The Wall Street Journal - 28.10.2019

R4| Monday, October 28, 2019 THE WALL STREET JOURNAL.

JOURNAL REPORTS | C-SUITE STRATEGIES

FROM TOP: BRUCE RADEN/AB INBEV; CLAUDIO SFORZA

Rapidly shifting trends in liquor con-

sumption have made the industry

ripe for deals as companies seek the

perfect brand portfolio. One of the

most acquisitive companies has been

Italy’sCampari GroupSpA, which

has been making its namesake bitter

red aperitif since 1860.

Almost 30 acquisitions over the

past two decades have turned Cam-

pari into the world’s sixth-largest

maker of premium spirits, with more

than 50 brands, including the aperitif

Aperol, SKYY Vodka, Grand Marnier

liqueur and Wild Turkey bourbon.

The company has also sold brands as

it rejiggers its portfolio.

Keeping up with shifting consumer

tastes presents a challenge. Campari

has been adept at taking advantage of

the expanding cocktail culture in the

U.S. and an interest in lighter drinks

with its Aperol spritz and other cock-

tails. But the competition for spirits

drinkers in the U.S. is growing, and

trends can be fickle. Campari’s varied

list of brands, which touch almost ev-

ery type of spirit, helps spread the

risk inherent in trying to keep up

with changing tastes, but it also can

limit the upside.

Politics presents another challenge.

For a business with an international

were pushing Campari Soda [a single-

serve aperitif that is 10% alcohol] in

the U.S., but for Americans it was too

bitter and didn’t have enough alcohol.

In about 2008-09 we realized that

the Negroni had two benefits. One

was that the addition of vermouth

took the bitterness away, so it made

it easier for the American palate, and

at the same time the addition of gin

made it a more powerful cocktail. Af-

ter gaining that insight, we said why

don’t we start pushing the Negroni.

We did Negroni Week [a yearly

charity event in June with some

12,000 venues taking part] and then

before you know it there is a Ne-

groni craze.

WSJ:What are you doing to attract

millennials?

MR. KUNZE-CONCEWITZ: The good

thing is that the millennial is inter-

ested in cocktails. They are shifting

from beer to spirits. In the U.S., spir-

its have been taking one point of mar-

ket share from beer every year for the

past six to seven years. Millennials

are curious, and their taste buds are

more used to bitterness—espresso,

coffee, kale, all of these things.

With that in mind, we have been

promoting bitters like Braulio, Cynar

and Averna, which are all doing ex-

tremely well in the U.S. We’ve seen

that they are used mostly in bars in

mixed drinks.

Mr. Sylversis a Wall Street

Journal reporter in Milan. Email

him [email protected].

BYERICSYLVERS

these challenging conditions.

Here’s one hint: When the company

tapped him last year to take over the

top marketing job, it let him continue

as the head of the company’s innova-

tion unit, ZX Ventures, which aims to

meet and anticipate consumers’ needs

with new products and services.

Here are edited excerpts of the

conversation.

Marketing by entertaining

WSJ:Traditional beer has been losing

ground for years. What’s going

wrong?

MR. EARP:We are a global company,

and there are a lot of tailwinds in

emerging markets, such as Colombia

and China—but more-mature markets

are under pressure. The choices that

consumers can make are diversifying.

So we really have to diversify and

offer what consumers are looking for.

That’s going to be a tool to reignite

growth in the U.S. market.

WSJ:Are beer drinkers changing?

MR. EARP:We see consumers trading

up and going for more-expensive

products. We’ve been focusing on su-

per-premium brands and craft. That’s

one angle. The second one is health

and wellness. Beer can play very well

in that space because it’s made of

wholesome ingredients. It’s relatively

low in carbs and calories despite the

perception some people have.

WSJ:What’s your plan for improving

your marketing in particular, if that

can be separated from diversifying

your products?

MR. EARP: Portfolio is key. If you

think about 10, 20 years ago, you

could create an average product or a

product that didn’t have a lot of func-

tional difference, and you could really

use mass advertising to drive emo-

tional differentiation. The world has

completely changed. Consumers are

much more savvy about what’s a

great product or not. So true product

differentiation became a much more

important factor than emotional dif-

ferentiation.

Once you have the right products,

the big shift in marketing is from in-

terruption to entertaining. The future

of marketing is one where brands will

need to earn their space and enter-

tain consumers.

And then you need to understand

your consumers much better, their

passion points and needs. Data makes

a massive difference. So we have a

massive area here to do that.

WSJ:How have you tried to entertain

consumers?

MR. EARP:We have many examples.

Country music is a massive passion

point in Brazil. We sponsored a whole

show about up-and-coming talent,

and our Brahma beer is integrated on

screen. In Mexico, we created a brand

BYNATIVES

CAMPARI EXPLAINS WHAT’S BEHIND THE

POPULARITY OF THE NEGRONI IN THE U.S.

brand portfolio, both Brexit and

new tariffs have created some un-

certainty in the company’s outlook.

Campari Chief Executive Bob

Kunze-Concewitz, who has run the

company since 2007, spoke with

The Wall Street Journal about

trends in the spirits industry,

what’s behind the rise of the Cam-

pari-based Negroni cocktail and

why he is cheered by the fact that

millennials like kale. Here are ed-

ited excerpts of the conversation.

WSJ: How does Campari keep

abreast of trends in the spirits in-

dustry?

MR. KUNZE-CONCEWITZ:We ac-

tively encourage our people to go

out and have an active social life so

they can see what’s happening.

That’s why in many cities we have

decided to relocate our offices from

the suburbs into the city centers.

In Germany, we recently inaugu-

rated new offices right smack in

the center of Munich. Before we

were out in the countryside. In

2012-2013 our people were so busy

commuting and not going out that

they missed a huge trend. A rival

Campari’s Bob Kunze-Concewitz

says millennials are open

to bitterness.

Pedro Earp, AB InBev’s

marketing chief, says the

company went from

craft-beer laggard in the

U.S. to leader in emerg-

ing markets.

drink came in and took market share

from the Aperol spritz. That was the

Hugo, which is Prosecco with elder-

flower. It was a wake-up call.

It’s a bit of a different

story, but in the U.S. we

moved from San Francisco to

Bryant Park in the middle of

Manhattan, where we want

our people to go out and ex-

perience things. New York is

a 24/7 city, while in San

Francisco people get up

early, commute to their tech

job in Silicon Valley and at 9

p.m. they go home.

WSJ:How do you make sure

the company is part of a

trend once you spot it?

MR. KUNZE-CONCEWITZ:

When it comes to spirits, ev-

erything starts in the U.S.,

because the cocktail culture

is more sophisticated and

more broad there. People

drink cocktails at dinner,

and in cities like New York

and San Francisco you have a lot of

cutting-edge mixologists. You don’t

anticipate trends looking at market

data but by going out and talking to

bartenders in the best bars at the

forefront of mixology in New York or

San Francisco.

WSJ:What’s behind the growing pop-

ularity of the Negroni in the U.S.?

MR. KUNZE-CONCEWITZ: Speaking

with bartenders, we realized the Ne-

groni had such strong potential. We

In the Liquor Cabinet

Campari’s top brands by share of

group sales, 2018

Aperol

Campari

SKYY vodka

Wild Turkey

Grand Marnier

Appleton Estate

16%

10

9

8

8

5

Source: the company

integration for Corona in

three Netflix original pro-

grams about football teams.

WSJ:You’re one of the big

players in the growing hard-

seltzer market, but competi-

tors like Mark Anthony

Brands’ White Claw are out-

selling your Bon & Viv.

MR. EARP:We are not 100%

happy with where we are in

the seltzer category given

the performance. But so far

we have two products: Bon &

Viv, which is more of a pre-

mium product targeting

more nonbeer drinkers, and

we just launched Natty Light

seltzer, targeting more beer

drinkers at a lower price,

and we are very happy and

surprised with the results.

Focus on innovation

WSJ:How does ZX Ventures

work?

MR. EARP:Instead of having

100% of our innovation run

from within the core busi-

ness, and in a way compet-

ing for financial resources

and attention with the big

businesses, we decided to set

up ZX, which is almost an in-

dependent organization with

dedicated resources and ded-

icated people to drive inno-

vation at an exponential rate

without distracting from the

focus on the big business.

WSJ:What’s something that’s come

outofZX?

MR. EARP:Craft beer has been grow-

ing in the U.S. since the ’80s. It was

very hard for us to put focus on craft

and put focus on scaling some brands

that we had at the same time, and we

lagged the evolution of the industry.

When we set up ZX we had two

opportunities: First, we could catch

up in terms of our portfolio. And sec-

ond, craft was actually still very un-

derdeveloped in a lot of the emerging

world. We said, why don’t we go

there and drive the craft revolution in

a lot of these emerging markets in-

stead of lagging behind? And that’s

what we did.

Then we created an area here

called brand experience. In the past

two years, we have opened more

than 500 beer bars with our craft

brands all over the world. These

bars became a marketing channel

that makes money.

And we have our Explore Fund, an

investment fund taking a look at

what’s next in beverages. We ended

up acquiring Kombrewcha. We have

Hiball, which is good-for-you energy

drinks.

Mr. Ivesis the editor of CMO

Today at The Wall Street Journal.

[email protected].

A Brewer’s

Challenge

As traditional domestic beer

consumption falters, Anheuser-Busch

InBev looks for new markets

T

he lagers that long symbolized beer in the U.S.—easy-drink-

ing brews whose ad campaigns entered pop culture with

catchphrases like “Whassup?”—are losing market share.

Traditional domestic beer remains the largest category

of alcohol in the U.S., but it fell to 17.7% of in-store sales in

the 52 weeks through Sept. 7 from 22.3% four years earlier,

according to market-research firm Nielsen.

Drinkers are gravitating instead to craft brews, liquor

and, most recently, seltzer with alco-

hol in it. Some are even testing the market for hard

kombucha, a version of the fermented tea drink that has

higher alcohol content than the trace amount in tradi-

tional kombucha. And mass-media advertising, which

once would have been Big Beer’s most powerful defense,

is steadily fading.

So what is the company behind the “King of Beers”

doing to keep up with all these changes?

AlthoughAnheuser-Busch InBevSA is known for its

flagship Budweiser brand, its portfolio includes brews

made around the world, and has expanded to include

both craft beers and hard seltzer. It devoted one of its

Super Bowl ad slots this year to a pair of mermaids who

pitched Bon & Viv Spiked Seltzer by talking up “fruit bo-

tanicals” and zero sugar. And yes, it now sells Kombrewcha, a carbonated tea

with 4.4% alcohol by volume.

At the same time, Anheuser-Busch InBev is battling traditional beer rivals

with a U.S. ad campaign pointing out that Coors Light and Miller Lite use corn

syrup in their brewing processes while Bud Light does not. (Never mind that

corn syrup is only used in the fermentation stage of brewing and never makes

it into the competitors’ products, a point that MillerCoors LLC stressed in a

false-advertising lawsuit. A judge temporarily barred Bud Light from running

some of the campaign’s ads or using the words “no corn syrup” on its packag-

ing, but the court fight continues.)

In an interview with The Wall Street Journal, Anheuser-Busch InBev’s chief

marketing officer, Pedro Earp, discussed how the brewer is trying to navigate

‘We have

opened

more than

500 beer

bars with

our craft

brands all

over the

world.’