Lighten Up!

If
you have any solid answers, there are some very large
brewers who want to meet you. They have a problem that is
defined by these questions. Two of the world’s largest
brewers think they may have found some answers already:
Heineken and Anheuser-Busch. They’re making major moves into
the light sector with Heineken Premium Light and Budweiser
Select.

Dan McHugh is
Vice-President of Trademark Brands at Anheuser-Busch, a
relatively new position that has been created to reflect the
company’s new perspective on its core brands (more on that
below). He’s very high on Budweiser Select as a solid,
integrated part of A-B’s total market strategy. “Budweiser
Select gives us a new entry in the lighter-tasting profile
that we have,” he said.

“Heineken has
been looking at the light category for quite a while. We
feel it’s right now for a light variant.” That’s the word
from Andy Glaser, Heineken USA’s Brand Director for Heineken
Premium Light (and Heineken).

Are these two
new brands an answer to these questions? To find out, we’ll
first have to take a deeper look at the problem. Light beer
continues to grow and expand, a category dominated by a
small number of identically positioned brands. Bud Light,
Miller Lite and Coors Light are the dominant players. Though
they may be a bit uneven in growth, depending on who’s got
the best ad campaign at the moment, all three continue to do
well while their ‘full calorie’ stablemates slowly
decline.

That’s not a
problem in itself. Everyone’s happy to see their brands do
well, and these brands are all the biggest sellers for their
respective brewers. Bud Light’s success increasingly comes
at the cost of slipping sales of the iconic Budweiser brand,
but Miller and Coors seem to have accepted that
fate.

Their campaigns
for their premium brands have the definite aura of
rear-guard actions; self-aware, and willing to take the
pleasant surprise of growth if it should happen, but
rear-guard nonetheless. They can see the way the market’s
blowing. Putting all your eggs in the ‘light’ basket may be
risky, but there are definitely riskier baskets to be in,
like the ‘ice’ basket Molson jumped into a few years
ago.

The problem with
the light beer category is that these three dominant brands
have become commodities: frequently discounted, and
distressingly – at least to the brewer and wholesaler –
interchangeable. Glaser indicated that Heineken’s market
research supports this. “We’ve found that there’s very
little brand loyalty in the category,” he said. “Price is a
big driver.”

This isn’t
unusual, but the lack of anywhere to go but down to a
bargain brand is not what marketers have successfully built
into the other categories in the market. The beer market
generally has plenty of options. If you like premium beer
but want something a bit more special, there are the
imports. If you like the variety of craft brews, the sky’s
the limit both in terms of price and extreme flavors. If you
want to pinch your pennies, there are bargain brands of a
number of types available. There are usually clear trade-up
paths available for the customer.

But the biggest
category in the market is light beer, and creating an
upgrade path for light beer has proven to be a difficult job
of market surveying. As Rhonda Kallman put it a few years
ago when she tried to crack that market with Edison Light,
“I have a picture in my mind of an open fridge, and there’s
bottles of Bud Light, Coors Light, Miller Lite, Miller
Genuine Draft Light, Corona Light, Amstel Light, Busch
Light, and Edison in there. That’s the whole section! There
is a need for some choice, and for something that’s
better.”

Edison Light
wasn’t the answer – at least, the market didn’t think it
was. There have been other attempts to create an upscale
light beer, the most successful of which is Amstel Light,
with a hard-charging effort coming from Corona Light, but
nothing has really caught fire yet. Amstel is almost too
full-bodied, Corona Light is perhaps not differentiated
enough from its big brother. Neither has been the break-out
success the brewers and marketers are looking for. Sam Adams
Light may appeal to the craft brew customer who’s looking
for a lighter alternative, but its darker color scares off a
lot of light beer drinkers.

What exactly is
it that customers want in a light beer trade-up? The answer
to that question may be in another, more basic question:
what is it that customers are looking for – and finding – in
the light beer they’re already buying? Judging from the
qualities of the successful light beers, the answers are
pretty straightforward. Light beer drinkers want lower
calories (though they don’t seem to be hung up on a
particular calorie-per-serving number), light, drinkable
body and light flavor without a lot of hop bitterness. They
will look at a carbohydrate count, but not as sharply as
they did a couple years ago.

Beers that buck
those trends, or try to take them too far, don’t achieve
widespread success. But that’s where those thorny questions
come in. If people want less from a light beer – less
calories, less body, less flavor – what is it that you sell
them more of to justify the higher price and prestige of a
trade-up brand? More less?

That’s not it.
Going too far doesn’t work: there are limits to how little
body or flavor people want, and the marketing highway is
littered with the derelict wrecks of brands that tried to
push those limits too far.

But giving the
customer more flavor and body doesn’t work on a broad base
either. You find out why when you ask Glaser the question
that’s been on everyone’s mind ever since the first hints of
the arrival of Heineken Premium Light: don’t you already
have a light beer? What about Amstel Light?

“First, Amstel
Light is at the more robust end of the light spectrum,” he
said. “Secondly, in terms of occasion opportunities,
Heineken Premium Light is different from Amstel Light.
Amstel Light is for regular import specialty drinkers. On
certain occasions, they want something lighter – with food,
to extend the evening, whatever – they want to stay
flavorful, but go light.

“Heineken
Premium Light is targeting a whole new category of
consumer,” he said, “one who drinks primarily within a
stable of domestic lights, but occasionally wants to trade
up: if you’re out for drinks with family or friends, it’s a
bit more special. Ordering a Bud Light or Miller Lite isn’t
quite the cachet you want to project. Heineken Premium Light
now has that premium badge and cachet to give them
confidence in that occasion. The liquid is a new recipe, a
much lighter taste profile than Amstel Light, a lighter
flavor profile.”

If that sounds
like a lot of market research and thought went into this
decision, give yourself a gold star. This is a long-term
program. “Heineken has been looking at the light category
for quite a while,” said Glaser. “We’ve tracked the category
’til it’s grown to almost 5O%. We’ve tracked several trends
and see a maturity in the category, and we’re starting to
see fracturing, and some niche markets are appearing. The
imported light category is there to develop.”

What they saw
and how they decided to proceed meets the basic parameters
we’ve already discussed. “We did a segmentation analysis,”
said Glaser, “and saw that a need was not being met: a beer
that was easier to drink, but with ‘premiumness’ and badge
equity. We saw a chance to put the Heineken equity into this
space.”

Amstel Light met
some of that unmet need, but had been aimed at a small part
of the niche. Heineken Premium Light aimed broader; it was
aimed at “easy”, according to Glaser. “The day of acquired
tastes are over,” he said. “People want things that are
easier to consume, and they want them now. Light beer is
easy to drink and provides a high degree of drinkability.
Now was the time to really explore the Heineken light
variant.”

Anheuser-Busch
has put the same kind of heavy market research into the
light category, but in a slightly different direction.
They’re not looking to move upwards, as Heineken is, and
traditionally has. A-B’s success has historically come by
moving outwards, in expanding categories and markets, and
that’s where Budweiser Select is aimed.

Dan McHugh
explained what their research found. “You had your Bud Light
drinkers, Bud drinkers,” he said. “We saw a need for a beer
that captured the upwardly mobile consumer. What they were
looking for was light beer stats on calories and carbs, but
with no lingering aftertaste. That’s where we said there was
room for a beer at a premium price.”

Budweiser Select
was the answer. The research and the brand came from A-B’s
new innovation team, headed by Pat McGauley, the
literally-titled ‘Vice-President of Innovation’. McGauley’s
whole job is coming up with new beers. The key is finding
where to put a new product. “We have an 8-step progress,” he
said, “and the first part is identifying the need,
identifying the white space. We’re filling empty spaces in
the alcohol beverage market.”

McGauley and his
team had a vision for Budweiser Select. “We created a light
beer, but we don’t say light on the packaging,” he said. “We
talk about the taste, and we package it differently. It has
the stats of a light beer, the positioning of a premium
beer.” Once the brand and the product were developed, they
handed it off to McHugh’s team.

Budweiser Select
represents a bigger idea for McHugh’s Trademark Brands
group: a key position to build the breadth and stability of
the Budweiser mark. “It’s important that the one thing we’ve
done is to establish very distinct positions for our Bud
Family brands,” he said. “Bud is the traditional classic.
Bud Light is the fun party beer. And Budweiser Select is for
the white collar, 25+ crowd, after college. They’re looking
for that beer with low stats on carbs and calories, a bold
taste that finishes clean.”

Like the “what
about Amstel Light” question, there’s a no-brainer that
comes up when A-B comes up with a new “Bud Family” brand
that’s narrowly slotted with Bud Light and Michelob Light
and Michelob Ultra: what about cannibalization? What brands
are the folks who are now buying Budweiser Select no longer
buying? How much of the brand’s success has come at the
expense of other A-B brands?

McHugh was quite
candid. “It’s there, as in the introduction of any new
product, especially one that’s plopped right in the middle
of the Bud Family,” he said. “But we’re pleased to see that
28% of Budweiser Select drinkers are either coming from our
competition or were formerly non-beer-drinkers. We’re having
a good run of capturing non-beer drinkers and beer drinkers
we weren’t getting before.”

What’s
interesting is that Budweiser Select isn’t selling on the
light beer stats, which kind of supports A-B’s market
findings on non-beer-drinkers. You won’t see it pitched as a
“light beer” per se, although it definitely fits in the
category. “It actually has lower carbs and calories than Bud
Light,” said McHugh. “But that’s not really a selling
proposition. The consumer discovers that on their own, and
they’re pleasantly surprised. It’s a discovery thing. When
they find out that it’s a light, that’s a plus, they like
that whole feel. You see a lot of brands doing the discovery
thing.”

The flavor
characteristics of Budweiser Select push the light beer
profile in some slightly different directions, pushing in
the risky “lighter” direction in one way, while going
“bolder” in another. The beer sports a sharper hop attack up
front, while delivering a cleaner finish than other light
beers.

A-B credits
their “Extended Brewing Process” for this, and McHugh
explained it quite simply. “It stays in the brewhouse much
longer than any other beer we brew,” he said. “To get the
full benefit of the European hops and other quality
ingredients we use, it has to stay in the brewhouse longer.”
Those ingredients, specially selected European and American
hop varieties, are also the origin of the “Select”
moniker.

The two
different beers represent two different approaches to the
issue of a category that has become a commodity, and their
market positioning follows up on that. Heineken Premium
Light is carefully positioned to be a step up within the
category and taste profile of a light beer.

“We’ve developed
a communications strategy the aim of which is to try to have
domestic light drinkers challenge their relationship with
their brand,” said Glaser. “It’s a very product-centric
strategy. We see the product benefit around smoothness. The
domestic light drinker is predominately not a Heineken
drinker, and they need reassurance that Heineken Premium
Light is going to fit their need.

“People said
that it was just so wonderfully smooth,” he said. “You get
that signature Heineken taste, but it finishes very clean
and quickly. We wanted to connect with this consumer group
and say, ‘Look, this is what you’re looking for, it’s very
smooth and very premium.’ The creative lines you’ll see are
being playful with the consumer on the whole smooth
aspect.”

Budweiser
Select, on the other hand, is an attempt to expand the
entire light beer category, not just add an upgrade tier on
top. “While you call it light beer category,” said McHugh,
“Budweiser Select has a bit more bite than your normal light
beers. It’s all about preference. Anheuser-Busch is being
very progressive. We’re going after variety, trying to see
where the consumer’s going and what they want, and
addressing those issues as they come forward. It’s really
early to tell, but early indications are that it is
expanding the light beer arena for us.”

Both companies
are serious about these brands, and indicate that they are
behind them for a prolonged push. McHugh’s statement about
Budweiser Select’s position in the Bud Family is a strong
one on its own; backed by the continued ad spends and
sell-through of the brand, it looks like a winner, though as
he said, it’s really early to tell.

“We’re very
committed to the launch,” said Glaser of Heineken Premium
Light. “We’re doing a lot in the on-premise channel. We’ve
created some innovative sampling techniques. Most people are
used to girls in t-shirts. We’ve got teams in flight suits
and uniforms. We call it the Red Star Airline, and the idea
is to upgrade tonight, like from Coach to First Class. ‘How
would you like to upgrade to Heineken Premium Light?’ It
creates a lot of buzz in the bars. We describe it as the
Heineken Way, a bit more intelligent, giving credit to the
consumer.”

It’s not just
bar sampling, though. Glaser knows that one promotion
doesn’t make a brand, and this is one they see as a big
opportunity. “We believe that in order to create this subset
of luxury lights,” he said, “it’s somewhat different from
ice beers, or dry beers. We’re trying to create a more
sophisticated niche within a category. There’s an emerging
and under-represented opportunity here, a long-term brand
opportunity. It’s all about getting the right side of a
trend. Consumers are moving that way: premiumization is
really big today.”

Both men were
also talking about an unexpected bonus: support for the
flagship brand. “Budweiser Select has allowed us from a
marketing standpoint to let Bud be itself,” said McHugh. “A
brand like Bud is going to stand the test of time over the
years. Bud is so established it will always have a base. But
before, Bud had to get that entry-level drinker. Now it can
just be Bud, an American classic, for the core drinker. When
it’s all said and done, Budweiser Select is actually going
to help Bud out.”

Glaser agrees,
and sees it already. “We saw an acceleration effect on
Heineken from the launch,” he said. “I think there are a
couple of dynamics. There’s a halo effect that increases
awareness for core Heineken, and the innovation creates a
buzz for Heineken in general. It’s also excited people in
the wholesale and retail systems, it’s created a better
share of mind within the whole system.”

How do you
promise more when what your customer really wants is less?
Deliver on a promise of smooth flavor with a solid badge
that radiates luxury. How do you put more wheels on the
bandwagon? Add another car to the parade instead. Heineken
Premium Light and Budweiser Select look like two solid
answers to the paradox of growing profits in the light beer
market.