Liquor-branded malternatives - Beer Notes - product trends - Statistical Data Included

Modern Brewery Age, Sept 9, 2002 by Gregg Glaser

The newest craze in the beer business is a product that drinks writers in the U.S. have dubbed "malternatives." In the UK and parts of Europe, these same drinks have the moniker "alcopops." The manufacturers -- brewers and spirits makers -- call them Flavored Malt Beverages. What are they? Simply put, they are beer (a fermented malt beverage) flavored with fruit, cola, tea, distilled spirits and other ingredients. But when it comes to hard liquor, only the "flavorings" of spirits are put into the bottle here, not the real thing, as is done in Europe.

These liquor-branded beverages are made with beer, taxed like beer and distributed like beer, but packaged and marketed to remind consumers of their hard liquor older siblings. The names tell this story at a glance: Smimoff lce, Captain Morgan Gold, Stolichnaya Citrona, Sauza Diablo, SKYY Blue, Jack Daniel's Original Hard Cola, Bacardi Silver, Cruzan Jumble Brew. No liquor, just the brand name.

The appeal of these malternatives is to young 20-something adults, those newly-legal drinkers of alcoholic beverages who want to look grown up as they go out to restaurants and bars, but who haven't yet been weaned off the intense sugary sweetness of their favorite sodas. This category of consumer is giving malternatives a huge boost in the market.

THE FIGURES

According to Information Resources, Inc. (IRI), a market research firm that tracks the consumer packaged goods industry, supermarket and drugstore sales of malternatives grew 81 percent during the twenty-four weeks ending Jan 13, 2002, versus the same period last year. This compares to a one percent growth for the alcoholic beverage category as a whole. "Malternatives are making inroads into the $125 billion beer, wine, and spirits industry and have been particularly successful in penetrating the young adult (21-29) segment, which is entering a significant growth period as 'echo boomers' mature," IRI reported in a study released April 9. "IRI's research shows that young adults are more interested than other groups in trying new alcoholic beverage products," said Ed Kuehnle, president of IRI North America.

In figures released on May 19 that tracked the previous 52 weeks, IRI reported that case sales of mal-ternatives were 13,178,014 sold, an increase of 57.7 percent from the previous year, for total sales of $343,188,544.00, a 69.5 percent increase. The malternative case share of the overall beer and cider category was 2.6 percent (up 0.9 percent), and the dollar share of the category was 4.2 percent (up 1.6 percent).

THE PRODUCTS

Anheuser Busch (A-B) released Bacardi Silver earlier this year in a joint partnership with the makers of Bacardi Rum. This follows an earlier release by A-B of Tequiza, a malternative that hints at a tequila flavor in the name but isn't branded to any particular product

DIAGEO

Diageo, the international drinks company formed in December 1997 by the merger of Guinness and Grand Metropolitan, later acquiring Joseph E. Seagram & Sons, is the maker of the leader in the malternative category, Smirnoff Ice. Introduced in January 2001 using the name of one of Diageo's topshelf products, Smirnoff Vodka, Smimoff Ice topped the malternatives' 52-week sales list in May at 4,999,026 cases sold (a 446.4 percent increase over the past year) for sales of $136,313,712.00 (a 433.9 percent increase). Diageo released a second malternative in the U.S. last May called Captain Morgan Gold. This product plays off the name of Diageo's Captain Morgan Original Spiced Rum brand.

SABMILLER

Before South African Breweries purchased Miller Brewing earlier this year, Miller had entered into joint ventures with three spirits makers to produce liquor-branded malternatives. With Allied Domecq Spirits USA, the American sales, marketing and distribution company for U.K.-based Allied Domecq Spirits & Wine, Miller produces two malternatives for the U.S. market: Stolichnaya Citrona and Sauza Diablo, derived from Allied Domecq's spirits brands Stolichnaya Vodka and Sauza Tequila. Miller also produces malternatives in joint partnerships with Brown-Forman Beverages Worldwide and Skyy Spirits, making Jack Daniel's Original Hard Cola (Jack Daniel's Whiskey) and SKYY Blue (SKYY Vodka.)

CRUZAN RUM DISTILLERY

The Cruzan Rum Distillery of St. Croix, Virgin Islands, has introduced three malternatives based on the flavor of their rum. Cruzan Jumble Brew (cranberry flavor with vanilla spice), Cruzan WaziKoki (spices) and Cruzan Mojito (citrus flavored) are brought into the U.S. by Todhunter Imports Ltd.

ATF REGULATIONS

As with all alcoholic beverages sold in the U.S., malernatives fall under the jurisdiction of the Bureau ol Alcohol, Tobacco and Firearms (ATF). In an industry circular released by ATF on April 8, a new policy was instituted for the labeling and advertising of all flavored malt beverages made in the U.S. or imported from other countries. Reacting to complaints by anti-alcohol groups such as the Center for Science in the Public Interest (CSPI) and Mothers Against Drunk Driving (MADD) that malternatives are being misrepresented to the public as containing hard liquor, ATF ruled that labels on malternatives and advertising campaigns for the products may only make a reference to a branded liquor and cannot in anyway infer that distilled spirits are an ingredient in the beverage.