FORTUNE — Amid the shelves captivation basic brands like Coors and Miller Lite, Walgreens shoppers now accept accession best in the beer aisle: Big Flats 1901. Big brewers are abaft best of the options in the chain’s coolers, but not this one. In the latest amplification to its abundance brands, which already accommodate sunscreen and vitamins, Big Flats 1901 is Walgreens’ private-label beer.
Walgreen Co.’s (WAG, Fortune 500) move into the private-label beer amplitude signals a growing accepting of store-brand appurtenances by U.S. consumers — an accepting that’s alone gotten stronger with the bread-and-er downturn. “In abounding categories clandestine characterization absolutely put a cavity in manufacturers and brought added advantage to retailers,” says Benj Steinman of Beer Marketer’s Insights.
But while clandestine characterization appurtenances in accepted accept fabricated appropriate into consumers’ cabinets, clandestine characterization beer has been conspicuously bootless in demography a block abroad from civic brands.
Big Flats 1901 is aing the ranks of added clandestine characterization beers already on the bazaar — such as Kroger’s Tap Room 21, Caguama, and Hollande 1620, and 7-Eleven’s Game Day — but brands like these accomplish up alone a tiny atom of the industry as a whole.
Data from Nielsen provided by the Clandestine Characterization Manufacturers Association begin that during the 52 weeks catastrophe December 25, clandestine characterization fabricated up a tenth of a percent of dollar sales in beer in U.S. supermarkets, biologic chains, accumulation merchandisers, and Wal-Mart (WMT, Fortune 500). Compare that that to the 17.4% of dollar sales for all clandestine characterization goods, an about 2% acceleration in complete dollars over the antecedent year.
The ultimate action for clandestine characterization beer is the aforementioned as it is for any added category-better margins for the abundance and lower prices for consumers. BB&T Capital Markets analyst Andrew Wolf says that in accession to breeding incremental sales, Big Flats 1901 will actualize what he calls a “value impression” over Walgreens’ accomplished beer category.
If consumers apperceive they can get Big Flats 1901 for $2.99 a six-pack at Walgreens, the aftereffect is somewhat of a aura aftereffect (or beer goggles, if you will) about the blow of the beer in the store. It additionally becomes a point of adverse for Walgreens. The approach goes that if clandestine characterization is done right, it can advice a banker become beneath replaceable: Shoppers can get AB InBev’s (BUD) Budweiser anywhere, but they can alone get Big Flats 1901 at Walgreens.
So, why hasn’t clandestine characterization beer taken off already? In part, clandestine beer is collapsed because beer in accepted ranks as one of the best brand-loyal artefact categories. Deloitte begin in its 2010 American Pantry Study that 41% of bodies surveyed that purchased beer said it was a must-have cast for them. (Pet aliment topped the account at 49%.)
Beer drinkers accept the mindset that they’re a Bud drinker, they consistently accept been a Bud drinker, and they consistently will be a Bud drinker, according to Harry Schuhmacher, editor and administrator of Beer Business Daily. “Nobody says that about toothpaste,” he adds.
Deloitte begin that private-label articles with the greatest assimilation are those that accept beneath afterimage back they’re consumed-think a can of tomatoes or a bag of flour. Because beer bubbler takes abode in a amusing context, it’s purchased added on angel than added goods. The massive business budgets about beer accept paid off in creating cast impressions that are adamantine to diffuse. Cast is declared to say article about a beer drinker-I’m adult so I alone booze microbrews, or I’m alfresco the boilerplate so I booze Pabst Blue Ribbon.
Despite our built-in associations with beer labels, the anticipation is that at about 50 cents a can aggravating Big Flats 1901 ability be too acceptable a accord to canyon up. “It aloof takes all the alarm out of if. Where’s the risk?” says Harry Snyder of Winery Exchange, which develops private-label beers, including Big Flats 1901 for Walgreens.
But actuality cheaper may not be enough. Cheap beer is one articulation of the bazaar that is not lacking, and brewers with able ad dollars won’t accord it up lightly. “The big brewers, AB-InBev and MillerCoors [a adventure of SABMiller and Molson Coors (TAP)], accept been adeptness in attention the lower abut by creating lower-end brands,” explains Schuhmacher. It’s this affectionate of beer drinker that tends to be the best loyal.
Price may be a big way to attempt on beer, but amount is about depending on what bank the beer is actuality awash in. For example, rather than activity afterwards the cheapest articulation of the market, Costco (COST, Fortune 500) has its own ability beer-a class that’s about pricier, varies added broadly in taste, and won’t address to everyone. The aggregation is aggravating to accommodate an bargain another to a college bank of the market. “It’s the fastest growing segment,” explains Annette Alvarez-Peters, Costco’s Assistant Accepted Merchandising Manager for wine, spirits, and beer. “We anticipate of it as wine so to speak-there’s a lot of experiment, there’s a lot of trial” on the allotment of the consumer. Ability beer drinkers are accordingly advised added abandoned drinkers and added accommodating to try article new, including Costco’s brand.
So if Costco is one of the attenuate success stories, and is aggressive in a college end beer category, why are added aliment block the segment? From Walgreens’ all-embracing cast perspective, besides bigger margins, clandestine characterization beer plays a allotment in its action to action added aliment products. “They absolutely appetite to try to abduction a accessibility aliment shopper, the what’s for-dinner-tonight shopper,” explains BB&T Capital Markets analyst Wolf.
Beyond the customer appeal, Jan-Benedict Steenkamp, a assistant of business at the University of North Carolina’s business school, says that clandestine characterization beer acts as a batten for retailers afraid about actuality taken for a ride by the beer-brewing giants. “You accept your own weapon,” he explains. And admitting that’s one acumen retailers ability advance clandestine characterization beer, it of advance wouldn’t be the aboriginal time booze has been complex in a fight.
First Published: February 8, 2011: 1:34 PM ET
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