A Hard Act To Follow
September 1, 2006
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A Hard Act To Follow
By SARAH THEODORE
Mike's Hard Lemonade takes the malt category to a new level
When Mike’s Hard Lemonade entered the U.S.
market in 1999, it was one of the pioneers of today’s flavored malt
beverage category. Since then, the market for FMBs has inspired some
big-name competition, some of which came and
went in a hurry. But the Mike’s brand managed to hold on to a
leadership position, and now the company is out to create another new
category, the malt cocktail, with the launch of the Mike-arita and
Mike’s Hard Frozen Lemonade.
Mike’s was created by Anthony von Mandl, owner
of parent company Mark Anthony Brands, although he prefers the title
“Chief Lemon Squeezer.” In addition to Mike’s, von
Mandl’s business includes a beer and wine distributorship and a
winery in Canada.
“I’ve always been in the beverage alcohol
business,” he says. “It’s a business that’s always
fascinated me and it’s the only thing I’ve ever
done.”
The Mike’s brand, he says, was the result of
watching the wine cooler market take off during the ’80s, and trying
to find a similar product that men would feel comfortable drinking —
in public, that is.
“Coolers, at their peak, sold well over 60
million cases and that was only basically to women and certainly not
on-premise, only off-premise,” von Mandl says. “Men had to be
in the closet, so to speak, to drink a wine cooler. But I always believed
there was a demand ... I just didn’t realize how long it would take
to come up with a compelling brand.”
The brand he ultimately developed had an irreverent
personality, which von Mandl describes as “comfortable and not
aspirational” — its marketing, for example, features a talking
bottle. Over the years, the company has expanded from Lemonade to a stable
of flavors such as Cranberry Lemonade, Lime, Berry and Crisp Apple.
“We take some of the basic American things like
lemonade and we add alcohol to it, we put cranberries in it,” he
says. “We do things with a quirky way but they’re things
everyone can relate to. That’s the essence of the brand.”
The company took the malt category a step further this
year with the launch of the Mike-arita and Mike’s Hard Frozen
Lemonade. While some competitive flavored malt beverages carry the names of
spirits brands, the Mike-arita and Mike’s Hard Frozen Lemonade are
malt-based products that actually cross over into spirits territory in
packaging and positioning as well.
The development of the new brands began several years
ago, with the creation of a new, proprietary malt-alcohol base that was
closer in character to vodka than it was to beer. “We set out with
the target of producing a neutral alcohol base that would be colorless,
odorless and flavorless, out of beer,”
von Mandl says.
Mike-arita is a Margarita-flavored product that is 9.9
percent alcohol by volume (compared with about 5 percent for the
traditional Mike’s line). Mike’s Hard Frozen Lemonade is 11.9
percent alcohol by volume and is designed as a blender drink. As opposed to
the original Mike’s line, which is packaged in 12-ounce bottles, the
new products are available in 750-ml. and 1.75-liter bottles, similar to
spirits packaging. Mike-arita also is available in an 8-ounce four-pack.
With the addition of the new products, the group at
Mike’s has taken to calling their category “progressive adult
beverages” these days rather than flavored malt beverages.
“Mike-arita and Mike’s Hard Frozen
Lemonade are incredibly exciting projects because we’ve created an
entirely new category,” von Mandl says. “When we looked at it,
we realized that we had this building block that we could use to do
different things. It’s very exciting because the access points we
have at retail [as a malt-based product] are something like eight-fold more
than spirits.”
The company believes the new brands, as well as the
continued success of the original Mike’s line, have it poised for
growth, and last year it moved its headquarters from Denver to Seattle to
be closer to Mark Anthony’s base in Vancouver. The company has a
nearly brand new executive team in the United States and is in the process
of renovating an “industrial-chic” office space in
Seattle’s Pioneer Square.
Plans for the new sales and marketing team include
gaining distribution in more retail channels and adding new, more visible
marketing. The Mike’s brand currently is the leader in grocery
outlets, but has relatively little distribution in other channels such as
convenience stores.
“Companies go through life stages, and
we’re sort of embarking on another stage of very significant
growth,” von Mandl says. “I would expect that as we drive
distribution, our business will double.
“It’s really because we, and I personally,
believe so much in the upside. Although Mike’s is available in every
state and you can find us in every town, we’re not in every account.
We know that if Mike’s Hard Lemonade were everywhere Budweiser is
sold, our business would more than double.”
Lab tested and approved
Research and development is one of the most important
parts of the Mike’s business, von Mandl says, although he adds that
the company takes its time introducing new products.
“We’ve never acquired anything; this
company has been completely built organically,” he says.
“We’re doing a lot of research in a number of different areas.
Most of the things probably will never see the light of day. But
we’re trying to see where we can go, what directions we can go and
ultimately we’ll see what consumers might get excited about.
“We launch very few brands,” he adds.
“We’re not a company that believes in throwing things up
against the wall and seeing if they stick ... our philosophy is that we
don’t want things that become ‘also-rans.’ We’re
really looking at building an enduring brand.”
The company has a new R&D center and an in-house
product development team. Less visible to consumers is the investment the
company has made in production quality control and standards testing, but
von Mandl says it is one of the most significant parts of the brand’s
evolution. He says the company invests heavily into not only its own lab
but in the facilities of its contract brewing partners.
New taste preferences
Von Mandl believes the flavored malt beverage category
still holds a great deal of untapped potential, due in large part to a
fundamental shift that has taken place in consumer taste preferences.
“We reflect the kinds of changes that have
happened in America over the past 20 years in terms of the consumer
landscape, of what people eat and drink,” von Mandl says. “We
have gone from hamburgers, fries and chicken to the choices we have today
from sushi to Italian to Thai — this incredibly broad selection that
people have in their everyday vocabulary of
things they eat and drink.”
But while there are many more flavor choices in foods
and non-alcohol beverages, “that really hasn’t hit the beverage
alcohol category, except in spirits,” says Vice President of
Marketing Kevin McLaughlin. The company’s goal is to provide the kind
of variety to the alcohol beverage segment that consumers now enjoy in
other categories.
Interestingly, the company’s research indicates
that rather than taking sales away from beer, the flavored malt beverage
category provides incremental value. “Based on our research, 67
percent of the volume is incremental, so it’s pretty
phenomenal,” McLaughlin says.
“If you’re throwing a party, what are
people likely to drink?” von Mandl says. “It used to be, 10
years ago, you’d go out and buy beer and maybe some wine coolers.
Today it’s become a lot more sophisticated. If you can go into the
beer aisle and also pick up a Mike-arita and some Mike’s Frozen Hard
Lemonade, you’re still going to buy the beer but you now have created
a much more exciting occasion.”
Talk to the bottle
Another new move this year is more aggressive
advertising from the company, which in the past has taken a more
low-profile approach.
“We sold our first 10 million cases of
Mike’s without spending one penny in advertising,” von Mandl
says. “It was completely a discovery brand.”
But the size of the brand today calls for more
advertising, and the company shot television commercials for Mike-arita in
Mexico featuring the brand’s “talking bottle” and Mexican
consumers. The company also launched a new version of its Web site,
designed to reinforce the irreverent humor of its marketing. Consumers can
“talk to the bottle” via e-mail messages and listen to a
“Sounds of Mike’s” page featuring songs and prank phone
calls performed by the talking bottle.
“Our media investment has been significantly
more,” von Mandl says. “In terms of marketing the brand, we
like to do that in a very guerrilla way. We will never try to compete with
big beer. We’re more akin to craft breweries.”
One of the areas in which the Mike’s brand has
evolved during the past several years is its packaging. The six-pack
carriers have been designed with a more premium, consistent look that
creates a billboard effect when placed side by side. “We’re
getting a lot better at the detail and making certain we have a brand that
really screams on the shelf,” von Mandl says.
Packaging for the new spirits-inspired Mike-arita and
Mike’s Hard Frozen Lemonade bottles includes a 1.75-liter bottle with
a handle and a tapered 8-ounce bottle with a solid base for the Mike-arita.
Also innovative is the core line’s 12-pack carrier with an expandable
handle for easier carrying.
On the docket for the coming year is more new
packaging that von Mandl says is “dramatically new and
different.”
“We’re doing some innovative work in glass
right now, and that’s something that the market will see early in the
new year,” he says. “Those things are very major investments
and take a lot of time and effort.”
On the lighter side
Not to be lost in the shuffle of all things new,
Mike’s Light Hard Lemonade, a newly reformulated version of an
existing product, is one of the company’s leading varieties this
year. In fact, the product is the fastest-growing brand in the flavored
malt beverage category, according to Information Resources Inc., with a 40
percent year-to-date sales increase over last year. Overall, Mike’s
brands are up 8 percent, the company says.
“That was an extremely difficult product to
formulate,” von Mandl says. “It’s very difficult to try
to take the sugar out and replace it. In the end, it took us a few years to
get to the point where we now think it’s great.”
A common theme at Mike’s is a premium image, and
the company is adamant about maintaining premium positioning and pricing.
It says the average age of its consumers is 32 years old, with higher
income and education levels, similar to import or craft beer consumers. Its
products, it says, should be priced accordingly.
“We believe people should realize full value
from our products,” McLaughlin says. “We don’t believe we
should be discounting. We firmly believe we should be aggressive with our
pricing, as should other people [in the category].”
As for the future of flavored malt beverages —
or progressive adult beverages in Mike’s-speak — von Mandl says
“the dam has broken” and consumers will continue to explore new
flavors and be receptive to new concepts.
“I think more than ever, people are drinking
what they like,” he says. “It’s not surprising
they’re drinking Corona or craft beers, it’s not surprising
they’re drinking Mike’s Hard Lemonade because they’re
drinking brands they can relate to and brands that deliver the kind of
taste that suits their new frame [of mind] and their new choice of
occasion.”
