Finding NEOs

FILED SEPTEMBER 16, 2013

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MillerCoors VP of Brewing, Research & Innovation David Ryder presented on premium lights in a very specific context at this week's Supply Chain & Operations Leadership Conference in beautiful (but flooding) Fort Collins.

Long-suffering light beers are "not watered down products. They're all very delicate products," David contended, and each with "a particular flavor profile." In fact each of the big three light beers "is profoundly different, made in a completely different way."

These differentiated intrinsics are important because of current consumer trends. David presented on company insights gleaned from 800,000 consumers in 3 countries over 10 years. That project determined two fundamental types of consumers, who "might as well be on two different planets," but go a long way toward explaining the boom in craft beer and Apple product sales during the the country's worst economic recession in modern times.

Consumers on "Planet Traditional," with 52% of the consumer population, rely on price, features and status to spend. During the recession, they cut discretionary spending drastically. Now a "deal" isn't enough to open their wallets; it's has to be extraordinary, like a closeout.

Consumers on the second planet are dubbed "NEO," for New Economic Order. NEOs are responsible for 77% of consumer spending, and almost every dime of profit that businesses make. Price remains a factor with NEO purchases, but much more important is the connection they feel with a product or service. Design, authenticity, discovery, originality are all held in high regard. As the economy crashed, NEOs became more NEO-like. They cut back on things that didn't matter, but expenditures on products and services they "truly connected" with went up. Like craft brew. Or Apple products. Or overpriced Yoga pants from lululemon.

SO WHAT'S THAT MEAN FOR PREMIUM LIGHTS? These insights have obvious implications for light beer if it is to resonate with the spenderly contingent, the one that's not just looking for a deal. "We have to look at the advertising, the way these 'Lights' are actually advertised," David said during Q&A. "We have to educate the consumer on what premium lights are. They are not watered down: each has its own distinct recipe, distinct yeast strain, distinct processing . They're very high-quality beers ... any off flavor in those premium lights will come through. ... And I'm not just saying this because I come from MillerCoors: The premium light beers are the most difficult styles of beer to make consistently."

They're also tackling the dual task of figuring out an acceptable drop for the category. "Some of these beers might drop off to a certain level ... but we want to know where that sweet spot is going to be. And how to get them growing again. Or, will we keep them [at] that particular level."

On the other hand, they're trying to figure out why premium regular beers are going down in America. "For example, Miller Genuine Draft is slightly on the decrease at the moment - yet Miller Genuine Draft is growing infinitely overseas. It's gangbusters [in] Panama, Russia, South Africa, Argentina. It's just way going up. So we want to understand why the American consumer is [not] contented with that."

But of course, MillerCoors is also figuring out how to play in the sexy new segments and super premiums, up 4% over the last couple years. But "how do we make sure we're not doing 4,000 SKUs to sell the same amount of beer?" asked Tamarron president Greg Hopkins, who noted a doubling of SKUs for distributors every 5 years.

"I can't answer your question because we're trying to answer it ourselves," said David. "The U.S. is unbelievably complex in terms of what consumer are consuming."

New Belgium's production and supply chain VP Nate Turner later asked how they determined what to discontinue. David mentioned their SKU rationalization program. "And it's working," he said (which met with some audience laughs). "But we have to be more aggressive with it," he said. "This year we're coming out with so many new brands. Some of which are working very well ... but we've got to take out some SKUs that are not working for whatever reason."

This thing with NEO's is interesting. They skew toward being Millennials from my observation, although you can certainly find them in any generation. I suspect it will be very difficult to convince these people that light beer is actually harder to make, or to highlight the subtle differences between premium light brands. But in marketing, we know that anything is possible: just have to get the right message to resonate. Recall that the industry was successful in driving yellow lager sales with the notions of Dry beer and Ice beer, albeit temporarily.


Until tomorrow, Harry

"Finance is the art of passing money from hand to hand until it finally disappears."
-Robert W. Sarnoff

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