Not So Soft Drink: Brewers Add Booze to Root Beer

 

Looking to extend craft beer craze, makers of Sam Adams, Miller push into ‘hard soda’ drinks

 

Source: WSJ

By Tripp Mickle

Aug. 14, 2015

 

Root beer, which soared in popularity as a pre-Prohibition temperance drink, is leaving its roots behind.

 

An alcoholic version called Not Your Father’s Root Beer has become one of the fastest-growing products in U.S. beer aisles. Boston Beer Co. , the maker of Samuel Adams, said last week its new Coney Island Hard Root Beer will be available nationwide by mid-August. MillerCoors LLC, the nation’s second-largest brewer by volume, is planning to launch soda-inspired beverages early next year.

 

Anheuser-Busch InBev NV, the nation’s largest brewer, is watching the trend closely. Its innovation team is “plugged into trends around sweet beers and products, working closely with consumer focus groups to understand and respond to these emerging interests and passion points,” said Val Toothman, vice president of Innovations.

 

Not Your Father’s Root Beer, which was first introduced late last year, made its creator, Small Town Brewery, the sixth best-selling craft brewer for the four weeks ended July 12, snagging 3.3% of the craft dollar sales at retail, according to retail tracking service IRI. It accounted for $8.1 million of the $245.8 million in craft sales during the period.

 

The brand’s success has created a new category in the alcoholic beverage industry. Some call it hard soda. Others call it flavored beer. An owner of Not Your Father’s Root Beer, who also is an owner of Pabst Brewing Co., is pushing the term “gruit ale,” which was used to describe spice- and herb-flavored beers made centuries ago before the widespread use of hops in beer making. The category has the potential to expand beyond root beer to alcoholic ginger ale, strawberry rhubarb and French toast stout.

 

The root-beer blitz highlights the beer industry’s effort to appeal to adults under age 35, many of whom prefer sweeter beers. These young drinkers have been at the forefront of consumer migration to liquor from beer, which has cost the beer industry about 10% of its share of the more than $200 billion alcohol market since 1999, according to the Distilled Spirits Council of the United States.

 

“There’s a tidal wave shift in consumer consumption patterns,” said Eugene Kashper, chief executive of Pabst Brewing Co. and a co-owner of Not Your Father’s Root Beer. “Younger people are looking for something lighter and sweeter. The beer segment long-term doesn’t seem like it will be dominated by traditional, hoppy beers.”

 

The push comes as public health advocates have raised concerns about cocktail-style brews, arguing they appeal to underage drinkers because they taste more like a sweet soda than a bitter beer.

 

Charles Hires first popularized root beer when he introduced it at the 1876 U.S. Centennial Exposition in Philadelphia. It grew in popularity during the temperance movement as an alternative to alcoholic beer.

 

Tim Kovac, a home brewer who founded Small Town Brewery in Wauconda, Ill., decided to put the alcohol back into root beer. He worked over a three-year span to develop Not Your Father’s Root Beer, which is 5.9% alcohol by volume, slightly more than the 4.2% of a Bud Light.

 

Pabst Brewing signed a distribution deal for the brand earlier this year, giving Pabst’s owners including Mr. Kashper and TSG Consumer Partners an option to buy a stake in the business. They exercised that option in June after monthly sales increased to more than $4 million from $722,467 in April, according to IRI. A six-pack of the root beer sells for about $11.

 

Mr. Kashper declined to disclose the ingredients beyond what is on the label, which lists “vanilla extract, other natural and artificial flavors and caramel color.” The lack of clarity about what’s in the drink hasn’t kept consumers away. Bars from Grey Lodge Public House in Philadelphia to craft-beer stores like Mix It Up in Virginia Beach, Va., have made it the central ingredient at root-beer-float parties, blending together the classic combination of ice cream with Not Your Father’s Root Beer for anywhere from 50 to 100 adults.

 

“Almost everyone who tried a root-beer float bought a six-pack or case,” said Coleman Ferguson, a co-owner of Mix It Up. He said the brand has benefited from its scarcity. It became so popular that the store sold out of its June supply and created a waiting list of 400 people. It requested 1,000 cases in July from its local distributor but received only 100 cases. “Now, it’s sold out again,” Mr. Ferguson said.

 

Alex Voytilla, a 24-year-old part-time mover in Virginia Beach, said he’s bought five cases over the past two months. He is a craft-beer fan but he likes to drink it in the evenings. “It’s refreshing right after you come home from a long day of work,” he said.

 

The success of Not Your Father’s Root Beer led Boston Beer Co. to accelerate the launch of its own root beer. The company’s Innovation arm, Alchemy & Science, had been working on a root beer since 2013 and tasted close to 15 root beers as it developed its recipe. Coney Island Hard Root Beer first hit shelves in the Northeast last month.

 

“We’re optimistic not only will it stick but it will open a category the consumer is excited about,” said Alan Newman, who heads Alchemy & Science. “What we care about is bringing people into the craft-beer category, and if this does that, god bless.”

 

There already are signs in some markets that the root-beer blitz could be slowing. Mike Scotese, owner of Philadelphia’s Grey Lodge Public House, said he was buying six cases a week in May of Not Your Father’s Root Beer but that dropped to a case a week in July. Last week, he didn’t even place an order.

 

“It may have peaked,” Mr. Scotese said.

 

But Mr. Kashper isn’t worried. He plans to bring Not Your Father’s Root Beer to 10 more states including Tennessee and Missouri by early September.