Whether you call it hard or spiked, alcohol-infused seltzer was the talk of the town in America this past summer, a fizzy craze that spawned numerous think pieces—media outlets ranging from The Wall Street Journal to The Atlantic weighed in—and, according to CNN, inspired a nationwide shortage of White Claw Hard Seltzer in September because the brand was “a victim of its own success.”
Maybe we should have seen it coming. For the past 10 years, beer drinking has been steadily losing its share of alcohol sales in the U.S., accounting for only 49% in 2018 (down from 55% in 2009), while hard liquor has risen to 36% from 31%, according to the Beer Institute. At the same time, we’ve entered a new era of self-care, with the wellness industry becoming a $4.2 trillion global industry, encompassing everything from skincare that has organic, vegan and cruelty-free origins to meditation apps. Add to that the growing $22 billion CBD and the $66.3 billion cannabis markets, and the movement away from beer—a traditional drink with a high-calorie image—starts to make a lot of sense.
In order to compete, or at least hold their ground, beverage manufacturers have had to adapt, sometimes radically. And Anheuser-Busch (known globally as AB InBev), which accounts for almost half of the U.S. beer market, a $114.2 billion industry, is an ideal case study.
Tapping into new products
Anheuser-Busch was actually early to the seltzer party. In 2016, having noted that only 43% of young consumers were drinking beer, down from 65% in 2006, the company acquired Spiked Seltzer (now known as Bon & Viv). The next year, Anheuser-Busch analyzed its portfolio and discovered it was responsible for only 10% of new products in the beer industry, and was relying too heavily on Bud Light and Budweiser (and none of its portfolio brands) for growth.
So this past August, the company introduced its own spiked seltzer under its Natural Light brand, launching with two flavors: Aloha Beaches and Catalina Lime Mixer. According to the IRI, a market research company, Natural Light Seltzer already has more than $9 million in sales.
These changes were part of a broader initiative to drive innovation, explains Marcel Marcondes, who became U.S. CMO of Anheuser-Busch in 2017.
In February 2018, the brewer introduced Michelob Ultra Pure Gold nationwide as the industry’s first USDA-certified organic beer. To promote it, Michelob Ultra Pure Gold partnered with Kelly Slater, an 11-time World Surf League champion, and sponsored the WSL Founders’ Cup of Surfing in 2018. At the time, Anheuser-Busch told Adweek the new product was in line with the brand’s health and wellness mindset. Michelob Ultra Pure Gold is now the third-fastest-growing beer brand, based on data from IRI, with more than $150 million in sales.
Anheuser-Busch has also created an internal team dubbed Apollo 11 that employs a “test and learn” model. The team, which meets daily, can prototype a new product, embark on a three-month pilot period to test new products in a few regions and then decide to either scale up the product or drop it.
In February, the company released Naturdays, a strawberry lemonade beer developed entirely in-house. That was followed this past August by Natural Light Seltzer, a hard seltzer in two flavors, brought to market by Apollo 11 in just 90 days. As it stands, Anheuser-Busch holds 52% of the share of innovation volume in the industry, with Naturdays holding the No. 1 spot in 2019 based on volume.
In addition to bringing new products to market, Anheuser-Busch has also “premiumized” some of its other offerings. For Budweiser, last year it introduced a “reserve series” limited-edition beer in partnership with Jim Beam. It includes Budweiser Reserve Black Lager, which will be available nationwide until spring 2020, and most recently, Discovery Reserve, an homage to the 50th anniversary of the moon landing. The company also released Bud Light Orange in April 2018 as an alternative in the light beer category.
Alongside these innovations, Anheuser-Busch has also taken steps to fortify its marketing efforts. Globally, AB InBev created its own internal agency, called Draftline, which in 2018 began working with the U.S. arm of the company to generate consumer-facing package design, content and billboards for all new products. Draftline, says Marcondes, “frees up time” for the company’s AORs to create bigger, splashier moments for the brands.
“We created Draftline to connect the power of data with creativity,” Marcondes said. “Why? To be more relevant.”
And the company started an in-house academy called the Marketing Culture and Capabilities team, which brings in speakers to teach Anheuser-Busch’s marketers how to deal with uncertainty and keep up with trends in earned media, licensing, storytelling and more.
To strengthen its understanding of consumers, the company launched an internal online community called Cheers!, made up of more than 6,000 people across the U.S. With Cheers!, Anheuser has been able to do everything from conducting live digital focus groups on Skype to putting out surveys and receiving responses overnight.
And, as recent members of Anheuser-Busch’s focus groups for Super Bowl ads can attest, the brewer has added neuroscience “helmets” (a mesh cap) to its product testing, to track a participant’s emotions about an ad or product.
“We’re improving the tools and technologies we use on the inside,” Marcondes says. “Neuroscience—which is a little crazy—but we do use it because one of the key problems on research is that people rationalize when they give you answers. So when they use those crazy helmets and we track their emotions, we get a lot of things that they cannot fake. We get their emotional reaction to things.”
How advertising fits in
So what role does traditional advertising play in all of this innovation?
Big, flashy TV spots are still essential for making a brand culturally relevant. They’re how the Dilly Dilly phenomenon and the entire Bud Knight universe were created (and the eventual Bud Light and Game of Thrones Super Bowl ad this year). Campaigns like these helped win Anheuser-Busch 11 Cannes Lions this year, a record for the firm.
But Marcondes is now looking beyond just making a splash. He says Anheuser-Busch has switched from measuring traditional KPIs such as share of airtime to share of mentions, and has built out a virtual newsroom that tracks each of the brands on a 24/7 basis and finds different ways to insert them into the conversation.
“This industry has been built [on] buying all the TV spots and sponsoring everybody,” he says. “But even with these sponsorships, our mindset has shifted dramatically. Instead of having visibility and … airtime, we want to be relevant to people. It’s not only about what we want to say, [but] how can we connect what we stand for with what they care about.”
At the start of the 2018-2019 football season, Anheuser-Busch placed 10 “Victory Fridges” stocked with free Bud Light in bars across Cleveland, with the caveat that they couldn’t be opened until the Cleveland Browns won a game. The company says it has since sold 500,000 more Bud Lights during the campaign in Cleveland than the year before. But it didn’t stop there. This season Anheuser-Busch also started selling the fridges in a variety of sizes at a Cleveland pop-up called B.L. & Brown’s Appliance Superstore. Units were priced from $199.99 and $299.99, with a limited-edition replica of last year’s Victory Fridges retailing for $599.99—and more than 2,000 of them sold in 48 hours.
The company also released a Budweiser campaign celebrating the 100th anniversary of the birth of Jackie Robinson and a tribute ad to celebrate the retirement of NBA basketball player Dwyane Wade. The latter focused on Wade “as a person,” says Marcondes, and moved people to thank Budweiser for the ad—exactly the kind of metric Marcondes says he “chases every day.”
Anheuser-Busch has taken an even sharper turn in how it promotes Natural Light, committing $10 million over the next 10 years to help students pay down their student loans.
“The more relevant you are to people, the less money you need to spend,” says Marcondes.
Under his direction, the company has set aside an average of 5% to 10% of its addressable budget—$559 million on media across linear, digital and print in 2018, according to Kantar—for its agency partners to come up with ideas that feel off the cuff and “contextual” to trends, explains Marcondes. This gives agencies room to experiment.
“It’s fundamentally a different company than when we first came on,” notes Neal Arthur, managing director of Wieden + Kennedy New York, Bud Light’s agency of record. “The biggest shift is now there’s a real appreciation and appetite for creativity. They really think about brands now and how a brand lives in the real world, and they’re really investing in every way.”
Ultimately, it’s about “finding genuine moments where the brand can interact with fans versus forced media moments,” says W+K creative director Brandon Henderson. “They’re putting all this work out there and letting the public decide what they want to choose.”