Brewers
Power Up Technology for 'Smart' Beers
Source:
Dow Jones
SIMON
ZEKARIA
Jun
25th
Lager
is going high-tech.
With
demand falling in the West's biggest beer-drinking markets, where mainstream
sales have been stung by a consumer shift to spirits and wine, brewers are changing
up the game by plowing money into research and development.
At
Milan Design Week in April, Heineken NV HEIA.AE +1.14% released 200
"Ignite" bottles of its eponymous lager brand that strobe when they
are drunk, light up when clinked with another bottle and flash as the music
beats thanks to a custom-built circuit board with motion sensors, computer
processor and wireless receiver. When left alone, the bottle dims and goes into
hibernation.Paul Smailes, Heineken's global head of digital, said the brewer
was planning to release an improved version next year at large music events.
"We
have lost a little bit of ground to spirit and champagne brands. We really
wanted to tackle that in an innovative way," said Mr. Smailes.
Connected
products are having a "big impact for brands and companies around the
world," he said. "Other brands are already playing in this space,
like the Nike+ FuelBand and the Pebble smartwatch. Adidas has a smart shirt,
shoes and [soccer] ball."
Bernstein
Securities analyst Trevor Stirling said "big beer was asleep at the
wheel" on marketing for many years. "They have woken up. If they
didn't do this, beer would continue to decline in relevance as an [alcohol]
category."
There
must be care in assessing technology's impact on consumer perceptions,
according to Simon White, chief planning officer of advertising agency
Draftfcb. "Once you start adding wizzy bits of technology, it could start
affecting brand image," he said. "Although the taste is the same in
reality, your perception of that taste changes."
However,
Mr. White said the social aspect of beer drinking lends itself to social-media
technology. "If you are a young man going out drinking in a bar, it is not
about the beer but being seen," he said. "If beer truly is a social
lubricant, then [technology] can help you."
This
can be advantageous, said Pete Brown, writer and blogger on the beer industry.
"I think brand owners mistake the level of reverence that consumers have
for their product. The brand isn't the sole focus of being there. It is very
much a facilitator to having a good time."
With
mobile technology, the cost factor is critical. Heineken doesn't disclose what
it spent on the Ignite project, but Mark Van Iterson, the brewer's global head
of design, said that even though the souped-up bottle won't be found "in
every six pack in every supermarket," ground-breaking product innovation
will reap financial rewards. While some lager brands allow interaction with
smartphones by scanning bar codes, beers with embedded motion-based technology,
like the "Ignite", are available to consumers only through marketing
events. Mr. Van Iterson says that may change as the product becomes more
sophisticated.
"The
more functionality we add to it, the more value it will add for people so maybe
they will be prepared to pay for it and it becomes a business case."
Draftfcb
analyst Chris Miller says current interactive beverages are "just the tip
of the iceberg". "I would guess in 10 years it would be strange not
to have it. The challenge will be to move it from gimmick to relevancy."
Budweiser's
"Buddy Cup," created by the company's Brazilian unit, already has
smartphone connectivity. A code on the bottom, when scanned though a Budweiser
smartphone app, links the tumbler to a Facebook Inc. FB +1.30% profile. A
"bump sensor" then enables the drinker to "friend" request
someone when two cups strike during a toast.
The cup
was tested in a pilot event in São Paulo. Brazil is one of parent company
Anheuser-Busch InBev NV's ABI.BT +2.12% major markets, yet a relatively new one
for the Budweiser brand. Brazil is hosting the FIFA soccer World Cup next year,
representing a big opportunity for the global brewer to release innovative
products.
"Once
technology is proven and consumer benefits are proven, then we roll [products]
out," said Pedro Earp, AB InBev's global vice president of consumer
connections, without specifying individual projects. "The World Cup is
going to be probably the most social event we've seen in the last decade."
Brewing
rival Carlsberg AS says it has a number of "interesting projects" in
the pipeline, while SABMiller SAB.LN +1.55% PLC says it is focused on brand and
packaging innovation.
Marketers
for liquor distillers are also starting to think high-tech. Pernod Ricard SA's
RI.FR +1.65% whiskey brand Ballantine has teamed up with a niche clothing
specialist to create a digitally-connected T-shirt enabled to flash online
status updates. And Diageo DGE.LN +0.64% PLC has allowed consumers to create
personalized video messages when gifting its blended Scotch drinks. By scanning
codes on the bottle with a smartphone, the recipient can view the video.
Beer
makers need to "premiumize" their brands to boost margins as Western
volumes struggle, and technology is another tool to do that, said Jefferies
analyst Dirk Van Vlaanderen.
"They
need to create excitement about the brands again. It has become more prevalent
in the last two to three years as we have seen a big slowdown in mainstream
categories," Mr. Van Vlaanderen said. The U.S. and Germany, the two
biggest Western beer markets, saw beer demand between 2009 and 2012 fall 2.5%
and 2.3%, respectively, according to research group Euromonitor.
"I
don't think it's a game of desperation. I think it is good sense [by] keeping
edgy," said Mr. Van Vlaanderen.
Beer
makers know they have to "fight back," said Mr. Brown, the writer.
"Lager has become commoditized. Brands have become interchangeable and
less special."
For
Heineken's Mr. Van Iterson, there is simply the need to stand out.
"The
money we invest in music sponsorship like festivals and concerts is one of our
biggest. The challenge is how do we make sure we are not just another beer
brand that is sponsoring music," he said.
Technology
"is a tool that makes that money work harder for us," he added.
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