BEER IMPORTS MAY BE DOWN, BUT THEY'RE NOT OUT

LUCIA MOSES

In the beer aisle, domestic still rules. Yet as imports' consumption grows, retailers are giving them more space and promotion to buoy an otherwise stagnant category.

Imported beer represented 11% of the market in 2003, or $12.3 billion, up from 4% in 1992, London-based Datamonitor reported. While its growth may be moderating -- volume advanced just 1.8% in 2003, according to Beverage Marketing Corp., New York -- it's still among the few expanding areas in beer. Datamonitor forecasted a 9% lift in imports through 2008 after a 41% leap from 1998.

Retailer strategies vary by market and format.

"The definite challenge is trying to cut into your power driver brands," said Martin Miller, category buyer for Niemann Foods, Quincy, Ill.

Niemann, which operates 30 stores, has shifted space to the profitable import segment as well as microbrews, more so in its stores serving college markets. The premium-priced imports and microbrews lead off the beer coolers, and the weekly ad always includes at least one such premium beer.

Others, such as R&M Foods, a 17-store chain based in Hattiesburg, Miss., have expanded the size of the beer aisle to accommodate imports rather than cut into domestics. "We're still doing very well with our domestic beers," said Darryl Martin, vice president of pricing and advertising.

Health and specialty retailers are less shy about giving weight to imports.

Earth Fare, a 10-store health chain based in Asheville, N.C., devotes about half of its beer cooler to imports, said Courtenay Tyler, wine and cheese specialist there. Budweiser and Miller are there for convenience, but "[neither brand is] a big seller for us," she pointed out.

At Caputo's Fresh Markets, Addison, Ill., a three-store operation, imports represent about 60% of the cooler -- a share that will grow once the store resets the category this month, stated Louie Adamo, beer and wine buyer.

Corona and Heineken are popular with Caputo's American-born shoppers. Yet here, the king of beers is the Polish Okocim, beloved by the large Polish clientele. The German Bitburger and Slovakian Golden Pheasant are big sellers, too, Adamo acknowledged.

The growing interest in imports lends itself to educational and promotional activities. To encourage people to sample import beers, R&M this year began a "Build Your Own Six-Pack" promotion at three of its stores. The promotion lets shoppers mix and match six imports. The result has been a tenfold increase in import beer sales, Martin observed. The chain also cross merchandises imports like Corona with snacks for pre-football game displays.

"Domestics are still our key, but we use imports to tie in with other items in the store," Martin said.

Earth Fare treats import beers with the same weight it gives wine. For example, it offers beer sampling along with wine tastings each Friday at its stores where allowed by law. Customers can read about beers in handouts and on descriptive signs above case displays.

Imports also are driving continued growth of light beer, which now outsells its full-calorie counterparts. Datamonitor predicted light beer will see a sales growth of 5.3% this year, vs. a 5.6% decline in regular beer. While low-carb beers, most notably Michelob Ultra, have made a splash, the research firm said this trend will fade as low-carb beers are seen as belonging to the light beer category.

It's not only premium-beer consumers who are switching to lower-calorie brews. Robert Pike is a beverage buyer for Saar's, a 10-store operation based in Oak Harbor, Wash., where low-end beer is the top seller. Pike reported "a definite surge in sales of the light beers." Saar's has thus shifted space from regular to light varieties in its cold and warm displays, as well as its freestanding display of 18- and 24-packs.

Despite these growth areas, overall consumption of beer has been declining. Brewers once saw the future in flavored alcoholic beverages, or malt-based alternatives to spirits. With their sweet taste and association with spirits brands, they enjoyed a rapid explosion of launches that doubled their size from $2.1 billion in 1999 to a peak of $5 billion in 2002. Then, FAB sales dropped by almost 12% in 2003.

So-called malternatives' popularity with mainstream drinkers became their downfall, noted John Band, analyst with Datamonitor.

"Drinks like Smirnoff Ice became associated with people of barely legal drinking age," Band said. "In some ways, they were the victim of their own success."

Malternatives suffered as young drinkers shifted to mixed drinks they perceived as trendier, said beverage analyst Darrell Jursa of Liquid Intelligence, Chicago. In a sense, FABs' problem reflects beer's image in general.

"People are drinking smarter and better," Jursa told SN. "Spirits and wines are ruling the day."