The Homa Files

TakeAway: New beer brands from retail giants Supervalu and Walgreens are part of a growing effort by chain stores to make a hit of private-label beer, a category that has proved difficult for retailers.

The retailers are trying to tempt shoppers with lower-priced alternatives to domestic mass-market brews such as MillerCoors’ Keystone Light.

The effort comes amid declining sales volumes for the beer industry, which has been hurt by stubbornly high unemployment.  But store-branded beers have struggled to gain traction for years in the U.S., in part because beer is typically consumed in social settings and brand image is important.

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Excerpted from WSJ, “Private-Label Beers Take a Shot at Earning Joe Sixpack’s Respect” By David Kesmodel, February 8, 2011

Supervalu, the third-largest U.S. grocery chain by revenue, began selling Buck Range Light, a low-priced domestic brew (12-pack of cans for as little as $5.99), in December. Drugstore chain Walgreens recently began offering Big Flats 1901 for as little as $2.99 a six pack. Costco rolled out craft beers under its Kirkland Signature brand in December 2008.

Part of the attraction for retailers is that sales of other store-branded goods—from soap to pasta—have been robust. Revenue for private-label products rose 2% last year in food, drug and mass-merchandise outlets, according to market-research firm Nielsen Co., compared with a 1% decline for branded items.

Annual sales for the U.S. beer market are about $96 billion, according to market-research firm Beverage Information Group. MillerCoors, which has a 29% share of the U.S. beer market, argues that house brands can pose downsides for the whole beer category. “Retailers should be cautious about over-proliferating their beer shelf with private label, unsupported brands that can commoditize the category”. Dave Peacock, president of Anheuser’s U.S. division, said “the industry is defined by players who invest heavily behind brands.” Anheuser-Busch controls about 48% of the U.S. beer market by volume.

Industry observers said it could be tough for Walgreens and Supervalu to build a following for their new brews. “I think it’s a hard sell, mainly because nobody has succeeded on the low-end with private-label beer,” said Harry Schuhmacher, publisher of the newsletter Beer Business Daily.

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This entry was posted on February 21, 2011 at 5:46 am and is filed under Beer & Liquor, Mktg - Brands - Private Label. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.