Chasing Michelob Ultra: Craft Brewers Unleash Wave Of Low-Calorie Challenger Brands

Chasing Michelob Ultra: Craft Brewers Unleash Wave Of Low-Calorie Challenger Brands
Last April, I asked Dogfish Head founder Sam Calagione what other craft brewers should know before introducing a beer product for health-conscious consumers.

His reply? “Come up with your own f*ckin ideas,” he said half-jokingly.

The somewhat defensive nature of his response was understandable. A few months earlier, Dogfish Head had unveiled its latest innovation — a 95-calorie IPA called Slightly Mighty — and Calagione probably wanted some time to establish a market-leading position in a nascent low-calorie craft beer segment.

That’s not to say that other beer companies hadn’t already tried to appeal to calorie-conscious consumers. Low-ABV products like Founders All Day IPA had been on the market for years, but those “session” offerings were never constructed with the intention of reducing calories. (All Day IPA contains 140 calories.)

Never one to copy and paste another craft brewer’s ideas, Calagione trained his sights on a much larger opportunity. By his count, Dogfish had a chance to cut into roughly 10 million barrels of volume that Anheuser-Busch InBev owned with its Michelob Ultra brand, a wildly popular choice among fitness fanatics and drinkers looking to moderate consumption.

“The active lifestyle space in alcoholic beverage is on fire,” Calagione recently told me, noting that his goal with Slightly Mighty was to create a 95-calorie option that tasted and smelled like a full-flavor IPA, but was decidedly different from its “session” predecessors.

Dozens of low-calorie craft beers — many of them IPAs or hoppy pale ales — have emerged over the last year. Notable examples include Monday Night Brewing’s 90-calorie Lay Low IPA, Firestone Walker’s 96-calorie Flyjack hazy IPA, Deschutes Brewery’s 100-calorie Wowza! hazy pale ale, Bell’s Brewery’s 110-calorie Light Hearted IPA, and Harpoon’s 120-calorie Rec League hazy pale ale, to name a few.

According to market research firm Nielsen, the number of craft beers with “light” or “low-calorie” claims on packaging increased 37% over the 52-week period ending January 25, 2020. There are now 118 different “low-calorie” craft beers being sold off-premise, the firm shared.

So what’s driving so many small breweries to shift their focus toward the lighter side of the beer market?

I asked a number of brewery owners and executives for their thoughts on this emerging segment within craft, and nearly all of them pointed to changing consumer preferences as the primary reason why they’re investing in the development of low-calorie craft brands.

“As consumers become more invested in their own wellness, they want drinking options that can complement a healthier lifestyle,” Harpoon Brewery cofounder and CEO Dan Kenary told me. “It’s only logical that brewers want to provide options for these consumers who are more calorie and overall health conscious.”

For his part, Scott Hansen, the cofounder of South Carolina’s East Island Brewing, which makes Island Coastal Lager and is rolling out an 88-calorie Michelob Ultra challenger called Island Active, said the broader consumer packaged goods industry has been focused on creating “better for you” products for years.

“Beer is simply trying to catch up,” he said.

Jake Rouse, the cofounder of Kentucky’s Braxton Brewing, which released its own 100-calorie IPA called Hop Fit earlier this month, concurs. He believes that craft breweries have “ignored the emerging trends of people trying to drink in moderation.”

“As the entire craft beer category continues to seek opportunities for growth, there's no doubt that brewers are looking for ways to go after that Ultra drinker and perhaps bring them into the craft family,” he said.

Indeed, many craft brewers I polled said they have witnessed the success of Michelob Ultra and thought about ways they could appeal to those drinkers.

“As with any consumer trend in the beer space, I think smaller breweries are smart to ask ‘What does this tell me about my consumer, and am I in a unique position to offer them something that addresses that need?’,” said Monday Night Brewing cofounder Jeff Heck.

For his part, Firestone Walker cofounder David Walker said that “all the mega trend data shows a perceived health and wellness bias,” and that it “makes sense” for craft brewers to produce beers that “align” with the trend.

All of this begs the question — can a collective group of craft brewers successfully cut into Michelob Ultra’s dominating market position?

“With so many breweries now playing in this space, I wouldn’t be surprised to see more share swinging toward craft,” said Kenary. “As more options become available – particularly from craft breweries who are making similar styles with premium, high-quality ingredients – consumers become more curious about trying different brands and market share starts to splinter.”

Heck agrees, and said he believes the low-cal trend is “here to stay.”

“The question is how big it will become over time,” he said. “If we can give consumers innovative, flavorful craft options that have the same health profile as the macro options out there, I think we have a good chance at owning a significant chunk of the category.”

However, the success or failure of these brands will ultimately be determined by how well smaller companies are able to tell their stories and execute on things like marketing, pricing and product quality.

“Once a brewer can match quality and branding, they have a good shot at the same consumer,” Walker explained.

For his part, Neal Stewart, Deschutes Brewery’s director of sales and marketing, believes it is “completely reasonable” to think craft brewers could collectively capture 10% of Michelob Ultra’s share, or about 1 million barrels.

If that happens, you can expect to see a lot more of these low-calorie options cropping up at your local bottle shop.

“People definitely come in and ask for these products,” said Kay Young, the owner of Craft Beer Cellar in Braintree, Massachusetts. “It's nice to finally be able to give them what they’re looking for.”

[Read Forbes Article Here](