Millennial Wave to Hit Imported Beer and Microbrews

I've never understood why more attention isn't paid to demographics! Thanks to the remarkable efforts of the Census Bureau, we KNOW what the population will look like in 5-, 10- and 15-years (which is, by the way, the reason there is little excuse for overcrowded schools).

Yesterday, I shared SeekingAlpha's conclusion that demographics trends may be unkind to Wal-Mart. Today, I am going to share SeekingAlpha's conclusions about the impact of these same shifts on beer. According to SeekingAlpha.com, Gen Y will " undoubtedly break the beer drinking records set by Boomers in the late 1970s and early 1980s." Here is an editted version of their analysis:

"As 78 million Baby Boomers started to exit the prime 21-34 beer drinking age bracket in the early 1980s, they were replaced by a much smaller potential-beer-drinker cohort, Generation X. This led to years of flat to declining volume in the beer industry. Now, as Generation X ages out of the prime beer drinking age, it is being replaced by the much larger Generation Y. This new generation of potential beer drinkers is currently mostly age 24 and under ... and it is the largest generation in U.S. history. In 2008 alone, more than 3.8 million members of Gen Y turned the legal drinking age of 21, 100,000 more than turned 21 in 2007. Their entrance into the prime beer drinking age bracket may already be making a difference. Industry data indicates that beer consumption has been on the increase since at least 2006."

Which types and brands of beer will benefit most from the shifts? According to their analysis, first and foremost it will be the big U.S. breweries (and their foreign owners), due to their sheer volume - 80% of sales. But the biggest gains will be seen by microbreweries, which are currently just 6% of sales, but already outpacing the rest of the industry. In 2007 the growth rate of microbreweries was estimated at 12 percent, (vs. 1.4 percent for the large domestic brands and imports). In 2008, microbreweries increased volume by another 5.8 percent, and increased sales more than 10 percent.

This analysis brought to mind an email I received from Marty Predd, a twenty-something Research Associate at Brand Amplitude who recently moved to Portland, OR from Indianapolis. He shared this a few months ago when we were working on a project for an imported beer client:

"As you may know, Portland is a mecca for craft beer...we have the most microbreweries of any city in the country, and I can think of about a dozen that are within walking distance of my loft. My girlfriend and I partake regularly and I'm sure we've become beer snobs to some degree. Bars we used to love in the Midwest seem less appealing now when we visit because of their limited selection of mostly huge national beers like Bud or Miller, or mega imported brands like Guinness, Smithwicks, Heineken, etc. With the exception of PBR, which has a nostalgic status in dive bars here, I can't think of the last time we enjoyed a mega beer brand that's not based here in Portland (i.e., Widmer)."

For data geeks like me who want to learn more, Ken Gronbach of SeekingAlpha has written a book,"The Age Curve: How to Profit from the Coming Demographic Storm". I've ordered my copy already.

Millennial Spirits: Make Mine Sophisticated

My Millennial friends tell me they are more likely these days to open a bottle of wine with friends than a six pack of beer. The data suggests they are right on trend. Overall, sales gains for wine and spirits are outpacing beer. And within the beer category, growth in imports and microbrews is outpacing regular beer. This trend, like so many, appears to reflect a growing sophistication in the tastes of young drinkers.

In June, Mintel released two new reports, one on drinking at home and another on drinking away from home. Both reports show similar trends by age: young people are increasingly opting for wine and vodka over beer. 32% of 21-25 year olds say they are 'drinking more liquor/spirits than last year'. The average number of microbrewed beers drunk by 21-24 year old microbrew drinkers increased from 3.0 in 2005 to 3.8 in 2007. And a full 38% of 21-24 year old drinkers say vodka is their top spirits choice in a restaurant or bar.

Diageo, a close watcher of Millennial trends, is among the first to really capitalize on the sophisticated appeal of vodka. Today, a new campaign is breaking for their new ultra premium vodka, Ciroq. Here's what Mediapost says about the new campaign, called "The Art of Celebration" featuring Sean "Diddy" Combs:

"Shot in black and white at one of Sinatra's former California homes, the 15- and 30-second commercials depict Combs as a high-spirited host amidst a chic crowd during an impromptu private house party. Combs is serving Cîroc, one of the world's only vodkas made from grapes, while engaging with his modern-day "Rat Pack" entourage. Sinatra, along with Dean Martin, Peter Lawford, Joey Bishop and Sammy Davis Jr., were the original packers. In the spots, Combs mingles, dances and jokes during the intimate party, before finally stealing a private moment to gaze into the night as the crowd enjoys a fun-filled evening inside. The spot represents a continuation of the brand's commitment to defining "sophisticated celebration"--a concept Combs embodies and cultivates both personally and professionally as a lifestyle and entertainment icon. During the holiday season, the campaign will evolve to focus on safety."

The combination of high style, celebrity and music is likely to appeal to Millennials, who are most likely less interested in 'luxury' than in what wine Fat Bastard calls 'Livin' Large'. As we have noted before, Millennials do not think of themselves as well-off, despite their relatively high disposable incomes. They do, however, see themselves as discerning consumers who value authenticity and quality. This campaign seems to hit the mark in both respects.