Take A Lesson From The Beer Business

by Paul Schlossberg
Posted On: 3/5/2018

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Paul Schlossberg
You must be wondering what the beer business has to do with our industry: Where is he going with this one? "Maybe you sell beer if you provide catering services. If you do provide catering, have you noticed the differences in beer brand preferences in recent years?

As you will see, there are some important lessons for us to take away from the dramatic changes in the beer industry in last 20 years. If you're a beer drinker, you've seen a broad range of new and different beers. And it's likely that many of you have tried, and possibly switched, to a craft beer or an imported beer.

Much of the changing dynamics in the beer business has been driven by younger people – millennials, Gen X, Gen Y and (soon) Gen Z. Guess what? Those younger people will soon be the dominant group of shoppers at the locations you serve. Said simply, many of them don't want the same beers that their fathers were drinking. It's likely to be the same for their brand choices across the product categories we are selling.

In future articles and postings, we will explore the differences in what younger people want from the brands they align with. It includes, but is not limited to: new and different brands; unique taste; clean ingredient panels; environmental responsibility; and much, much more.

The leading beer brands apparently missed this generational shift. How else to explain the volume and market share losses these brands experienced?  

In USA Today, on January 23rd, "Budweiser falls from the top three U.S. beer brands" reported that Budweiser beer brand is now #4 in the beer category according to data from IRI. In 2017, the brand's sales decreased by 4.6% versus 2016.

According to the Brewers Association, craft beer share of market was 12.3% in 2016, more than doubling from 5.7% in 2011.

Another USA Today article, on December 28, 2017, "Beers Americans no longer drink" reported: "For many of the beer industry's most iconic brands — such as Budweiser, Bud Light, and Miller High Life — the best days may be in the past."  

Think about your future shoppers:

According to Governance Studies at Brookings, "Millennials will comprise more than one of three adult Americans by 2020 and 75 percent of the workforce by 2025."  Their taste and brand preferences will, most likely, bring revolutionary change to our industry. What we sell and how we sell it must adapt to their needs (maybe it's "demands" and not "needs").

If we fail at meeting their expectations, we risk the same prospects that the leaders in beer business are facing now. We face daunting competition. It includes convenience stores, fast food restaurants, chain drug stores, supermarkets and more. Don't forget delivery – especially Amazon. With their acquisition of Whole Foods, you might be seeing Amazon making a concerted effort at two-hour delivery of fresh food.  

If someone described your business as "the best days may be in the past," how would you feel about it? What you do about it? Most important of all, how could you have prevented it? What we see here is classic mistakes made by the established (or legacy) brands in a category.

What is our industry to do next?

Our industry is at a critical point. We could lose out to competitors who are "not in the room." We win on convenience every time. What we offer is the closest shopping point for the people at our sites. The problem is that our newest competition is on a device. These shoppers have their computers, tablets and smartphones. It is easy for them to order snacks, beverages or meals from readily accessible apps.  

How do we become much more effective in competing for the daily purchases at our locations? Your business will be more complex to control as you add (and delete) items more frequently. Think about:

1.    Menu rotation: We must have more frequent introductions of products in and out of our menu plans in every category. That is not easy with the limited number of SKUs we offer. It is most important in food categories.

2.    New products: We need more new items in every category. Call it "product news" and focus on how to communicate that to the people at each location. Different communication techniques will be required across your accounts.

3.    Effective promotional strategies and tactics: As an industry, we must make major improvements in how we promote. This is typically a subject where we have limited (to no) experience. How will you deal with unexpected surges in promotional sales?

4.    Building long-term shopper loyalty: We must execute typical shopper loyalty programs. But, as you will discover, it's a lot more than that. We also need to find ways to capture the attention and interest of the shoppers we serve.

We will get in to more details about each of the four above action plans in the next few months. Your competitors are not other operators in our industry. Those other operators compete with you when there is an RFP for a location. Your competition is outside our industry.

The established beer brands missed the signals when the craft beer brands came on the scene. By the time they reacted, it was probably too late to overcome the downtrends in sales and market share.

That's the lesson. Don't miss the signals. Is your volume being cannibalized by delivery (whether it's Amazon or nearby restaurants)? Here is an easy way to figure it out. Three days each week, have lunch at locations you serve. Walk around. Introduce yourself.  Pay attention to what people are eating. If they are having things you are not selling: (A) you could add it to your menu; (B) you can add something similar to your menu.

Don't forget the lesson! Three days each week, have lunch at locations you serve.

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Paul Schlossberg is the president of DFW Consulting, working with clients to merchandise and market products in impulse-intense selling environments, such as vending, onsite foodservice and convenience stores. Based in the Austin, TX area, he can be reached at Paul@DFWConsulting.net or 972-877-2972 or www.DFWConsulting.net.