BREW FORCE 1997-01-27 (1)

RICHARD TURCSIK

Microbrews are drawing shoppers back into the long-dormant beer department and driving new growth for category sales.

The specialty beer segment -- encompassing microbrews, imports and specialty craft beers -- continues its climb, bringing luster to this previously flat category, according to retailers and industry experts.

More microbrews are on the market than ever before, and retailers are adjusting their beer sets to fit as many of them in as possible.

"We have given microbrew beers added space," said Mike Shultz, senior vice president at Hughes Family Markets, Irwindale, Calif. "Depending on the store, we may cut back on chilled wines available in the dry set. In some cases, we have set these specialty beers on our dry tables, with the best sellers in the cold box."

"We have seen no decline in the microbrews whatsoever. They are still going strong," said Tom Roesner, buyer of beer/wine/liquor for Maumee, Ohio-based Seaway Food Town, which has expanded the microbrew departments in two of its recently remodeled stores to 16 feet.

Roesner said the microbrews are even helping sales of the premium products like Budweiser and Miller.

"Premium sales in the category are up. If microbrews are taking sales from any segment of beer, it would be the midpriced and price-driven products," he said.

"We do very well with the microbrew beers," said Suren Avedisian, director of operations for Omni Foods, Gilford, N.H.

Omni's sales are also augmented by the store's proximity to Boston College and the popularity of football in the region.

Over the past year, Omni has doubled its microbrew beer section, which now fills an entire aisle 24 feet long. Having run out of room, Avedisian said he would need to eliminate cases of mainstream beers to expand his microbrew offerings any further. Currently, mainstream products are merchandised along the bottom shelf.

Ruth Kinzey, corporate communications manager at Harris Teeter, Charlotte, N.C., said microbrews, craft beers and imports are performing well at her chain, and as a result, Harris Teeter has increased the amount of space allocated to those products on a store-by-store basis.

Jennifer F. Solomon, a securities analyst with Salomon Bros., New York, confirmed retailers' experience, saying, "The microbrews have brought a lot of people back to beer. There is no doubt microbrews educated the entire industry about the breadth of the beer drinker."

Gary A. Hemphill, vice president of information services for Beverage Marketing Corp., a New York-based beverage-industry sales tracking and consulting firm, said specialty beers and microbrews are helping to turn the beer industry around.

"Beer follows the trend we are seeing in other alcohol categories, including cocktails," he noted. "While people are tending toward moderation, when they do opt to drink they are choosing higher-quality products."

Beer is indeed making a comeback, especially the higher-end products. Hemphill figures that in 1996, the beer industry grew 1% after several years of decline.

According to Information Resources Inc., Chicago, for the 52-week period ended Oct. 4, 1996, supermarket beer sales reached $5.3 billion, a 7% increase over the previous year. On a case basis, 389.9 million cases were sold in supermarkets, a 0.1% decrease.

Since microbrews generally carry much higher price tags than premium beers, retailers said, microbrews are responsible for much of the growth in the category.

John Banocy, direct-store-delivery buyer at Shop n' Save Supermarkets, Kirkwood, Mo., said he makes 15% margins on the microbrews.

"We make more money on microbrews than we do on the regular beers," he said.

Still, the proliferation of microbrews raises a major problem for retailers -- deciding which brands to stock.

Kinzey said Harris Teeter considers the taste and packaging of the product when selecting which microbrews to carry.

Shultz of Hughes Family Markets said the uniqueness of a product is a consideration. For instance, ales and lagers from any manufacturer will sell.

"You need to be careful with flavored and specialty items within a brand, such as Honey Wheat, Raspberry, and Strawberry Blond," he cautioned. "You can end up with duplication. We keep track of the latest popular flavors and make sure we have at least one."

Another problem facing the microbrews is that consumers are often reluctant to pay $7 or $8 for a six-pack of a product they have never tasted. Several supermarkets -- including Quincy, Mass.-based Stop & Shop Cos. and Seaway Food Town -- have developed "mix and match" sections that allow consumers to try six-packs of several different microbrew and specialty items.

Stop & Shop markets the mix and match products at $6.99 a six-pack, while Seaway, because of Ohio's state pricing laws, charges between 99 cents and $1.69 per bottle, depending on the item.

"In our remodeled stores we have added a 4-foot warm section. The customers can mix and match to try one, two, three, six or however many they want of different flavors and varieties. It seems to be doing really well," Roesner said.

"We have our own generic six-pack container that has no UPC code on it, so the cashier is forced to scan each individual bottle for the mix and match," he said. Stop & Shop declined to comment on its program.

Many retailers seek out beers produced by local microbrewers and brew pubs to add uniqueness to their aisles. For example, in addition to national blockbuster Samuel Adams, Omni also stocks Concord Pale Ale and Boston Lightship Lager.

Shop n' Save's Banocy said specialty items from Anheuser-Busch are selling well in St. Louis.

In greater Los Angeles, locally produced microbrews don't sell as well as they do in other parts of California, Shultz of Hughes said.

"All stores cannot and should not carry all the items we carry as a chain. They just won't sell in some areas. Regional advertising does a good job at many locations and it pays to do this," he said.

In its weekly ads, Harris Teeter advertises well-known specialty beer products, as well as popular domestic brands.

"Within the store, we are able to customize the promotion of new specialty beers or those microbrews produced by a local supplier," stated Kinzey.

Among the retailers interviewed, Banocy of Shop n' Save was the only one to see some softening in the microbrew segment, especially among the smaller players.

He attributed this, in part, to poor merchandising on the part of most smaller brewers.