CBA: LET’S TALK ABOUT OCCASIONS
February 1, 2012Craft Business Daily
Yes, we’ve covered CBA a lot. But their focus on segmenting by occasions and understanding the demos that fall within them has allowed them to reinvent their brands.
Of course, CBA is also a different animal. They compete among the top craft companies, and at this week’s ICR conference, Andy Thomas and Terry Michaelson revealed a couple of tailwinds for 2012. Compared to competitors, they overindex in average items per store (around 7 vs. around 4 for Sierra, for example). That, coupled with their weekly ACV of a mere 48% is “a great one- two punch.” More about that closer to the call. Now we focus on the research that informs CBA’s positioning.
THE CRAFT DRINKER IS AN “ANOMALY,” SO WE NEED TO TALK ABOUT OCCASION. Despite what we expect to know about Millennials and the future of beer, breaking down volume is a little trickier. “Mostly Non Craft Drinkers”; “Majority Craft Drinkers” and “Exclusive Craft Drinkers” all make up about an equal share of total craft category volume, according to CBA. That’s the basis of their portfolio strategy: They have brands to serve each, and plan to move consumers “up the line” as they get more exposure.
For example: “Our Kona brand sources people who might be a little more import and lighter super premium oriented; on the other end, Redhook is
positioned to get a crossover, more mainstream drinker looking to experiment in craft, but not an IPA drinker yet,” says Andy. “Squarely in the middle” is Widmer, which “is all about the craft [drinker seeking] exploration and esoteric ingredients.”
Their three-pronged brand approach “allows [them] to get recruitment drinkers and crossover drinkers and trade them up to the regular drinker; get them into the heart of craft with more higher-margin beers.” CBA is all about higher margin.
If Widmer is their craft nerd brand and the goal for trade-up, it’s good that it also comprises the biggest share of CBA’s portfolio at around 44%; Kona and Redhook are evenly split at about 28% each. Kona is growing about 31% YTD; Redhook, at about 3.8% growth after 5 years decline. Widmer is doing well with its move toward the high-end occasion, bridging the gap at -1.6% YTD from being down a full 3%. Total portfolio growth was 9%.
DEMOGRAPHICS OR EVEN MORE ON MILLENNIALS!!! Sure they’re young and sexy, but Andy broke down the reason we’re obsessed with them as a segment. They’re only 21% of the alcohol drinking age population, but 29% of beer consumption. “As we look at growth prospects, we know craft has a cohort effect,” says Andy. “These are preferences that consumers are likely to take with them as they age.” Millennials have the highest volume index for [total] craft of any age group, at 126. Gen Exers are at 96 and Boomers at 86.
They may not be as plentiful as Gen Xers, but CBA research also suggests they greatly influence these other segments, too. They adopt trends earlier.
THEIR VALUE EQUATION. Even better: Value means something different to Millennials. They’re not price insensitive, CBA guys say, but are starting to make the value calculation in different ways. It’s not just about the maximum number of beers they can buy, but also about what they really want. Experience is important to them.
That doesn’t mean craft can take price with abandon. “We went up in the Northwest,” in October, sometimes upward of a 13% spike, Andy told CBD after the presentation. It was something they were swallowing hard for, which explains why they reported an anticipated moderation on the STR growth for Q4, and around 5.5-6% depletions growth for full year. “But the brands are in a good place,” says Andy. After any increase you’ll have a spike and then trough, and “hopefully it moderates after that.”
DEMO MINING IN ACTION: HOW THEY WON WITH REDHOOK. How does all this theory apply to building brands? Andy describes how it helped them prescribe the cure for Redhook. It had been a pioneer in the craft beer space in the ’80s, but “lost track of who it was,” says Andy. So they went back to the basics of what its core consumers had loved. “It was always about having really approachable craft beers, having an attitude, not being about the most esoteric hops, or bourbon barrel aging,” he says. So they returned to that DNA: put the brand in a heritage bottle, reskinned the packaging, and got back to basics with styles – ESB, Longhammer, etc. The brand “instantly took off,” and is now positive after years of decline. They got the consumer to rediscover.
BREWPIC: The new CBA mark.
Until tomorrow, Jenn