pioneers of micro and/or craft brewing, said supermarket operators should continue to pay close attention to the craft beer segment.
"This is an incredibly exciting time for the microbrewery business and our little corner of the beer industry. We're seeing phenomenal growth on a base that's no longer infinitesimal," he said.
According to Koch, craft beers now represent close to 2% of the beer volume in the United States.
"What craft beers are doing is very good for the industry. We're giving people a reason to pay more money for beer and to purchase higher-margin, higher-profit items within a category that has traditionally seen a lot of margin pressures, both at the brewer's level and at the retailer level," Koch stated.
In general, Koch said, supermarket operators need to fine-tune the way they look at their beer departments.
"Traditionally, supermarkets have lagged behind independents in building the high-margin end of their beer line. They've been dominated by this high-volume mentality of 'let's sell lots of boxes at no money and use beer as a traffic builder.' "
Retailers can improve their bottom line, he said, by creating some excitement around the craft segment.
"The rent microbrews return to a supermarket per foot of shelf space is very high," Koch said. "Supermarkets have been slow to catch on to the need to use category management to sell more high-end beer. That's not only craft beer, but imports as well. That's where there's a lot of untapped profit potential for supermarkets: managing the flow and the shelf sets to attract people to beers that generate the high margins for them," he added.
The Boston Beer Co. has just begun to get into category management with independent stores, Koch said. Independents, he said, probably will lead supermarkets into using category management to develop the high end of the beer set.
Though supermarkets are clearly expanding the shelf space devoted to high-end beers, Koch said, they're not managing it correctly. "Supermarkets need guidance. They're expanding it because they know it makes more money for them, but they're not managing that expanded footage as well as they're managing the rest of the beer category.
"Supermarkets are now beginning to say, 'I've got three doors out of my 10 for craft beers because they're 15% of my volume and 25% of my profits.' First, they just expanded them as new beers came in. They put them on the shelf in random order, some alphabetically, some by region; some just let the wholesalers screw up their sets twice a week. Now they realize that this is valuable real estate," he stated.
Koch expects the industry's big players will continue to offer their own versions of craft beers. The competition, he said, helps not only the craft segment, but the entire department.
Though supermarkets are generally lacking in beer category management, there are exceptions to the rule, Koch noted.
"Harris Teeter is a leader in effective and profitable category management in beer," he said. "It has made a conscious effort in a part of the country that has not been a microbrewery leader to develop the high end of the market. When you compare their shelf set to other people in North Carolina, South Carolina and Georgia, it's clear that Harris Teeter is making more money out of its beer departments."
Koch also cited Safeway, Lucky, Vons' Pavilions stores and most of the supermarkets in the Seattle and Portland, Ore., areas as leaders in beer category management.