Microbrews are showing big muscle in the beer aisle. According to retailers, microbrews -- all-malt specialty beverages often manufactured in small batches by small local breweries -- are exhibiting phenomenal growth, with no end in sight. Even better, their hefty price rings and high margins are breathing new life into the beer category.
As an added bonus, they are attracting upscale consumers to the aisle without siphoning off many sales from the traditional, domestic, high-volume brews.
"We find that the stores that do pretty well on premium varietal wines also do well on microbrews. They do go hand in hand, and people are trading up if the occasion is appropriate," said Marty Bendle, liquor sales manager at Albertson's northern California division, Sacramento, Calif.
"The microbrew and specialty beers are growing in a big way," said Nick Wedberg, vice president of sales and marketing at Plumb's, Muskegon, Mich.
"Generally the profit is greater. There's been a lot of new varieties introduced by a lot of the companies within the last year, and there are going to be more to come," Wedberg said.
"We're adding new microbrews darn near every week," said Oscar Sicola, liquor and beer buyer-merchandiser at Fiesta Mart, Houston. "We're normally adding three to five every week, and sometimes even more. I think we are picking up new drinkers and we may be picking up some distilled spirits drinkers.
"Most of the micros are doing very well, like Samuel Adams. They are reintroducing Pete's Wicked Ale back in this market after a year or two hiatus. Cellis beers, from a Texas microbrewery, are doing real well, and Shiner is still blowing and going. "Anheuser-Busch's answer down here is Ziegenbock. I believe they came out with that to compete with Texas Shinerbock, which is the No. 1 microbrewery that we deal with in Texas," Sicola said.
"The microbrews are still growing very fast and they are selling very well," said Charlie Owens, director of general merchandise, health and beauty care and nonfood at Ball's Food Stores, Kansas City, Kan. "I see the growth continuing. They are an added dimension to the beer department that is attracting new consumers to the category." "An advantage of microbrews is the focus on quality and distinctiveness. Consumers look to these attributes," said Ruth Kinzey, a spokeswoman for Harris Teeter, Charlotte, N.C.
"As retailers, if we are to continue to reach new customers and keep them returning, we must search out and obtain these products. Distribution of microbrews can be challenging, but not unworkable," she said.
While the microbrews are still a small factor in the beer case compared to the Budweisers and Millers of the world, they are rapidly gaining market share.
Beer in general is gaining in importance as a key supermarket category, with microbrews driving much of that growth. Information Resources Inc., Chicago, which tracks beer as a total category, said for the 52 weeks ended Feb. 19, beer had supermarket sales of $5 billion, an increase of 5.3% from the year before.
According to Jim Neighbors, an administrator with the Institute for Brewing Studies, a Boulder, Colo.-based tracking organization, the microbrew, or craft brewing segment, is currently about 1.3% of the entire domestic beer market. In 1994 the segment had sales of more than 2.5 million barrels.
The institute reports there are 232 microbreweries and 18 regional specialty brewers in existence in the United States. Sixty-four new microbreweries began operations last year. The failure rate for the U.S. microbreweries is one in six.
"In the last four years, we've seen an average of 45% growth, both in terms of the amount of beer produced and the number of companies opening. If that rate of ascension continues, the market will double again next year and again the following year. In the next five years, 5% to 10% of the entire beer market could be controlled by the craft brewers," Neighbors explained.
"While the industry is stagnant, we've seen a tremendous shift in the types of beers that are being consumed, and I expect that shift to continue," he said.
Bob Jennings, beverage buyer and merchandising manager at Raley's, West Sacramento, Calif., said microbrews now encompass about 7% of total beer sales and are still growing. As a result, Raley's has turned to category management to monitor the category.
"There is not enough room in our whole section to keep adding, so we are constantly looking at the category and eliminating the slow sellers and adding the new microbrewers," Jennings explained.
At Raley's, the microbrews appear to be pulling from the imports.
"With the exception of Corona and Heineken, imports are one category that is losing in the beer segment. I don't believe that we have even added a new import beer during the last year. That is where the growth in the microbrews is coming from," Jennings said.
"I would expect the microbrews to continue to grow, at least through next year, and then it will probably level off. There is just an overabundance of microbrew beers now, and I think some of the smaller ones will fall off," he said.
Kinzey said Harris Teeter has greatly expanded its specialty beer section in all of its stores by taking space previously allotted to traditional beers.
"Microbrews affect category management in a unique way," she said. "Individually, there are only a few 'brands' that are listed statistically on national rankings. Even on a local basis, there are not many volume leaders. As a whole, the specialty beer category does provide a higher profit margin and collectively generates a sizable volume in many of our stores," she said.
Tom Roesner, buyer of beer, wine and liquor at Seaway Food Town, Maumee, Ohio, said his chain is still in the process of expanding its sections to incorporate more variety on microbrews and imports.
"We're taking a little bit of space away from our total beer category. We're re-emphasizing at store level to keep in stock, and I don't foresee any problems. I don't think we're going to jeopardize any sales from the premiums, midprice or price sectors," he said.
But the proliferation of the microbrews has begun to cause some problems, especially since they are produced by small companies.
"A big disadvantage is that the many of the smaller microbrewers really don't understand marketing programs. They don't understand price points, or post-offs," such as giving $2 off any item during a particular month, said Jennings of Raley's.
"These guys think that you can just put the beer on the shelf and it will sell itself. You have to give the customer a price break, you have to give the retailer a price break, and you have to promote your item. Very few items will just sell by themselves," he stressed.
"When you're dealing with microbrews, they are going to be a much lower priority in a major distributor's house. The fact that they are not really organized and are just getting their feet wet in the business makes it a little tough sometimes to line up pricing and promotions," said Bendle of Albertson's.
Sicola said Texas law requires that beers be purchased through a three-tier distributor system, so Fiesta Mart doesn't have problems dealing with manufacturers. However, the proliferation of microbrew brands has raised other merchandising concerns.
"We just went through and discontinued in imports and microbreweries about 30 items. But we may add in about 40 items, because every week there is a new item coming out. Beyond those we just discontinued, it is getting real tough to discontinue any others because all of them are moving."
Bendle of Albertson's noted, "There are probably three to five new entries each week. We're not taking them all on, but it is taking a lot more management than it used to. It has actually been following the California wine category, where there are so many entries all of the time. It is going to get to the point where when you bring one in you're going to have to take one out."
He said the weather also has been a factor in the popularity of microbrews.
"With the weather being as lousy as it has, more people are staying indoors. Therefore, it has been a pretty easy switch from a traditional outdoor-type beer to an indoor beer. The microbrews and imports fit that mold because they are in glass and you can't traditionally take glass outside as easily. Normally at this time of the year you sell a lot of the bulk can packages, and they are down big time," he said.
Retailers said they enjoy the higher rings and margins that microbrews offer. However, the retailers noted, they only sell well at stores in higher-income communities.
"Microbrewed beers are basically geared toward the mid- to high-income clientele. We really don't carry too much of a selection in our lower-income stores, but in our higher-class stores we carry a wider variety because they tend to sell," said Wedberg of Plumb's.
"The problem with microbrews, as with any upscale-type category, is that it doesn't appeal in every area. Our stores in the lower income and ethnic areas don't do as well in the category. We're individualizing our selection wherever we can," said Bendle.
Retailers said one reason for the growth of the microbrews is that people like to buy locally produced products.
"The microbrew revolution started as consumers began to demand something different. Locally produced brews are and will continue to be very hot commodities," said Kinzey of Harris Teeter.
"We've got Atlanta Brewing Co. microbrew. All of the accounts in town carry it, and it seems to be selling very well. Samuel Adams is another microbrewery that is selling very well. They are those items that appear to be very trendy," said Tim Henning, director of sales and marketing at Cub Foods Stores' Atlanta division, Lithia Springs, Ga.
Henning said the microbrews are reminiscent of Old-World Europe.
"In European cities, each pub has its own brand. It is kind of neat because you get a different taste everywhere you go," he said.
Several retailers said they have been mentioning microbrews more frequently in their advertising as a different form of bragging rights.
"Everybody in town carries the Budweiser, Miller, Coors, and you have to stay real competitive on those. But you can make a little bit of money on the microbrews and imports, because not every area in town is going to sell those types of beers, so they are not as competitive," said Sicola of Fiesta Mart.
"Advertising support is growing among the specialty beer producers. However, quality and distinctiveness still seem to be the main factors in the selection process," said Kinzey of Harris Teeter.
"Consumers buy from a well-merchandised section. Therefore, the best way to get customers to try specialty beers is to demonstrate a commitment to it. We also have a single-serve section to encourage customers to try the various microbrews," she added.
Some retailers are restricted on their advertising and have to find other ways to promote their microbrews.
"The laws in Ohio are such that you can't do much advertising. Therefore, we have really just increased the total section so that it looks like we are carrying a nice variety of imports and microbrews," said Seaway's Roesner.