The Survival of FMBs
Flavored malt beverage (FMB) sales spiked to their ultimate peak a few years ago, but since then, manufacturers have continued to introduce new products, flavors and brand extensions. Some predicted the category would fall out completely after reaching such a high, but others remained optimistic.
Now, in the midst of summer 2004, the category is still around, and product innovation continues. "I kept thinking it was going to die out, but now I think there will be a place for it," said Curtis Watson, category manager of beer and CSDs at Maverik Country Stores Inc., a 169-store chain based in North Salt Lake City, Utah. "I think it has inked out its slice of the pie."
However, sales have flattened out. Watson explained he hasn't seen growth in his category for the last 18 months, but it is remaining stable. "It's still important to carry, but it's also important to know that the excitement is dwindling," said Kim Michelson, senior beverage category manager at Royal Buying Group, based in Hinsdale, Ill., which serves more than 3,800 stores nationwide by negotiating vendor programs.
As with any other hot product, the competition comes down to survival of the fittest, and the top-selling brands are likely to be the ones still around in years to come. "Within any category you will see some winners," said Michelson. "It may be similar to the energy drink category. If you look at the share report, a lot of the brands are falling off, but a couple of them will make it, like Red Bull, which is still strong."
Fueled by Originality
To keep interest high, FMB manufacturers continue to introduce new ideas into the category. "Companies are trying to get their piece of the pie and then trying to maintain it once they get it," said Watson. "Like everything, you have to bring variety into it, and part of it is new flavors. We want to make sure we are out there with the new flavors. With all the advertising [from manufacturers] out there, we need to have it in the set."
The FMB category brought a lot of innovation into the cooler last year, and it continues to do the same this year. "There have been no fewer than 10 new products introduced by major manufacturers in the malternative segment this year, and it has revitalized the segment," said Tom Rose, vice president of trade marketing and development at Diageo-Guinness USA. "Innovation will continue to fuel it. Just based on consumer trends over the last 15 years, today's consumer has an expectation of a wide variety of products and is interested in new and fresh ideas."
Diageo, manufacturer of Smirnoff Ice products in the FMB space, introduced Smirnoff Twisted V (Five) this year, a line of fruit-flavored malt beverages in four flavors — Green Apple, Raspberry, Mandarin Orange and Cranberry. This line now accompanies the manufacturer's other products in the space, including Smirnoff Ice original and Triple Black.
"Our best seller is Smirnoff Ice, followed now by Twisted V and then Triple Black, which together have a 54 percent share of flavored malt beverages," said Rose. "You hear people predicting the category will die out, but you see the big guys dedicating a lot of time and energy into introducing new products into the market, which is a pretty expensive proposition if the category wasn't doing well."
According to Watson, Smirnoff Ice original and Mike's Hard Lemonade are Maverik's best sellers in the category. "We typically carry three flavors of the Twisted V and the Smirnoff original, but we also keep a sampling of one of the Seagram's Coolers, like the Strawberry Daiquiri and the Fuzzy Navel, which do well."
Carving its own niche, United States Beverage's brand, Seagram's Coolers, introduced new packaging last year to create a new identity and attract new consumers to the brand. They company also introduced Seagram's Smooth in two flavors — Red and Citrus. This year, the company added three new Seagram's Smooth flavors — Pink Dragon, Island Bliss and Liquid Haze — all in bright colors to grab the eye of the customer from the cooler door.
"We target both males and females and our primary target with these flavors is more urban," said Justin Fisch, Seagram's Smooth brand manager at United States Beverage. "This year we launched the bright colors to try to differentiate ourselves from other competitors out there. Last year the Red had more success than the Citrus, primarily because it is different than other products out there."
Anheuser-Busch also introduced extensions to its Bacardi line of malt beverages, and following the low-carb frenzy, launched Bacardi Silver Low Carb Black Cherry in June of this year. "The low-carb option has the flavor of black cherry with only 2.6 grams of carbs and 96 calories," said an Anheuser-Busch spokesperson.
"It will be interesting to see how the low-carb trend will pan out in this segment," said Watson. "The new Bacardi is low-carb and Mike's Light is also a low-carb alternative."
Considering that the beer category has introduced low-carb alternatives successfully, many think the FMB category will follow suit. "Low-carb is now the hot trend in the beer category," said Michelson. "Maybe low-carb malts will see the same thing."
Anheuser-Busch also introduced Bacardi Silver Limon, a lemon-flavored malt beverage, in March. "The FMB category continues to consolidate and Anheuser-Busch is taking advantage of the opportunity to capture volume and market share," said the company's spokesperson. "A-B brands have performed well since their respective introductions, and the Bacardi Silver family holds a 24 percent share of the industry's spirit-based FMBs."
A Look Ahead
Right now, FMB sales are at their peak, and will remain that way through Labor Day. "We have a pretty strong following all year long, but Memorial Day and the Fourth of July are the big periods," said Rose. "There are really seven key beer holidays, and summer brings the highest spike for all of them, and FMBs spike even higher than beer in the summer."
Rose said some retailers capitalize on this trend when marketing certain items. "We have seen a huge interaction with party items like spices, mustard, ketchup and chips," he explained. Placing FMBs near these items is a great opportunity to capture incremental sales for a retailer, said Rose. "FMBs are an impulse purchase, and are often purchased with beer, not instead of," he explained.
"In the summertime, we may bump up some displays or racking in some of our larger stores," said Watson. "We don't typically promote it or try to boost the category. For the most part we have been able to remain profitable."
Overall, since its peak, the FMB category players have continued to fight for their share of the profit, and those that thought it would die out have been proven wrong. "I think it's probably found its watermark and it will stay," said Watson.
"I think what you have seen, as in any emerging market, is a shakeout," said Rose. "The top three brands account for [an overwhelming majority] of the sales in the category, and the next phase will be a continued shakeout."
Now, in the midst of summer 2004, the category is still around, and product innovation continues. "I kept thinking it was going to die out, but now I think there will be a place for it," said Curtis Watson, category manager of beer and CSDs at Maverik Country Stores Inc., a 169-store chain based in North Salt Lake City, Utah. "I think it has inked out its slice of the pie."
However, sales have flattened out. Watson explained he hasn't seen growth in his category for the last 18 months, but it is remaining stable. "It's still important to carry, but it's also important to know that the excitement is dwindling," said Kim Michelson, senior beverage category manager at Royal Buying Group, based in Hinsdale, Ill., which serves more than 3,800 stores nationwide by negotiating vendor programs.
As with any other hot product, the competition comes down to survival of the fittest, and the top-selling brands are likely to be the ones still around in years to come. "Within any category you will see some winners," said Michelson. "It may be similar to the energy drink category. If you look at the share report, a lot of the brands are falling off, but a couple of them will make it, like Red Bull, which is still strong."
Fueled by Originality
To keep interest high, FMB manufacturers continue to introduce new ideas into the category. "Companies are trying to get their piece of the pie and then trying to maintain it once they get it," said Watson. "Like everything, you have to bring variety into it, and part of it is new flavors. We want to make sure we are out there with the new flavors. With all the advertising [from manufacturers] out there, we need to have it in the set."
The FMB category brought a lot of innovation into the cooler last year, and it continues to do the same this year. "There have been no fewer than 10 new products introduced by major manufacturers in the malternative segment this year, and it has revitalized the segment," said Tom Rose, vice president of trade marketing and development at Diageo-Guinness USA. "Innovation will continue to fuel it. Just based on consumer trends over the last 15 years, today's consumer has an expectation of a wide variety of products and is interested in new and fresh ideas."
Diageo, manufacturer of Smirnoff Ice products in the FMB space, introduced Smirnoff Twisted V (Five) this year, a line of fruit-flavored malt beverages in four flavors — Green Apple, Raspberry, Mandarin Orange and Cranberry. This line now accompanies the manufacturer's other products in the space, including Smirnoff Ice original and Triple Black.
"Our best seller is Smirnoff Ice, followed now by Twisted V and then Triple Black, which together have a 54 percent share of flavored malt beverages," said Rose. "You hear people predicting the category will die out, but you see the big guys dedicating a lot of time and energy into introducing new products into the market, which is a pretty expensive proposition if the category wasn't doing well."
According to Watson, Smirnoff Ice original and Mike's Hard Lemonade are Maverik's best sellers in the category. "We typically carry three flavors of the Twisted V and the Smirnoff original, but we also keep a sampling of one of the Seagram's Coolers, like the Strawberry Daiquiri and the Fuzzy Navel, which do well."
Carving its own niche, United States Beverage's brand, Seagram's Coolers, introduced new packaging last year to create a new identity and attract new consumers to the brand. They company also introduced Seagram's Smooth in two flavors — Red and Citrus. This year, the company added three new Seagram's Smooth flavors — Pink Dragon, Island Bliss and Liquid Haze — all in bright colors to grab the eye of the customer from the cooler door.
"We target both males and females and our primary target with these flavors is more urban," said Justin Fisch, Seagram's Smooth brand manager at United States Beverage. "This year we launched the bright colors to try to differentiate ourselves from other competitors out there. Last year the Red had more success than the Citrus, primarily because it is different than other products out there."
Anheuser-Busch also introduced extensions to its Bacardi line of malt beverages, and following the low-carb frenzy, launched Bacardi Silver Low Carb Black Cherry in June of this year. "The low-carb option has the flavor of black cherry with only 2.6 grams of carbs and 96 calories," said an Anheuser-Busch spokesperson.
"It will be interesting to see how the low-carb trend will pan out in this segment," said Watson. "The new Bacardi is low-carb and Mike's Light is also a low-carb alternative."
Considering that the beer category has introduced low-carb alternatives successfully, many think the FMB category will follow suit. "Low-carb is now the hot trend in the beer category," said Michelson. "Maybe low-carb malts will see the same thing."
Anheuser-Busch also introduced Bacardi Silver Limon, a lemon-flavored malt beverage, in March. "The FMB category continues to consolidate and Anheuser-Busch is taking advantage of the opportunity to capture volume and market share," said the company's spokesperson. "A-B brands have performed well since their respective introductions, and the Bacardi Silver family holds a 24 percent share of the industry's spirit-based FMBs."
A Look Ahead
Right now, FMB sales are at their peak, and will remain that way through Labor Day. "We have a pretty strong following all year long, but Memorial Day and the Fourth of July are the big periods," said Rose. "There are really seven key beer holidays, and summer brings the highest spike for all of them, and FMBs spike even higher than beer in the summer."
Rose said some retailers capitalize on this trend when marketing certain items. "We have seen a huge interaction with party items like spices, mustard, ketchup and chips," he explained. Placing FMBs near these items is a great opportunity to capture incremental sales for a retailer, said Rose. "FMBs are an impulse purchase, and are often purchased with beer, not instead of," he explained.
"In the summertime, we may bump up some displays or racking in some of our larger stores," said Watson. "We don't typically promote it or try to boost the category. For the most part we have been able to remain profitable."
Overall, since its peak, the FMB category players have continued to fight for their share of the profit, and those that thought it would die out have been proven wrong. "I think it's probably found its watermark and it will stay," said Watson.
"I think what you have seen, as in any emerging market, is a shakeout," said Rose. "The top three brands account for [an overwhelming majority] of the sales in the category, and the next phase will be a continued shakeout."