Beer Companies Look to a Healthier Brew for Growth
A growing push among consumers to live healthier lives has completely remade the food industry over the last half decade. Consumers shop differently, cook differently, and eat differently today than just five years ago. But does it also mean they will drink beer differently? That premise is explored in a recent report by Bernstein analyst Trevor Sterling that looks at whether a consumer shift toward health and wellness could shake up the alcohol sector through a rise in low- and no-alcohol beers.
Right now the “low and no” category, as the industry calls it, has a taste and image problem, and as a result makes up only about 2% of overall beer consumption. “Historically, in ‘serious’ drinking circles, alcohol-free beer was frowned upon,” Sterling writes. “Alcohol-free beer tasted bad, it didn’t make you look cool, and there was no buzz.” Despite the low base, Sterling expects that the move toward health will make low and no one of the fastest-growing categories in beer. The compound annual growth rate for beer overall was less than 1% between 2010 and 2016, but low and no beers provided a glimmer of hope at 5.2%, according to insights firm GlobalData.
The rate of growth has made the category a “major priority” for big brewers, Sterling tells Fortune. ABInBev has said it wants 20% of its global beer volumes to come from the no and low category by 2025—it is currently in the mid-single digits—and now has zero-alcohol varieties of its global brands. Earlier this year Heineken launched a no-alcohol variety of its flagship brand in Europe. “The growth is driven by consumer trends rather than the classic push from big brewers,” says Jonnie Cahill, Heineken’s senior director of low and no alcohol, citing an increasing interest on wellness and balance. “These are solutions and products that consumers are asking for.”
The industry has little choice but to act. Sterling cites statistics from the 2015 National Survey on Drug Use and Health, which found that more than 40% of 18-25 year-olds reported they have not had an alcoholic beverage in the past month. And brewers risk finding themselves on the “receiving end of anti-drinking campaigns focused on fighting obesity,” much like the soda industry has, Sterling says.
The challenge for companies like Heineken is turning the perception of a zero-alcohol beer as a “distress purchase” on its head. “It was often coming from a position of sacrifice or a negative”— consumers felt forced to choose the category because they were the designated driver or watching their weight, Cahill says. Heineken is trying to change that by marketing its low and no alcohol beers in the same way they market their higher-ABV counterparts. “We don’t have an asterisk,” Cahill says. “If we make this about alcohol we’ve lost.”
Part of the issue used to be that low-alcohol products were not the highest quality, Cahill explains, but that has changed as technology has improved. Brewers make low-alcohol beer by either filtering or evaporating the alcohol out, or by fermenting a low alcohol beer. Removing the alcohol content no longer means removing the flavor. The U.S. market may prove to be the biggest geographic challenge. Low and no alcohol beers already have a foothold in China, where they are more affordable. And in Germany, beers mixed with beverages like lemonade (called a radler) are commonplace. “It’s never been a feature of the U.S. beer landscape,” Sterling says. “I think there’s just more consumer resistance to the idea of low-alcohol beer.”
The fundamental question is why you would pick low or no alcohol beer rather than a soda if you are looking to avoid alcohol, or just drink water if you do not want the calories. Sterling did his own unscientific sample and found that less than half of the testers said they would rather drink the highest-rated zero-alcohol beer than a soft drink. “Alcohol content seems to still be the attractive offering for the beer, and not the flavor or other characteristics,” he writes. The better approach, he thinks, is positioning as a “good tasting” alternative to soda rather than a substitute for beer.
Citations
- http://for.tn/2wf95uk Fortune
- http://bit.ly/2feKcuu – Investing.com
Dunkin’ Donuts Wants to Lose the Donuts
Dunkin’ is losing the “Donuts” in its name. You will still be able to get donuts at all Dunkin’ locations. But the Massachusetts donut-and-coffee chain, which has been increasingly emphasizing its coffee more than its donuts, says it will be dropping “Donuts” from the name of some stores. Recently, the industry publication Nation’s Restaurant News reported that an upcoming Dunkin’ Donuts location in Pasadena, Calif., will cut “Donuts” from the store name and go with just Dunkin’. The Pasadena location will be the first of several to try out the shorter store name.
There are more than 12,000 Dunkin’ Donuts locations worldwide, and it looks like only a handful could be affected in the near future. But if the Donuts-less name is a hit with customers, it could be adopted more widely. The chain wants people to think of its stores as a destination for coffee, although it will still sell doughnuts. Dunkin’ Donuts said it will not make a decision on whether it will change its name until late next year. “While we remain the number one retailer of donuts in the country, as part of our efforts to reinforce that Dunkin’ Donuts is a beverage-led brand and coffee leader, we will be testing signage in a few locations that refer to the brand simply as ‘Dunkin’,” the company said. The coffee chain has been referring to itself as “Dunkin” since it began its “American Runs on Dunkin’” advertising campaign more than a decade ago.
The trial run on the rebranded name may become part of a larger redesign that is set to roll out during mid-late 2018, and Dunkin’ Brands plans to determine “Dunkin’s” permanence at that time. The move reinforces comments made by chairman and CEO Nigel Travis during the company’s second quarter earnings call. Travis discussed the company’s initiative to streamline menus and design a new store layout so as to boost efficiency and increase its reputation as a “beverage-led, on-the-go brand.”
Travis said both menu innovation and simplification were key components of the company’s efforts to transform Dunkin’ Donuts. In conjunction with the streamlined offerings, the brand expects to rollout a new store layout in the near future. Dunkin’ also said it will offer curbside delivery to all franchisees. The company is also expanding delivery in the Miami market in a partnership with DoorDash.
Yet rebranding initiatives—like other company and product name changes—can be risky. Many Dunkin’ Donuts loyalists are very protective of their “Dunkies.” That is especially true in New England, where the brand is core to community identity: This is a place that created a mural of Boston Red Sox hero David Ortiz made entirely of Dunkin’ Donuts last year, in honor of his retirement. What is more, many other past corporate rebranding efforts have been mocked and quickly dropped. In 2011, for example, Netflix renamed its DVD delivery service Qwikster, leaving customers confused and frustrated. Less than a month later, Netflix nixed Qwikster; both its DVD and streaming products still go by the name Netflix.
Two of the most disastrous failed name changes happened in 2009. That is when Pizza Hut was met with ridicule for trying out the shorter, supposedly cooler “The Hut” as its name. Even worse, RadioShack became “The Shack”—again, briefly. It is understandable that RadioShack wanted to rebrand itself—few people buy radios anymore, and the company was struggling mightily—but the move was largely viewed as an embarrassing grasp at hipness. It was also just plain unappealing: Who would go to the shack to buy premium electronics?
The Dunkin’ Donuts’ change, which, again, is only being tested at select locations, seems like it is on safer ground than those puzzling rebranding initiatives. Then again, customers often frown on any changes whatsoever to the brands they love. This is especially true in tradition-bound New England, where there could be suspicion and resentment if anyone dares to mess with residents’ beloved Dunkin’ Donuts.
Citations
- http://ti.me/2vxUBYC – CNN Money
- http://bit.ly/2wsZlvC – Nation’s Restaurant News
The Good News Is . . .
- The U.S. economy added 209,000 jobs in July while the unemployment rate fell to 4.3%, the lowest since March 2001, according to a government report. The number of employed Americans hit a new high of 153.5 million. The employment-to-population ratio also moved up to 60.2%, tied for the highest level since February 2009. The closely watched wage number was unchanged from previous months, with average hourly earnings up 2.5% on an annualized basis. The average work week also was unchanged at 34.5 hours. Bars and restaurants provided the biggest boost for the month with 53,000 more positives, while professional and business services contributed 49,000, the Bureau of Labor Statistics said.
- Archer Daniels Midland, Co., one of the world’s largest agricultural processors and food ingredient providers, reported earnings of $0.57 per share, an increase of 39.0% over year-earlier earnings of $0.41 per share. The firm’s earnings topped the consensus estimate of analysts by $0.05. The company reported revenues of $14.1 billion. Management attributed the results to continued strength in its Ag Services and Corn Processing business units, as well as contributions from recent acquisitions.
- Discovery Communications announced a $11.9 billion deal for Scripps Networks Interactive to build a new force in cable television focused on nonscripted programs. The deal unites Discovery, which owns Discovery Channel and Animal Planet, with Scripps, which has Food Network and HGTV, a channel focused on home improvement. The combined companies will control about 20% of the ad-supported pay-television audience in the United States. It also will be home to five of the top TV networks popular with women, bringing the Scripps channels together with Discovery offerings that include TLC, Investigation Discovery and OWN, the Oprah Winfrey Network. The announcement comes amid sweeping consolidation in the telecommunications and media industries. Under the terms of the deal, Scripps’ shareholders will receive $63 a share in cash and $27 a share in Discovery common stock.
Citations
- http://reut.rs/2v3Aqkp – Reuters
- http://cnb.cx/2lwnm3s – CNBC
- http://bit.ly/2hvZdsw – Archer Daniels Midland, Co.
- http://nyti.ms/2eV3nt4 – NY Times Dealbook
Planning Tips
Tips for a Mid-Year Tax Checkup
After April 15, most of us are happy to ban all thoughts of income tax until next year’s tax deadline looms. But taking a little time to do a mid-year check-in and tune-up can really be worth it, saving you last-minute panic and cash. Take advantage of summer to lock in tax breaks and catch up with any payments you owe. It is the slow period in the world of tax advising, and, therefore, a good time to plan ahead before the year speeds up in December. Below are some things you might want to cover in a mid-year tax checkup. Be sure to consult with your tax advisor to determine what tax strategies are appropriate for your situation.
If you have an extension to file your 2016 tax return, do it now – Why wait until Oct. 15, when the return is due? If you are expecting a refund, the money should be earning interest for you, not the government. And if by some chance you have miscalculated (and underpaid) the tax you owe, the sooner you pay up the better. Penalties and interest start to accrue the day after the April tax deadline, even if you have filed for an extension.
Stay on track with tax payments – If you have had, or expect to have, any life-changing events during the year–marriage, divorce, having a child, buying a house, a spouse taking or leaving a job–you may need to adjust the amount of tax that is being withheld from your paycheck. You do not want to give Uncle Sam a big interest-free loan, but you do not want any underpayment penalties, either. The IRS has a withholding calculator, so you can get it right. If you need to make any adjustments, file a new W-4 form with your employer.
Review your retirement accounts – Could you afford to bump up your contributions or even max them out? Some companies are limiting and cutting back on their 401(k) contributions, but that does not mean you should. Check on your investments and asset allocation.
Determine if you are close to the itemize/don’t-itemize point for deductions – If so, you may want to use a strategy called bunching, in which you push discretionary write-offs into a year when you’re going to itemize, rather than one when you take the standard deduction. Think of scenarios such as the following: At mid-year, it looks like you are almost at the point where you could itemize. You usually give $1,000 to a particular charity each year. You are close to retirement, so next year you will not need the deductions to offset as much income. So this year you double up on your contribution to take advantage of itemization when you need it.
Get organized – Avoid another marathon session of receipt logging next April by enlisting the help of an app. For instance, Shoeboxed Receipt and Mileage Tracker lets you scan receipts (valid for IRS documentation) with your iPhone, iPad, or Android mobile device, making it easy to track your expenses and deductions as you go along. The do-it-yourself program is free, or you can choose a paid plan (starting at $9.95/month after a free trial) that lets you mail in your receipts. Keeping up-to-date with expenses and maximizing your tax deductions is particularly important if you have business travel and entertainment expenses, or need to track business use of your personal car.
Citations
- http://bit.ly/2qWJ5kQ – efile.com
- http://intuit.me/2usaXxx – Inuit
- http://bit.ly/1m3zT7i – Investopedia
- http://bit.ly/2v4FXXY – TheCPADesk.com
- https://wlth.fr/2u5XReg – Wealthfront.com
