Less Thrilling

By Margaret Webb Pressler
Washington Post Staff Writer
Sunday, October 9, 2005

When a huge consumer products company starts slipping in sales or market share, even just a little bit, it can be a sign of a much bigger problem. And that explains why beer executives are on the offensive these days.

Though beer is still the most-quaffed alcoholic beverage in the country by far, it is slowly losing its grip around the marketplace edges: among new drinkers, among aging baby boomers and among other Americans whose tastes are gradually becoming more sophisticated. More and more, when people kick back with friends and enjoy a drink, they're not choosing beer.

From 1998 through last year, beer's share of all alcohol servings slipped from 59.6 percent to 58.1 percent, according to Adams Beverage Group, a market research company. By contrast, consumption of spirits and wine has been inching up for several years, reaching 28.5 percent and 13.4 percent respectively last year.

The beer industry is madly trying to figure out how to reverse this trend, which industry insiders insist is cyclical but which some analysts warn could represent a more long-term change in who drinks what and when.

"Demographic trends are working against the brewers," said Bonnie Herzog, a beverage industry analyst for Citigroup.

Younger consumers raised on an ever-growing array of soda flavors and juice drinks, Herzog and others say, are finding the transition into alcohol a little easier with mixed drinks, which can be sweeter than beer and personalized to one's own taste. Baby boomers, meanwhile, are gradually transitioning from beer to wine and cocktails. And across the board, beer is suffering from a bit of an image problem.

The core consumer of a cold brew is widely thought to be either the football-loving couch potato or anyone with a household income below $45,000 a year. But in today's Internet-savvy, consumer-driven culture, those are not exactly the beacons of a populace that increasingly buys well-designed home products at Target and flips longingly through the Pottery Barn catalogue.

"The industry was very complacent in the last couple of years," said Robert C. Lachky, executive vice president of global industry development for Anheuser-Busch Inc. "Frankly, the back door was left open."

But brewers say they get it now. They say they're on it, even though the industry continued to dip through the first half of this year, according to researchers who follow beer sales. Indeed, there is a lot going on: Companies are investing heavily in new product development, new packaging and new marketing -- all aimed at getting people to turn to beer for more "drinking occasions."

At the core, what many industry executives say they really need to do right now is make beer cool again.

Changing Habits

This problem crept up on the beer industry when it wasn't looking. Beer had been so strong for so many years, while wine and spirits wallowed in the doldrums, that it was easy for companies to forget that beer drinkers were not necessarily forever.

"If you told me 15 or 20 years ago that spirits would be growing in the 2 to 3 percent range and beer would be declining, I would've laughed," said John Michalik, North American director for the London-based beverage consulting firm Canadean Ltd.

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