The Rise and Fall of FMB’s

Alcopops,
malternatives, “FMBs’, hard drinks: whatever you call them –
and what you do call them probably identifies your slot in
the alcohol beverage business – these sweet, beer-strength
drinks have had an amazing and fast-moving career. From odd
and abortive beginnings in the ‘6Os and ‘7Os – StingRay,
Hop’n’Gator, Red Baron, and if you don’t remember these,
it’s probably for the best – to Zima, the first solid entry
in the field, it was the hard lemonades that really got the
category hot in the mid-199Os.

Anything that
wasn’t obviously beer got swept into the category: flavored
malts, ciders, coolers, hard lemonades (and teas and root
beers and so on), a whole gamut of beer-strength potions
that tasted like anything but beer. And they were hot, the
darlings of trend-setters, with catchy, edgy ads that made
the most of their fashionable appeal. Malternatives were
riding high for a few years, despite a couple spectacular
failures among products that were rushed to market (the
Captain Morgan and Sauza attempts come to mind). Almost
every new flavor seemed to boost them higher. It was eerily
reminiscent of the dot.com boom; almost anything could get
on the shelf, no matter how bizarre.

Now their
prospects are on the rocks. Ask anyone in the volatile,
trend-driven, on-premise trade. “The alternatives? Not
selling at all,” responds Patrick Droesch, Vice-President of
Beverages at Brinker International, parent company of
Chili’s, On the Border, and Romano’s Macaroni Grill.
“Smirnoff Ice continues to decline. We still carry it in our
stores, but it could be only for the rest of the
year.”

Tim Johnson, the
director of purchasing and beverage operations at Champps
Entertainment, Inc., agrees. “They have dropped off
considerably,” he said. “We still offer two or three of
them. The Smirnoffs are out there, pushing flavor of the
month. We don’t emphasize it. We do require Smirnoff Ice,
but not what flavor. That’s a local choice. In a couple
spots they’re doing well. But the South? The Northeast?
Nothing. It just never caught fire.”

Despite these
negative trends, reports of the malternative’s demise may be
a bit premature. “It’s actually a moving target,” said Eric
Shepard of Beer Marketer’s Insights. “Malternatives are
slightly on the rise again with the introduction of new
flavors: the Smirnoff Twisted V line, and some of the new
Mike’s Hard flavors are doing well. But as a whole, the
category is being propped up by these new introductions. The
new brands are off-setting the erosion of the old brands.”
Shepard indicated that the category was not rising anywhere
near as steeply as it had, but modest increases are a
completely different story from steady declines – just ask
anyone who sells brown spirits.

The core
malternatives – Smirnoff Ice, Mike’s Hard, Bacardi Silver,
and the much-maligned pioneer, Zima – are showing
double-digit drops on the last annual numbers, anywhere from
16 to 46% down from the previous year’s sales. The broad
swath of imitators is also down.

The pattern
seems to be a familiar one. An innovative new brand comes
along and catches fire due to its novelty and smart
promotion. Imitators (or re-positioned precursors, like Zima
and Two Dogs) spring up and ride the wave. But the hot trend
dies of its own hotness as trend-setters look for the next
new thing and somewhere, some priest of heat denounces the
trend as over, and why did anyone ever think that was cool?
The trend declines swiftly, and wholesalers are left with
aging pallets of the last new thing.

It would seem to
be that familiar pattern, except for the sparks of the new
flavors Shepard noted. Why are these brands, which are all
too obviously the same thing only different, catching the
eye of the drinkers? “The new brand thing is a pendulum,”
Shepard said. “A lot of ice beers and dry beers came out in
the early 199Os, then things shifted back to the core
brands. Now it’s new brands again. It’s a reaction to what
producers think consumers are looking for. And.people may
have gotten bored with beer, too. The marketers pick that
up.”

After covering
this industry for ten years, the cynical side of me thinks
that maybe it’s the marketers who have gotten bored with
beer. They drive the cycle of product innovation to keep
things moving, churning new labels through at a frantic
pace.

And lest you
think I’m only talking about malternatives, it’s the same
case in craft-brewing, where the extreme double IPAs and
imperial pilsners are captivating the fevered minds of beer
geeks and brewers alike. Rest assured, somewhere out there
someone is brewing a triple IPA . . . and looking over their
shoulder to watch for a quadruple. Who knows where it will
lead; I just heard a sales director for a craft brewery say
today, “I know one of these days I’m going to wind up trying
to sell a beer made from, I don’t know, the water they
cooked the hot dogs in. ‘Meat beer, it’s new!’.”

Low carb beers
would seem to have been a genuine innovation, something
different. The huge growth in low carb beers, like the
ground-breaking Michelob Ultra, put the bona fides on that
one, at least for a while. “There is no question that
Michelob Ultra hit a home run,” said Johnson. “Aspen Edge
was too late, and then there was a lot of talk about was the
name right for a low-carb beer?”

Colleen Brennan,
the Beverage Manager for the O’Charley’s chain, agreed.
“They’re still selling, Ultra particularly,” she said. But
she noted that Ultra’s success didn’t come without a price.
“It did cannibalize Michelob sales somewhat, there was a
trade-off.”

The waters got
muddied pretty quickly, too. What was a low carb beer? Was
it new? Not according to SAB/Miller, who quickly countered
Ultra’s swift growth with a simple statement: all light beer
is low carb, take a look at Miller Lite’s low carb number.
It didn’t help when Bud Light ads seemingly agreed with
Miller, and urged customers to choose on taste, not carbs.
All of a sudden, Ultra and company didn’t look so innovative
any more.

Innovative or
not, Brennan sees low carb beers – that say they’re low carb
– staying in the picture. “I think low-calorie, low-carb is
here to stay,” she said. “There will be new products next
year, it’s not going away. But at the end of the day they
buy on taste. If you can get light with taste, that’s a
bonus. Once people realize that most light beers are
low-carb, they’ll buy on taste.”

Like them or
not, “energy beers” seem to be innovative, and they are the
third “next big thing” to hit the beer market in six years.
Beers like Sparks, Moonshot and Anheuser-Busch’s new
B-to-the-E are beers laced with legal stimulants. Spurred by
the popularity of Red Bull and vodka cocktails, these beers
are going head-to-head with that idea.

It’s not that
new an idea. The fellow who taught me bartending back in the
early 198Os drank coffee with a slug of Old Grand-Dad:
“Catch the buzz, stay awake to enjoy it,” he always used to
say.

These are not
the first caffeinated mainstream beers, either. Iguana Light
was a Miller product brought out in the mid-‘9Os, flavored
with the Brazilian guarana berry, a berry with twice the
caffeine of coffee beans and a sly, sideways reputation as
an aphrodisiac. Iguana Light was not a success in test
markets (so much so that it became a case study in marketing
failure), perhaps due to the guarana flavor or perhaps the
mindless “I Wanna Iguana” slogan, and it was discontinued.
There have also been a number of coffee beers in the craft
segment, none of which ever reached a serious niche in
sales. And there was “Buzz Beer”, a mythical caffeinated
beer that comedian Drew Carey made in his garage
microbrewery on “The Drew Carey Show”.

But a wave of
them have hit the market in the past year. B-to-the-E,
Moonshot, Mobius, and Sparks are the first, sure to be
followed by others. B-to-the-E is 6% beer infused with
caffeine, guarana and ginseng, and flavored with blackberry,
raspberry and cherry. Moonshot is a more straightforward
beer, shot with caffeine, from New Century Ltd., Rhonda
Kallman’s company, the people who brought us Edison Light
beer. Mobius is a bit more New Age, a “European-style lager”
embellished with caffeine, taurine, ginseng and thiamine,
from a South Carolina entrepreneur named Robert Spencer who
thinks that “In a year, we’ll be worldwide.”

Moonshot came as
an inspiration to Rhonda Kallman. “I was tailgating at a Red
Hot Chili Peppers concert,” she said, “and I’d been drinking
Edison Light in the parking lot, and drinking caffeinated
sodas, and I felt great. I suddenly thought, ‘I should
bottle this.’ Look at Starbucks, look at Red Bull. People
say it all the time: “I need caffeine!” So I called up our
consulting brewer, Joe Owades, and he hung up on me! But I
called him back and said, ‘I’m serious, I really want to do
this!'” Moonshot is a straightforward light lager with a
dose of natural caffeine.

B-to-the-E is a
reference to powers of 1O, as explained by Bob Lachky,
Vice-President of Brand Management and Director of Global
Brand Media for Anheuser-Busch. “‘B’ is the crown ‘B’
Budweiser symbol,” he explained. “The ‘E’ stands for
something extra, the extra being caffeine, guarana and
ginseng.” Budweiser raised to something Extra? What’s that
make Budweiser Select? (And just what is Budweiser Select?
Low carb? A new light beer? Something else?)

The real
question about all these beers (aside from the obvious one
of “Are they beers?”) is whether this is an idea whose time
has come. The Red Bull boom, which shows no signs of slowing
down, would seem to indicate that it has a good chance. But
the shaky status of the other recent innovators should warn
you that if this idea’s time has come, it may be a short
reign.

The scorched
earth, “get in, get out” strategies on these innovations
bring up a more serious question that nags around the edge
of the issue. Have these categories had a negative effect on
the image of the core, premium beer brands, the “real”
beers? Do they, by their success and their very presence,
imply that something is wrong with beer’s image, that beer
can’t satisfy the 21- to 3O-year-old drinker’s wants? Are
people really bored with beer?

That question
came up when Anheuser-Busch had a press conference for the
launch of B-to-the-E. Bob Lachky was asked “Why aren’t these
young folks just happy drinking beer?”

Given the
occasion of the question and answer, it’s perhaps
understandable that Lachky didn’t ask which young folks, and
whether they were drinking beer before, but instead
proceeded to give the rationale for the new beer-like drink.
“They are not,” he said, “because there is so much in our
culture and our society which speaks to individuality, to
experimentation.

“If you studied
the sociology of what is going on in our country,” he
continued, “there is a real move for people wanting to put
their stamp on being an individual and you have seen it
impact every industry. People used to say, “I am a Budweiser
drinker” or “I am whatever.” “I drink wine.” People don’t
say that anymore. They say, “Well depending on my mood and
depending on the time of day, depending on whether I am
after a softball game or if I am out on a date with somebody
I am really trying to impress, maybe I’m switching around
with what I want to drink.”

“It is not that
people aren’t drinking beer,” he emphasized. “Beer is still
the highest incidence of alcohol consumption for alcohol
beverages versus distilled spirits and wine and that has
historically been true for the last 3O, 4O years. But
variety and innovation is more of a factor than anything
else. The spectrum of drinks that people will come in and
out of has changed so drastically in the last five years it
is more about individuality and wanting something different
and not conforming.”

Brennan is not
so sure she agrees with that, pinning beer’s soft market
performance squarely on one thing. “There’s a rise in the, I
don’t know, the cocktail culture,” she said. “That’s what is
hurting beer, all the new cocktails and flavors. That’s cut
into beer sales more than the malternatives. And, of course,
vodka, rum, liquor is naturally low in carbs.”

Tim Johnson
isn’t really worried about an impact on beer’s image or
sales. “The malternatives were marketed to the 21- to
3O-year-old drinkers, who generally haven’t acquired taste
buds to handle the more full-flavored beers – I’m talking
more about the craft beers, the micro segment. By their
nature, the alternatives marketed to that young group, so I
don’t think they hurt traditional beer’s image. The
malternatives are entry-level beverage alcohol
drinks.”

Then he puts it
in perspective. “You know, the late baby-boomers, my
generation, our first drink was a 7&7,” he said with a
laugh. “We didn’t want to drink Canadian, it was too
expensive, and bourbon was just too much, so we took the
Seagrams 7 and put some fizz in it. That was our entry
drink. The malternatives are that now. That age group tends
to be a bit more explorative, anyway.”

So the cycle
ound. Malternatives, ciders and hard lemonades may be on the
downturn, low-carb may still have some life in it, and
“boost beers” are what’s happening now. “Now” may be the
most important word in your purchasing decision lexicon for
the foreseeable future, until things turn back to
normal.

Or maybe not. To
put yet another perspective on the whole malternative
picture, take a look at overall category numbers. The third
largest malternative in sales isn’t Bacardi, Mike’s Hard
Lemonade or even Zima. It’s Bartles & Jaymes, the
venerable Gallo brand that hasn’t had an advertising
campaign in over ten years. Things like that help you keep
your cool when things start to change so rapidly.