Making Beer Ever Lighter

The WSJ today has a good cover story today about Anheuser Busch's strategy of making Budweiser pleasing to every palate across America. How can they do that? By making it as bland as possible. However, with regional brewers like Sam Adams, Boulevard and Anchor and niche brewers like Dogfish Head, Abita and New Belgium as well as Miller Lite eating up Bud's market share and selling more flavorful beer, AB's strategy is no longer working.

For decades, Anheuser's aim was to develop a beer that would sell across America, one inoffensive enough to appeal to the nation's varied palate.

Now, that goal is out of step with a shift in consumers' tastes. From coffee to fashion to media, niche products are rising, especially ones that consumers can customize, and the great mass brands of the postwar period are under attack. Imported brews and smaller so-called "craft" beers with stronger flavors are more readily available and are selling fast, as are wines and spirits.

Moreover, for all its devotion to consistency, Anheuser concedes Budweiser has changed over the years. It quietly tinkered with its formula to make the beer less bitter and pungent, say several former brewmasters, a byproduct of the company's desire to create a beer for the Everyman.

The question of taste has created opportunities for Anheuser's rivals and has resulted in some ferocious marketing battles. Anheuser, an industry bellwether, used to shrug off such challenges. Now, among myriad other factors, it's begun to take a toll on Anheuser's financial performance and has led beer makers to a moment of self-reflection.

Anheuser's flagship brand, Budweiser, has been losing market share for more than 15 years. Two years ago, Anheuser as a whole lost market share as its Bud Light for the first time didn't pick up the slack. In 2005, after years of confidently raising prices, the brewer decided to discount cases of beer to retain customers. The brewer's profits last year slipped 18% and its stock fell 14%.

Anheuser says the earnings decline is unrelated to the taste of its beer. It also notes that Bud Light is on average more expensive than Miller Lite, which Anheuser says is a sign of the brand's continued strength. The company, however, has also acknowledged that the discounts were designed to combat SABMiller PLC's Miller Brewing Co., which has relentlessly poked fun at Bud Light's flavor in national TV ads. In part because of the discounts, Anheuser's shipments picked up late last year. The company is expected to report first-quarter earnings today.
...
In search of new drinkers, Anheuser last year threw more than 30 new products into the market. And, in a little-noticed move Anheuser is loath to discuss, the brewer recently added more hops to its beer to make it stronger.

After World War II, marketers strived to create products that would appeal to palates across the U.S. They succeeded, and partly with the help of the interstate highway system, built an unrivaled mass-market food industry. As refrigeration became widespread, it swiftly delivered products to every corner of the country at a reasonable price.

A diverse nation learned to like the same things. As regional varieties gave way to national brands, companies embraced soft-edged, broadly appealing formulas, which gradually lightened products from cigarettes to bread. It was a winning strategy that created success stories such as ranch dressing, Maxwell House coffee and Kraft cheese. A similar strategy in Hollywood produced the mass-market situation comedy and the Hollywood blockbuster. Market research fed the trend with its relentless tendency to find the common denominator.

For a long time, consumers were satisfied. Daniel Ennis, director of the Institute for Perception in Richmond, Va., a group that analyzes consumers' flavor preferences, says every person has an "ideal" taste for a beer or potato chip or cookie. But in the real world, companies create foods consumed by millions. "People live in suboptimal situations," says Mr. Ennis, who has consulted for Miller. "They don't send their kids to the best schools, they don't have the best jobs, they don't eat the best foods."

Or drink the strongest beer. From 1950 to 2004, the amount of malt used to brew a barrel of beer in the U.S. declined by nearly 27%, and the amount of hops in a barrel of beer declined by more than half, according to Brewers Almanac. Part of that decrease is due to improvements in how brewers extract flavor from hops. Nonetheless, beer's taste became steadily lighter. (Flowers of the common hop plant, Humulus lupulus, are used as a flavoring and stability agent in beer, helping create its characteristic bitter taste and aroma.)

The beer industry measures bitterness using a scale called International Bitterness Units. The higher number of IBU's, the greater the bitterness. Over the past twenty years the IBU's of most American-style lagers has dramatically declined, from roughly 15-20 IBU's to fewer than 10 today, according to the Siebel Institute, a Chicago laboratory and brewing school that tests beer.
...
The gradual move toward lighter tastes accelerated in the mid-1970s when Miller introduced Miller Lite. Anheuser followed with Bud Light several years later. Consumer tastes, influenced by the 1980's fitness and diet craze, gravitated toward products that promised fewer calories. Brewers followed and started tweaking the flavor of their full-calorie lagers as well, according to beer executives and industry analysts.

Bud's ever-increasing lightness worked for years. But lately, consumers have started cooling on mass brands in favor of smaller, often unknown rivals. The proliferation of new media gave consumers more information about niche products. Their tastes grew more sophisticated and aspirational, spurred by an increase in overseas travel.
...
"I think you're seeing an increased consumer acceptance that bitter is a positive characteristic in beer," says Keith Lemke, vice president of the Siebel Institute.

Last year, craft beer shipments by volume grew 9% to 7.1 million barrels, according to the Brewers Association, the craft beer industry group. Beer drinkers reached for tiny brands such as Fat Squirrel Nut Brown Ale, Obsidian Stout and Dogfish Head Chicory Stout. Likewise, imported beer volume grew 7.1% to 25.6 million barrels, according to information compiled by the Beer Institute, the industry group for the big brewers.

At the same time, domestic beer volume dropped 1.2% to 178.8 million barrels. While the sales of regular American beer still dwarf those of the upstarts, the momentum is not running in its favor.

Those who know me, know that I don't drink AB products. Miller Lite is my preferred brand while golfing and Boulevard and Goose Island products make up most of my other beer drinking. A beer with an IBU of 10-20 is just not flavorful enough for me to waste my time with. I prefer a really hoppy beer, one of my favorites is called Hazed and Infused. I've felt for a long time that Anheuser Busch has ruined Americans' taste for real beer. It's nice to see an article like this that points out AB's strategy and that more flavorful beers are catching up. Mostly, though, I was just interested in a WSJ front page article about beer.