THE ICE AGE

Ice beers are red hot. In the space of a few months, virtually every major brewer has thrust an ice beer onto the market, and those that haven't are planning to soon. In addition, the big brewers have extensive ad campaigns in the works for this summer to back up those introductions.With their crisp, nonbitter taste -- and in most instances a higher alcohol level than regular beers -- ice beers are

Ice beers are red hot. In the space of a few months, virtually every major brewer has thrust an ice beer onto the market, and those that haven't are planning to soon. In addition, the big brewers have extensive ad campaigns in the works for this summer to back up those introductions.

With their crisp, nonbitter taste -- and in most instances a higher alcohol level than regular beers -- ice beers are expected by many retailers and brewers to bring a new head to flat sales of beer in supermarkets.

In interviews with SN, some retailers said they expect ice beer to develop into a full-fledged category of its own, much like light beers did during the 1980s.

So far, however, the ice products are not breaking new ground in terms of space for the overall beer assortment. Instead, retailers are reducing facings and eliminating slower moving items to fit the ice beers in existing space. And in many cases beverage merchandisers said the ice brews' success is likely to ultimately come at the expense of other beers.

Ice beers are taken to a very cold, subfreezing temperature during the brewing process, resulting in the formation of ice crystals. Most brewers use a process that removes the ice crystals from the beer, resulting in a smooth, richer tasting product that is slightly higher in alcohol than regular beer.

One notable exception is Budweiser, which uses a brewing process that retains the ice crystals and results in an ice beer with a 5% alcohol level, comparable to most regular beers.

Initial sales have been strong, especially considering that many ice beers were introduced in the middle of the worst winter in recent memory. Retailers expect the ice beers to do even better as the key summer beer-guzzling season approaches.

"People are just going crazy over the ice beers," said Duane Smith, buyer at Haggen, Bellingham, Wash. "Miller Icehouse and Miller Lite Ice are doing well on the premium level. That stuff is just flying out of the stores. We just did Schlitz Ice as a price beer and it just flew. It did a tremendous job," he said.

"I really think ice beers will be long-lasting and develop into a category much as the light beers have developed into a separate category," said Bob Jennings, beverage buyer and merchandising manager at Raley's, Sacramento, Calif.

"Ice beer is the hot item right now, along with the microbreweries. We have added a tremendous amount of microbrews, about 20 additional ones," Jennings added.

"Ice beer has brought a lot more excitement to the category than we have seen in a considerable period of time. We think they will add to and grow the category," said Ed Cook, director of advertising at Harris Teeter, Charlotte, N.C.

"We think the reason for that is it is perceived by customers as being higher in alcohol content, in some cases rightly and some cases wrongly," Cook explained.

The novelty of the ice products has made many retail sections receptive to the parade of big-name entries.

"We carry all of the Miller Icehouse and Lite Ice, Bud Ice, Pabst Ice and the imported Molson Ice and Labatt's Ice. Virtually anything that comes down the pike as far as ice beer, we will authorize it," said Tom Roesner, direct-store-delivery buyer-merchandiser at Seaway Food Town, Maumee, Ohio.

"I've seen some out-of-stocks in the stores. We have some good-size displays and I see customer takeout," said Oscar Sicola, buyer at Fiesta Mart, Houston. "From what I have seen at store level, they are doing much better than the dry beers," he added.

Fiesta carries Molson Ice, Bud Ice, Icehouse Plank Road Brewery and Miller Lite Ice in Houston and Beaumont. In Austin, Sicola is carrying Coors Artic Ice. Selected Fiesta Mart locations will also carry Schlitz Bull Ice, Schlitz Ice and Colt 45 Ice.

"Just everybody and their brother is coming out with an ice beer, and from what I hear there are more and more of them in the pipeline," Sicola said. "There may be some new imports coming out, as well as going to the other end of the spectrum with more popular price and budget beers. I heard a rumor recently that Olympia is looking at one and Lone Star may be looking at one. It looks like every facet of our price items will have an ice beer."

Sicola said he hopes to carry most of the new ice beer items. "We may not carry every item in every location, but in select stores. For example, I might carry the Schlitz Malt Liquor Bull in our inner-city stores because the malt liquors do very well there," he said.

"Consumers like the higher alcohol, and the taste is smooth and not bitter at all. They are real drinkable," said Richard Bellows, grocery buyer at Scolari's Warehouse Markets, Sparks, Nev.

Many sources made similar favorable initial comparisons against the lackluster career of dry beers. But some observers questioned whether ice beers would slump as dry brews apparently have, once the novelty wears off.

"The early acceptance of ice beer throughout the country, through various manufacturers in this business, has been positive," said Barry Ziegler, a securities analyst who covers the beverage market with A.G. Edwards & Co., St. Louis. "It creates another category of beers, but whether it has staying power or not is hard to predict.

"All of the major brewers are creating ice beers, so it is going to be a very competitive area, and marketing and distribution will be key factors in the success of brands," he said.

His sentiments were echoed by several retailers.

"Initially the ice beers are doing well. I don't know if they will last forever, but they have certainly created some excitement this summer. Everybody got on the bandwagon a lot quicker than everybody did with the dry beers," said Keith Dauterive, senior vice president and director of buying at M&E Food Market No. 2, Nederland, Texas.

"In our market the first guy that rushed out here and did a very good job has been Molson, and we've seen very good results," said Dick Salmon, senior vice president at Melmarkets, Garden City, N.Y.

"Budweiser is coming along rapidly, and Miller is in third. Behind that is Labatt's. Labatt's is not very aggressive, but they fall into the category of being one of the richest people in the beverage business. They have a lot of staying power based on that," Salmon said.

"We expect a significant increase in competition from manufacturers this summer. We think it will probably grow the category for the ice beer business. We expect them to impact sales positively. It is too soon to tell whether the category will last, and what will happen this summer. There may be some cannibalization of other beers," said Cook of Harris Teeter.

"I hope the ice beers are here to stay, but it is too early to tell. They may be a fad like the dry beers," said Fiesta Mart's Sicola.

"We're riding the ice beer bandwagon, but it is too soon to say if they will still be hot next year," said Roesner of Seaway Food Town.

Sales figures from scanning data for ice beers are not yet available because of the newness of the category. According to Information Resources Inc., Chicago, total supermarket sales of beer and ales for the 52-week period ended Jan. 30, 1994, totaled $4.8 billion, a 1% decline from the previous 52-week period. During the same period case volume was 378.7 million, a decrease of 0.8%.

Ziegler said, however, that ice beers seem to be bringing new sales to the category, perhaps outside of supermarket beer sections.

"Industry figures indicate that, industrywide, there is a little better volume increase and some of that has to be from just the rollout of the ice beer. If you get repeat buyers, and if they are detained or not, depends on how good the product is," he said.

Most retailers told SN that as far as their business was concerned, they expect the total beer category to remain flat, and they anticipate the ice beers will cannibalize other beer sales.

"I don't think a soda pop drinker is going to switch to beer. Ice beer growth is just coming from people switching beer brands. It is just a switching of the business, and you have to get with the program or you're going to get left behind," said Smith of Haggen.

"We don't see the beer category increasing as a whole. What the breweries are hoping for is that they can get a little more market share for their individual brands. I expect more and more increase into this category as time rolls on," said Jennings of Raley's.

"We think ice beers are going to be a trade off and that they will take sales away from existing products. We don't expect them to add on beer sales," said Bob Costello, director of grocery operations at D'Agostino Supermarkets, Larchmont, N.Y.

"The Miller Lite Ice may be taking from Miller Genuine Draft. The Bud Ice may be taking from Bud Dry. The Icehouse might be taking from some of the imports," said Fiesta Mart's Sicola.

Sicola added that, so far, fitting the ice beers into the aisle hasn't been too much of a problem.

"For the time being I'm making the vendors work it in their own space. They are adjusting their slowest item, or turning their package another way to make room for this new item. I'm having everybody take it out of their own space until I can really get some scan data to go back and see what has slowed down a little bit because of it," he said.

Costello of D'Agostino said he is working ice beers into his mix, "basically just by squeezing them in and deleting some items." His chain carries Molson Ice, Labatt's Ice Beer, Miller Ice and Bud Ice, with Molson being the best seller.

Dauterive of M&E Food Market said his chain of 38 stores carries Icehouse, Miller Ice, Bud Ice, Molson Ice and Schlitz Malt Ice.

"We had to discontinue some beers to make room for all of these. We just discontinued the slowest package of whatever we had. It was a matter of category management to do it. Since they offer the same margins as regular beers, it isn't really a problem," Dauterive said.

Dick Gordon, buyer at Rogers Supermarkets, Fort Wayne, Ind., said, "We only have one or two SKUs so far, so it's not something we have to worry about working in. Something will wash out along the way, and when it does we'll have more room for them."

Cook said Harris Teeter currently carries Molson Ice, Icehouse, Bud Ice and Schlitz Ice. While all of the ice beers are selling well, Molson is selling the best, he noted.

"We are merchandising the ice beers within the department. Our stores are merchandised according to distributor. They are coming from within existing space, and typically facings are being reduced as opposed to discontinuing items," he said.

"We're pretty much letting the guys trim out some of the dead wood to make room for the ice beers," said Seaway Food Town's Roesner.

"We are allocating some space in some beer resets that we are doing now. We are displaying the ice beers and being very aggressive with them," he said.

"Most of the guys we're talking to are getting out of the dry beers. They foresee ice beer as probably replacing the dry beers, and hopefully the ice beer will have more success than the dry beers did," Roesner said.

He said it is still too early to tell if the ice beers are taking away sales from the traditional beers, and added that they are priced in line with the other beers.

Jennings said Raley's carries Bud Ice, Miller Lite Ice and recently added Molson Ice.

"We are discontinuing the slowest moving items and also reducing facings on the items that we presently carry to make room for the ice beers," he said.

"The [overall] decline in sales appears to be coming out of the imports and the premium brands. The more variety you have out there, the pie shrinks a little bit for each item," Jennings said.

"We recently reset our beer sections and knocked out certain things, but they are items that have proven themselves to be completely negative. Case movement was not even there," said Salmon of Melmarkets. He explained that Melmarkets markets the ice beers next to their same brand brethren.

"We merchandise them with the rest of the lineups. With Molson's we have the Golden, Light and Ice. They are right in the lineup and it is a choice for the consumer to make," he said.

Smith of Haggen said the ice beers have been doing a terrific job. "Molson Ice is now No. 1 in all six-packs and 12-packs of imports and microbrewed, and they haven't even been out the full 13 weeks yet. Icehouse [Plank Road] is our No. 11 beer. Right now all of our ice beers are doing terrific, except for the Bud Ice," he said.

"Budweiser is doing something different, which I think is wrong. They are promoting their ice beer package one month and then their Dry brand the other month. With everybody else it is just a brand extension, and maybe that is why Bud Ice is not doing so well. It is also lower in alcohol than the other ice beers," he said.

Like other retailers, Haggen will be stocking more ice beers, but not expanding its beer department.