Time to Toast Private Label Beer

February 15, 2011
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Private label beer may be a product whose time has come, a noted beverage industry analyst tells PLBuyer’s eReport.
“Statistics show private label growth in alcohol sales. So far it’s primarily wine and spirits, but consumers’ take on beers is changing. It’s more and more a commodity item, with little difference between the three giant light beers,” says Tom Pirko of Bevmark, a beverage consulting firm.

“Consumers got interested in craft beers because they’re looking for something different. They’re willing to experiment, and looking beyond advertising. That’s an open door for private label.”
And food retailers recently have been walking through that door with new private label beers. Supervalu, the third-largest U.S. grocery chain by revenue, is introducing Buck Range Light, a low-priced domestic brew. Drugstore giant Walgreens recently began selling another private label beer, Big Flats 1901, for as little as $2.99 a six pack.

“The brewers have been like ostriches with their head in the sand, whether faced with imports, crafts or otherwise. They thought they could control the branding and distribution,” says Pirko.

The major brewers’ business model is predicated on driving sales through advertising. But with the proliferation of cable and Internet media, traditional mass market advertising is losing its effectiveness in the beverage world.
“People used to strongly identify themselves as Coke or Pepsi drinkers, but not anymore,” Pirko notes. “They’ve moved away from lifestyle identification with products. They’re looking for new sensations and tastes.”   
If the beer-market fragmentation Pirko already sees continues, “The biggest gains will be for craft beers,” he says, “but it will also happen at the low-end and middle of the market as well. A special opportunity has come along [for private label], as it did for coffee and other categories.”

Pirko, however, won’t hazard a growth forecast for private label beer. One potential impediment to private label beer sales will be raw material costs, he notes. “The price of barley and wheat are zooming up and that’s putting pressure on the brewers. How they absorb those price increases will make a difference in how things unfold,” he says.

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