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JERSEY CITY, N.J. -- Flavored malt beverages saw the largest sales increase in the malt beverages category in 2010, which begs the question, why? Maybe it's the increase of flavors, or a push to market drinks traditionally aimed at women to a broader audience. Or maybe it is simply that flavored malt beverages have started bouncing back from the hit they experienced during the economic downturn.
"Every industry was affected by the economy and malt beverages were no different," said Jennifer McCauley, brand manager with Seagram's Escapes, one of the leading makers of flavored malt beverages. "We saw our numbers go down for a few years, but in 2010, we and the industry saw the bleeding stop and we started growing. We saw a 15-percent increase, which outpaced the category as a whole. And this year, our numbers continue to improve."
Among U.S. convenience stores, malt beverages currently average $123,921 in sales per store, according to the 2011 Convenience Store News Industry Report. Of that total, flavored malt beverages account for $5,181. While that may seem to be an insignificant number, it's important to note that the dollar figure for 2010 represented a 14-percent increase compared to 2009.
Flavored malt beverages are typically associated with the seasons: something light and fruity for summer barbeques, something a little thicker and darker for fall bonfires. However, the beverages are increasingly being sold all 12 months of the year.
"We are typically strong May through Labor Day, but we are definitely seeing strong results the rest of the year as well," McCauley said.
NOCO Express can attest to that. Terry Messmer, director of merchandising for the 32-store convenience chain in Western New York and Rochester, agreed that flavored malt beverages sell well throughout the year, though business does pick up during the warmer months. "Six packs generally do OK all year, but they are big-sellers this time of year. Where our stores are located, we only have a four-month window when people can go outside," he explained.
The retailer does, however, sell a steady flow of single-serve flavored malt beverages throughout the year. "We have had huge success with singles all year round," Messmer said, adding that NOCO Express is looking to expand its single-serve offerings.
NOCO Express has core items it stocks all year, including Smirnoff Ice, Twisted Tea and Mike's Hard Lemonade. The variety of flavors depends on the size of the store, Messmer added.
But things ramp up in the warmer months. Specifically, the c-store operator works with its vendor partners to market a different promotion each month during the summer, rotating through the key flavors and products. NOCO Express tries to tie in these in-store promotions with the vendors' national campaigns and build displays around them, he said.
For example, NOCO Express did some promotional work with Seagram's Escapes when the company introduced its Pink Punch last year in honor of breast cancer awareness.
The launch of Pink Punch was a key factor in Seagram's Escapes expanding its flavor line to cover every season. As McCauley explained, the company has 11 core flavors, including mango and sangria, which were shipped this February to hit c-store coolers by the summertime.
Seagram's Escapes also offers three seasonal flavors. Pink Punch was the first and will be available August through November. That will be followed by a winter flavor for November through January, and then a spring/summer flavor for February through June.
"We introduced Pink Punch in 2010 for Breast Cancer Awareness Month," McCauley said. "Retailers told us they would like to carry it, but asked what would come after it. If they were going to make room on the shelves, they needed something to follow it up with. In 2011, we will have a more seasonal SKU [lineup], which is a first for us."
The varieties Seagram's Escapes chooses depend on trends, emerging flavors and what is doing well not only in the malt beverage segment, but in outside segments such as candy, gum and juices, according to McCauley. The company then overlays those trends with its consumer research to see what lines up. "There are new flavors out there such as Acai berry, but our consumers tend to want flavors they are familiar with," she added.
And Seagram's Escapes is constantly re-evaluating its flavors. "We did a SKU rationalization last year and decided to discontinue four flavors in 2010 that we determined were not profitable for us," McCauley said. "SKU consolidation in retail is a big challenge for a lot of brands. We need to be really smart and focus."
As for sales of Seagram's Escapes, McCauley noted that national distribution is pretty fragmented. "Florida is one of our top three states, but we are not seeing strong sales in all warm-weather states," she explained. In fact, its volume comes from all over the map, with Pennsylvania, Texas, Florida, Ohio and New York making up the company's top five states.
"Those states made up 37 percent of our sales at the end of 2010,” she said, “but if you plan it on a map there isn't really any correlation."
Of those sales, the convenience store channel represented 20 percent of Seagram's Escapes' business at the end of 2010. "We saw 11-percent growth to our convenience distribution," said McCauley. "Convenience stores are definitely a focus for Seagram's."
Another beverage manufacturer with a strong presence in the flavored malt beverage segment is Heineken USA. The maker of Newcastle Brown Ale will release four limited-edition flavored brews this year including Newcastle Summer Ale, Newcastle Werewolf, Newcastle Winter IPA and Newcastle Founder's Ale. "All four limited editions will be available in draught, six- and 12-pack retail formats," said Colin Westcott-Pitt, vice president of marketing for Dos Equis, Amstel Light and Newcastle Brown Ale at Heineken USA. "They will all support Newcastle's reputation for delivering approachable and accessible ales."
The company turned its attention to limited-run products at the request of consumers who have asked for additional brews beyond the Newcastle Brown Ale, Westcott-Pitt said. "The timing of our limited editions aligns with the growing consumer demand for variety that's seen in the growth of the craft segment," he explained. "We tested Newcastle Summer Ale successfully in 2009 and 2010, so we are ready to provide a year-round offering."
But not all products are destined for a limited run, he said, adding that "a brand needs to be authentic in the category." As for flavors, Westcott-Pitt said a few brews reflect the season while others are less explicit. "We wanted to keep the range fresh and exciting, and coming out with four brews all based around specific seasons didn't feel like we would achieve that," he explained. "Consumers are demanding more variety and novelty in their beer selections."
Whether a limited run or a year-round offering, new flavored malt beverages are constantly hitting the market. What still remains to be seen is what affect newly reformulated drinks such as Four Loko -- an alcoholic energy drink that is back in stores minus the caffeine -- will have on the always changing cold vault competition.
"For a time, caffeinated products like Four Loko were drawing some business away from malt beverages," said NOCO Express' Messmer. "But with the relaunch, they are introducing more flavors in bottles similar to a Twisted Tea or Mike's Hard Lemonade looking to try to capture some of that market."