When Obsolescence Strikes
Three recent news articles about light beer, diet soda, and craft beer all conspire to tell an interesting story. Consumer product categories that have been fixed for years may be going obsolete, and that could be bad news even for the products displacing them.
Some days you're working your way through the news feed and an interesting gestalt forms. Consider these three items. First, the "rise" of light beer (scare quotes to be explained in a moment). From the Washington Post:
Preliminary analysis of national 2017 beer sales indicates that, for the first time in decades, Budweiser is no longer one of the top three beer brands sold in the United States. Bud Light, which has been the best-selling beer in America since knocking Budweiser into second place in 2001, retains the top position. Coors Light, which passed Bud to become the country’s No. 2 beer in 2011, remains in second place. Then comes the shock: Miller Lite has returned to the top three, narrowly edging out Budweiser.
For the first time in history, the three top-selling beers in America all have "light" (or "Lite") in front of their names. Mass market beers are still in freefall, but the full-octane version of these beers are falling faster--thus light beer's relative "rise."
With sales of Diet Coke in a prolonged rut, Coca-Cola announced last Wednesday that it is tweaking the design of its most famous zero-calorie soft-drink can to be more slender and colorful... Diet Coke may still be the second-most popular soda in the country, but soft-drink consumption has declined every year this decade. In its last annual report, Coca-Cola said that the volume of Diet Coke sold in North America declined by 5 percent—more than any other Coca-Cola beverage brand identified in the report.
Finally, word emerged today that Green Flash was scaling back its national distribution and retreating to just 17 states, while laying off 15% of its workforce in the process. Brewbound:
However, rationalizing 18 percent of the company’s distribution also required the company to cut its operating expenses, Hinkley said. Those cuts amounted to 33 workers across production, operations, sales, marketing and administration. However, the cuts won’t impact Green Flash’s retail business or Alpine Beer Company, he added.
These three stories form a chain of linked phenomena. Mass market products reached their zenith sometime in the 1970s, and then choice started creeping into the picture. Light beer was introduced to a large audience in the mid-70s, about the same time "diet" sodas hit the scene (Diet Coke debuted in 1982). This was a concession to consumers in a country of 200 million people, but it also signaled the end of the kind of dominance single brands could command in the height of the industrial era. The Atlantic article points out the inroads bottled water, flavored waters, and seltzers have made in the past decade, which have sent the fortunes of large soda brands south, while the Washington Post piece recaps what's happened to big beer.
Taken together, this feels like one of those moments where there's a changing of the guard. As categories evolve, certain products become obsolete. In the 1970s, breweries launched light beer as an alternative to "full-flavored beer," the logic of which became unclear when craft beer arrived. If you're going to drink something with calories, why not have something with more flavor than Bud? Diet Coke was a "healthy" alternative to regular soda, but with the arrival of zero-cal bottled water and seltzers, the reason for drinking something packed with chemicals that tastes mildly unpleasant becomes less obvious, too. Among sodas, "diet" is becoming obsolete; among mass market lagers, "domestic premium" may be headed toward obsolescence.
As for the wannabe national craft breweries, finding a way to justify selling just 18% of your product in 33 states, as Green Flash had been doing, is also hard to justify. Green Flash is a representative of one of the new product categories that has been cannibalizing big beer for decades, but as product categories collapse into tiny fragments, trying to build even modest-sized national brands becomes challenging. Whether we're talking soda or beer (soft or hard fizzy drinks), there is a lot of choice out there. Companies are going to have to figure out what, or where, it makes sense to keep selling.