Energy Beers Boost Brewing Industry

July 12, 2006 — -- For centuries, cracking open a cold one has been the cue to kick back and relax. Now brewers hope Americans will take to a cold beer designed to rev up rather than slow down.

Energy beer, a fusion of traditional ale and caffeine, is the latest craze to hit the beer industry.

Last week SAB Miller announced it would buy McKenzie River Corp.'s Sparks, a caffeinated alcohol malt beverage with ginseng, guarana and taurine.

The orange-colored brew was the first of the new energy beers to hit the market and has been credited with spawning a new breed of beer and opening a new market for beer brewers worldwide.

"Sparks was the innovator and creator of energy beer," said Pete Marino, a spokesman for the Miller Brewing Company. "The category didn't really exist before Sparks came out."

In the two years since its 2003 debut, Sparks saw an annual growth rate of more than 100 percent. When the drink took off, brewers took note and the number of energy beers hitting the market has increased steadily.

In early 2005, Anheuser-Busch introduced BE (pronounced B-to-the-E), a caffeine-infused beer with a blend of herbal stimulants. The company later launched Tilt, a malt beverage enhanced with caffeine and fruit flavors. In May the Miller Brewing Company released Mickey's Stinger, a malt liquor that packs more caffeine than a cup of coffee.

Growth Rate, Variety Attract Brewers

Though the segment is new and fairly small -- experts say it might constitute 1 percent of the almost $9 billion beer industry -- its triple-digit growth rate is enticing. While sales of domestic beer lag and growth in light beer idles, energy beer booms.

"The growth potential is a lot steeper in this category than it is in other categories," Marino said. "It's an extremely attractive segment right now."

The trend confounds traditionalists. Sachin Kulkarni, a self-proclaimed beer aficionado, cringes at the thought of energy beer.

"I like the taste of beer in its essence," he said. "And caffeine, all these added ingredients, it takes away from the purity of beer."

'Entry-Level Drinkers' Targeted

But beer makers have reason to embrace it. Once thought to be as American as apple pie -- colonists built breweries in Pennsylvania and North Carolina long before the Revolutionary War -- beer's status has slipped in recent years.

Beer Marketer's Insights, an industry trade publication, estimated that in 2005, beer constituted 55 percent of all alcohol consumed in the United States, down from 59 percent in 1998.

The reason? According to Eric Shepard, executive editor of Beer Marketer's Insights, today's drinkers thirst for flavor and variety, and they're turning to spirits like vodka and rum to get their fix. Energy beer is a way for brewers to fight back.

"People seem to be constantly craving new flavors," Shepard said. "They're interested in different styles, different products. That explains a lot of what's happening in spirits and in beer."

Brewers know that not all the 127 million American adults who drink malt beverages will go for energy beer. They're targeting so-called entry-level drinkers -- people between the ages of 21 and 27 who have made energy cocktails like the mixture of Red Bull with vodka so popular.

Some Drinkers Have Reservations

ABC News spoke to men and women in energy beer's target demographic and asked them to taste two brews from the genre -- Anheuser-Busch's BE and Tilt.

None of the testers had sampled energy beer before -- some hadn't even heard of the hybrid -- and many expressed reservations about mixing caffeine with the depressants in alcohol.

"It doesn't seem right," Kulkarni said. "It's like asking your body to do two different things."

According to George Hacker, director of alcohol policies at the Center for Science in the Public Interest, such fears are not unfounded.

"These beverages counteract the dulling effects of alcohol, but they don't counteract the intoxicating effects of alcohol," Hacker said. "They promote heavier drinking by making people think they're more alert and capable than they actually are. The caffeine certainly could have negative effects."

Health concerns aside, our testers' opinions on energy beer were about as mixed as the average cocktail. After a sip of Tilt, one dubbed the drink "very tasty," while another grimaced as he choked down the fluorescent orange liquid.

Asked whether they preferred BE or Tilt, most testers opted for the "like beer but sweeter" BE. But given the choice between the caffeine-enhanced malts and regular beer, almost all opted for traditional ale.

Not Expected to Replace Traditional Beer

Despite the quick growth, some experts hesitate to tout energy beer as the next big thing.

"Sparks has been a very hot brand," said Beer Marketer's Insights' Shepard. "Does that mean we're all going to be consuming this very soon? I don't know -- I wouldn't predict."

But most agree that brewers will continue to come out with nontraditional beers featuring flavors and ingredients beyond the basic.

"They're putting new things out there to see what different consumers might be interested in -- organic beer, malt-based beers targeted at females," said Sarah Theodore, editor of the trade publication Beverage Industry. "They're going after specific consumer segments and not necessarily taking a one-size-fits-all approach."

Beer makers hope that by expanding their range of offerings, they can win over drinkers partial to hard liquor or wine.

In a written statement, Anheuser-Busch vice president Andy Goeler said: "Consumers expect choices, and we continue to increase the range of popular beers and beverages we offer. Caffeinated beers are only one example. ... We will continue to take cues from adult alcohol beverage drinkers to ensure, no matter the drinking occasion, we have something for everyone."

But the move to produce more energy beers and entice young drinkers concerns Hacker.

"The emphasis on concocting whatever it takes to attract new taste buds to beer is something we find very troubling," he said. "This creativity has all to do with beer makers' bottom line and very little to do with public health and safety."

In the end, what beer drinkers think of these nontraditional brews will determine whether they sit on store shelves or get tapped in bars. Indeed, some taste buds are very happy with the traditional brew that's stood the test of time.

Said Dong Lee, one of the entry-level drinkers who sampled Tilt: "It's OK. But it's not beer."