RETRO ACTIVE

Amanda Chater

Much of the fizz in the beer market is coming from an unexpected area: retro beers.

While high-end foods and beverages are the fastest-growing part of food sales, inexpensive, old-fashioned beers such as Pabst Blue Ribbon, Rheingold, Utica Club and Old Milwaukee are helping drive the beer market.

"This is beer the way it used to be made. It's authentic," said Long Island, N.Y.-based beverage consultant Greg Prince. "People think everything was more real in the old days -- everything was better."

Expensive crafted, microbrewed and imported beers are driving beer sales at the high end, while young, new drinkers are behind retro beer's popularity. Retailers and consultants said retro beers are embraced by an edgy, artistic crowd that eschews mainstream products that are heavily advertised on billboards and in magazines.

"They're so uncool, they're cool," said Jeff Porter, bottle shop and beverage category manager at Andronico's, a 10-store chain in Albany, Calif., of retro beer's appeal. "The philosophy is, 'I'm drinking something cheap,' and people are proud of that."

Al Prete, store director at Caputo's Fresh Markets in Addison, Ill., said retro beers are popular with young adults because they're relatively unfamiliar with them and haven't heard anything negative about them. Their lower alcohol levels and prices also make them attractive to these consumers, he said.

Beer's ability to be promoted with many foods makes it easy to merchandise. Retro beers' appeal is based on being under the radar, though. Should retailers take a low-key approach so they don't turn off fans?

Consumers create a sense of identity with retro beers, and if they are overmarketed they lose that identity and switch to something else, Porter said.

Retro beers' manufacturers haven't put any marketing behind them, though, so they don't risk becoming mass-market, he said. "It's OK if consumers just see the beers merchandised in one or two stores, or just in one chain," he said.

Still, Porter is careful not to overmerchandise retro beers. Andronico's features changing displays of beer on an endcap. Porter said he's thinking of putting up a comprehensive display of retro beers next July Fourth.

He also features 3-foot stacks of beer (mostly retro and microbrews) in the beer aisle, choosing beers according to their sale price and what's popular in a given store. He plans to put up signs that tell the story behind the beers to build affinity with customers. He also plans to include food pairings.

Porter doesn't shy away from cross merchandising retro beers with snacks like pretzels and chips. They also sell well near the barbecue pit in the meat department. "Beer is so diverse, it goes with everything," he said. Beer is usually cross merchandised outside its department, but there are always cold versions in beer-aisle coolers.

Dahl's Food Markets, an 11-unit chain based in Des Moines, Iowa, downplays retro beers so as to retain their edgy appeal. Kenny Kane, a store manager, displays them on a wing of the big, better-known brands, and if there are 100 cases of Budweiser or other domestic beers displayed, he'll have a stack of 20 or so cases of retro beer. "It maximizes the display and makes sure you're attracting drinkers from both categories," he said.

Retro beers typically aren't included in Dahl's weekly beer tastings; those feature imports for the most part. Dahl's also promotes beer in its circular, but out of 12 beer ads, retro beer has probably only been featured twice.

Paul Gatza, director of the Brewer's Association in Boulder, Colo., said supermarkets would benefit from replacing some of the trendier beers, especially malternatives, with retro beers, which sell in greater volume. He also recommended cross merchandising them, especially in advance of football season.

"The companies have attractive point-of-sale information, and supermarkets should use that on endcaps," he said. "The hard part is getting the younger demographic into the store, but retro beers have a pretty good opportunity once they're in there."

Retailers also fuel interest in retro beers by maintaining low prices, which is another reason for their popularity.

At Jungle Jim's International Market in Fairfield, Ohio, wine and beer director David Schmerr buys beer when it's on sale so he can keep prices low. Pabst has come back into favor, and at $2.99 for a six-pack, it costs far less than the $6.99 to $9.99 for six-packs of microbrews and $10.99 to $12 for six-packs of imports. "Milwaukee's Best has also come back big time, and a lot of it is due to pricing," Schmerr said.

Overall, beer has fallen out of fashion as spirits and wine have gained share, but the category remains an important one for retailers.

For the year ending Aug. 7, beer sales in supermarkets, drug stores and mass merchandisers (excluding Wal-Mart Stores) totaled $8.6 billion, more than double that of wine, which had sales of $4 billion, and spirits, $2.8 billion. Wine and spirits grew faster, though, increasing sales 9.3% and 5.9%, respectively, while beer grew by just 0.7%, according to Information Resources Inc., Chicago.

Retro is one of a couple bright spots in the otherwise lackluster beer category, but it's unclear how long its popularity will last.

Gatza said the short-term future looks good, thanks to retro's anti-establishment image and high gas prices. "There's a sense that people don't want to be told what to drink, so these beers are appealing from an anti-corporation context," he said. "The [retro] brands could do well as gas prices continue to increase. I expect we'll see more of them rather than fewer."

Harry Schuhmacher, editor of Beer Business Daily in San Antonio, expected retro beers to stick around for at least a couple more years. He doubted they would have the staying power of craft beers, though. Drinkers of the latter want to drink local, American beer that has some character, he said.

Beer Market

Budget beers represent the third-largest beer category, behind premium and import

46.2% premium

18.9% import

17.1% sub-premium

6.6% super premium

4.6% micro/craft

4.1% malternative

1.2% non-alcoholic

0.8% malt liquor

0.2% cider

*Year ended July 10

Source: The Brewer's Association

The Pabst Comeback

Pabst Blue Ribbon has been the biggest success story in the retro beer category in the past few years, but it didn't happen without a careful marketing approach.

Liquid Intelligence, a Chicago-based beverage consulting firm, helped bring Pabst back from obscurity.

"To bring back a brand, you have to communicate with the audience that matters most," said Darrell Jursa, managing partner at Liquid Intelligence. "Most brewers take a mass approach and don't have a consistent story, and peoples' perception of their brand keeps changing." Domestic beers often try to be everything to everybody, and that's been their downfall, he said.

The first step was to find out who was drinking Pabst. Jursa found they were people who were a little off the radar, like artists, poets, and people into alternative sports. "They look at the world in a very different way."

Pabst's fans also were found to be young. "A lot of younger people were starting to drink Pabst because it wasn't Budweiser and it didn't have a lot of marketing," he said. "They embraced it because it still held true to today; it had authenticity."

Pabst is the best-selling retro beer at Andronico's, a 10-store chain in Albany, Calif., said Jeff Porter, bottle shop and beverage category manager. In stores near colleges, cans sell best, he said, at $4.99 for a six-pack or $8.99 for a 12-pack. "It's the cool, cheap, hip beer."

It's a similar story at Caputo's Fresh Markets in Addison, Ill. Al Prete, store director, said domestic beers are the best sellers in Caputo's, and of the retro beers, Pabst sells best, at a price of $2.99 for a six-pack of cans.

Liquid Intelligence targeted that audience and promoted Pabst with little fanfare. In Pittsburgh, for example, the company gave away low-rider bikes after discovering they were attractive to many Pabst drinkers. "We would never put up banners or hire movie stars," Jursa said. -- Amanda Chater

Suds Sales

Budget beers have picked up, although sales have slowed in recent months

Case Volume*; Case Volume Change vs. Year Ago; Case Volume % Change vs. Year Ago

Imports: 18.6 million; 1.1 million; 6.4%

Domestic Above Premium: 11.8 million; -1.1 million; -8.3%

Premium: 66.1 million; 1.7 million; 2.6%

Near Premium: 15.4 million; 89,666; 0.6%

Budget: 17.4 million; -80,882; -0.5%

Craft Brands: 4.7 million; 383,459; 8.8%

*In U.S. food stores with $2 million and over in sales (excluding supercenters), 13 weeks ending Aug. 20

Source: ACNielsen Scantrack