As the craft brewing segment matures, many brewers, distributors, and retailers have begun to wonder whether shelf sets organized by style (traditionally used by chain retailers to market wines) offer a better model for craft beer than the shelf sets organized by brand (traditionally used by chain retailers to market beer).
When I started to dig into this question, I was conflicted. I worried that the interests of the craft consumers and brewers, and those of the distributors and retailers, might be at odds with one another. The spirit of craft brewing has always been focused on giving beer drinkers the product quality and variety they demand, harnessing imagination and the mastery of brewing to exceed expectations of what’s possible. Betraying the consumer to push a brewery agenda was out of the question.
The more brewers, distributors, retailers, and industry experts I spoke to, the more confident I became that brand sets—appropriately supplemented with style education—offer the best option for craft beer drinkers, brewers, and the rest of our partners in the craft supply chain. I’ll tackle each of these tiers of the system below, starting with retailers.
First, it’s important to note the obvious fact that not all chain retailers are alike in their goals and business models. What works for one, may not work for another. Grocery stores, in particular, are an especially poor match for style sets. In the grocery channel, brand sets make for neater, more appealing shelves, better support for popular ‘local’ and ‘seasonal’ themes, and an easy and efficient re-stocking process.
When I spoke to Dave Mevoli, corporate communications director for New England and Mid-Atlantic-based L. Knife and Son, he emphasized that: “Products from the same supplier are designed to look good together. Style sets present a ‘mishmosh’ of packaging—different styles and sizes of bottles, different shapes of six and four-pack carriers mixed in with each other—it’s just messy and not visually appealing.”
There’s evidence that consumers agree. In a pilot test run by Bump Williams Consulting in cooperation with nine grocery retailers from across the U.S., consumer satisfaction level went down in the style set pilot stores compared with brand set control groups in the same district. And consumers’ dissatisfaction appears to be about function not just form. To function correctly, sets have to nail the issue of find-ability, allowing consumers to navigate to what they’re looking for with minimal effort.
This brings us to one of the primary driving forces in craft sales right now: the “buy local” mentality. Whether consumers are motivated by supporting their local economy, minimizing their carbon footprint, or maximizing product freshness, many of them are looking for local products.
Locality was a common theme echoed in every interview I conducted:
- Whatever can be done to set up sections of the store with local beers is hitting a need right now. - Bump Williams, Bump Williams Consulting
- We’re seeing an amazing surge in our local crafts. They’ve taken off because they are local, and consumers are asking for 'what’s local’. - Erik Budrakey, craft and specialty brand manager, DeCrescente Distributing, Mechanicville, N.Y.
- Local is huge everywhere I go. Man, it resonates well with consumers. I think it’s something all wholesalers should be focusing on. - Jim Schembre, national general manager, World Class Beer, Indianapolis, Ind.
So why does this matter? With brand sets, it’s easy to group those brands by city, state, region, etc., highlighting those that are from the local breweries. But in style sets, local products are not only scattered across a variety of shelves, but the brand identity the local brewery has worked so hard to construct, and that consumers are seeking out, is de-emphasized because their similarly designed packages are no longer adjacent.
Finally, there’s the efficiency issue. At minimum, style sets require grocers and their wholesalers to insert an additional step into the process and rearrange their stock by style before it hits shelves. While it can certainly be done, it presents an obvious challenge. Mevoli summed it up by saying: “If you have thirty or forty SKUs, fine, but if you have hundreds it certainly takes more time. It would change how we deal with back stock and filling shelves, how pallets are built, and how trucks are loaded. It would be an entire mind shift.”
Now, that all might be worth it if it pays off in higher ROS, but it’s not at all clear that it would. Schembre focused on the upside, noting that: “Yes, it takes more operations work. Our sales costs are double that of a non-craft wholesaler, but our gross profit is also double. Sometimes this is what you have to do if you want to sell an $8 product instead of a $4 product.”
Williams was less optimistic, noting that in his pilot study, even after six months, key packages and styles were out-of-stock in the style set stores at much higher rates than the control groups. He found that without a way to spot holes at a glance: “retailers couldn’t order properly and distributors couldn’t manage the shelf. Seven of the nine chains went from positive craft segment sales trends before the reset, to negative trends in the six months following the reset. Seven of the nine retailers went back to brand sets following the pilot.”
This takes me back to my original point that not all retailers are created equal. I also spoke to Brian Bowden, the VP of Spirits, Beer, Tobacco, and Mark Ryan, director of marketing, at the California-based specialty alcoholic beverage chain Beverages & More! Bowden noted they’ve run pilot tests of style sets and had better results.
His perspective was that while novice consumers might prefer a brand set, savvier consumers prefer a style set. Ryan chimed in to say that BevMo!’s ability to create and maintain style sets communicates their expertise in craft beer to the savvier consumers.
It’s worth noting that BevMo! operates in a specialty channel and had trained staff stationed in the craft beer section to help direct customers. In supermarkets, convenience stores, super centers, drug stores, and wholesale clubs of the world, there’s unlikely to be the quantity or quality of staff support for consumer navigation that BevMo! is able to provide.
If we move up the chain a bit to the distributors, I heard the same philosophy time and again: Educate by style, sell by brand. Budrakey put it this way: “As a brand manager, my job is to grow brands. I have a responsibility to my suppliers. It’s not my job to grow lagers or IPAs. It’s my job to grow Brooklyn or Harpoon. So, I’ll support that with a ‘Styles of the Season’ sign focusing on and describing märzens, porters, and pumpkin beers in the fall. But I still set the shelves by brand.”
Schembre hammered home the education piece: “If there’s no information available, people go with what they know. And what they know is what they’ve seen on all the TV commercials.” He also emphasized merchandising by style. “We’ll look at velocity reports by style, and if IPA is selling well, we’ll put more IPA in there. Of course, sometimes the only reason something isn’t selling well is lack of education, so we’ll get more information cards in there for those styles.”
The biggest worry of the distributors I heard was “wine-ifying” the market. Mevoli commented: “Look at how consumers view wine. They don’t stick to a brand, they just say, ‘Give me a cabernet.’ That’s really a disservice to these craft brewers that have spent so much energy and passion building a fantastic brand.”
Schembre thought it might already be to late to counteract this trend, but saw its potential impact on the segment in the same light. “The personality of craft beers and the story about the real people who make them is what resonates the best. But when some of these breweries out there start to struggle, we might see some pricing issues, and those breweries without strong brands will be hit by the lower priced offerings in their style.”
One final concern brought up by the distributors I talked to was price flow in the planograms. When I spoke to Jessica Muskey, the VP of marketing for Craft and Specialty Brands at Premium Distributors of Washington, D.C., she told me that: “We’ve had some stores in our footprint re-set their shelves by style. Instead of leading up the set with your higher priced craft beers organized by brand, you end up with a craft wheat beer right next to one from Shock Top selling for several dollars less per six-pack. You lose the higher priced sale because it presents them right next to one another as though they are the same thing.”
Encouraging this price-oriented purchasing hurts the whole chain, especially if pressure to offer low prices encourages brewers without the same economies of scale as the national brands to compromise on quality.
The beauty of American craft beer is the innovation. We wouldn’t have the current craze for American IPAs—the most popular style of craft beer in grocery stores today—without the initial rebellious craft brewers who were willing to push the limits of the hoppiness horizon. But style sets are the enemy of innovation.
Limited Style Sets Hinder Innovation
If every beer has to fit into one of a small handful of style sets (wheat beers over here, stouts over there, etc.), breweries will feel compelled to tailor their portfolio of products to fit those limited style sets in order to get in front of consumers. Oh sure, there will be an “All Other” section, but I can bet you that they are relegated to the least trafficked part of the shelf and bloated with everything from berliner weisse to bourbon barrel-aged barley wine. These products will languish compared with those styles picked to enjoy the spotlight.
Consumers will have a much harder time discovering new styles when they don’t sit alongside the more familiar products from the same brewery. Don’t believe me? Look no further than the wine shelf at your local supermarket. There’s a reason why vineyards across the country try to coax Cabernet Sauvignon and Chardonnay grapes out of land better suited for less well known cultivars like Nebbiolo and Albariño. Style sets channel demand into a narrow range of styles, limiting choice for consumers and undermining the whole spirit of the craft brewing movement.
Assigning Meaningful Style Sets
Even aside from the impact on innovation, I doubt it’s even possible to construct style sets in a way that is meaningful for consumers. For starters, while “seasonal” might make sense as a style category for the purposes of data analysis for companies that track grocery scans, it’s a hollow concept when we’re actually talking about what beer tastes like. One brewery’s summer seasonal might be a kölsch, another’s a Bavarian hefeweizen, and another’s a saison—and that’s within a single season.
Across the course of a year, here at Ninkasi, our seasonal SKU will change from a dry hopped pale ale in the summer to a dark double alt in the fall. And when the new year hits, we will introduce our ReNEWale, which was a robust porter in 2012, but a new style each year. Where’s a retailer to stock these items? With the pale ales? The porters? The miscellaneous?
The Risks of Style Sets
One risk is that consumers will come in looking for beers like ReNEWale in the porter section and won’t find what they’re looking for because all the seasonals are together somewhere else. They leave disappointed and the sale is lost for everyone in the chain.
The other risk is that the style sets give consumers a false sense of certainty that they know what a particular product will taste like. Just think: the IPA set is likely to encompass not just English and American variations on the style, but East Coast and West Coast cousins, double and imperial IPAs, black IPAs and white IPAs, rye IPAs and wheat IPAs, dry hopped IPAs, fresh hopped IPAs, herbed IPAs and fruit IPAs. A consumer could easily pick up one, dislike it, and reject the entire style category, when what actually disagreed with their palate was the sub-style they chose, or a particular brewery’s yeast strain.
Preserving Brand Identity
Finally, there’s the issue of control over own destiny. We craft brewers spend as much time thinking about how to present our beers to the public as we do brewing them. With distributors and retailers constructing style sets, organizing the shelves by style transfers a lot of the control over brand identity into their hands.
Placing particular brewery’s Belgian IPA with the IPAs rather than the Belgians, can spoil the ‘Belgian-style specialist’ image the brewery has been constructing for itself. The same goes for those who don’t style label their beers. Sometimes the mystery is part of the mystique, letting a wonderful beer overcome a stigmatized style simply by leaving the style off the label and selling the beer on the strength of its name and taste. By stocking beers by brand, craft brewers can control the brand images that are a critical part of their success.
So, What's a Distributor to do?
Distributors have an essential role to play in communicating what the beers in their portfolios are all about, and there are myriad ways to educate consumers and retailers while retaining the brand shelf sets that offer the many advantages discussed above.
Educate From the Inside Out
A good first step before looking outwards would be to look inwards and make sure your team is fluent in the language they need to accurately and comfortably describe the products they represent. This goes beyond categorizing beers by style—and into understanding the ingredients and processes that contribute to making craft beer, the foods that pair well with different beer flavors, and proper beer handling and serving techniques, right down to the proper glassware.
There’s an introductory level Beer 101 course on the Brewers Association’s CraftBeer.com website that's a good place to start. Also seminars at BA events like SAVOR and the Great American Beer Festival can provide some basic beer knowledge as it pertains to food. The MasterBrewers Association of the Americas’ Beer Steward Certificate Program and the Cicerone Certification Program are great options for more advanced studies with an emphasis on on-premise service. For a deep dive into beer quality and style identification, the Beer Judge Certification Program might be the way to go. Information on these and many other programs are listed on the Beer Schools page of CraftBeer.com.
Knowledge at Retail
The next step is sharing this knowledge with retail accounts and working with them to figure out how to share it with consumers. Point-of-sale items can play a critical role here. Shelf flags can tell consumers a style story, while letting the beer sit within a brand set. Carousels with beer style information and food pairing ideas—similar to those already deployed in many produce sections and near meat and fish counters—could also help. For bigger impact, large signage hanging from the ceiling and cooler wraps can play up particular styles. When there’s room for displays, these can be used extremely effectively to educate and sell.
Budrakey told me that the beauty of a multi-branded “Style of the Month” display is that it goes up and comes down, it doesn’t have to be maintained indefinitely. It allows the store to cover twelve styles in a year, keeps the retail experience fresh for consumers, and it seems to maintain brand identity. He’s found consumers are likely to go back for the actual brands that have been displayed, not just any product in that style.
The question of brand versus style sets is a good one to ask. At its core, it’s about how to best support a segment of the beer category that’s become critical to distributor and retailer success, not to mention customer lifestyles. As Schembre told me: “We believe a large part of our craft business is incremental to the existing category sales. If we shut down tomorrow, at least half of our consumers wouldn’t trade over into non-craft beer. They’d switch to wine and spirits.”
So, the stakes are high. Whether the issues preoccupying you are providing visual appeal in the aisle, easy navigation for consumers, re-stocking efficiency, brand differentiation, or continued innovations, the answer seems clear—when it comes to chain retailers, brand sets are the way to go.
Jessica Jones is the Director of Business Process Development at Ninkasi Brewing Company. In this role, she is responsible for developing tools and processes that help all departments of the company to operate more efficiently, and for coordinating the sales and production functions via sales forecasting, production scheduling, inventory management, and logistics and distribution. She has been a member of the Brewers Association Market Development Committee since early 2012, working with the other committee members to support the continued development of the domestic market for craft brewers. Prior to joining Ninkasi Brewing Company, Jessica spent time working for Firestone Walker Brewing Company and in the management consulting industry. Jessica received her BA from Harvard and her MBA from Stanford’s Graduate School of Business.