In a marketing battle with giant competitors, Hudepohl Brewing Co. has found that special events can give it an edge.
In a marketing battle with giant competitors, Hudepohl Brewing Co. has found that special events can give it an edge.
Darkness fell, and rockets pierced the sky. Robert Pohl, the 35-year-old general manager of Cincinnati's Hudepohl Brewing Co., joined the throng lining the banks of the Ohio River as more than $70,000 of his company's slim marketing budget literally went up in smoke. That is the price Hudepohl paid to sponsor its hometown Labor Day fireworks display, a lavish affair that annually draws upwards of half a million people at the height of Cincinnati's Riverfest.
Hudepohl can't afford such theatrics as a mere gesture of civic pride. The closely held, family-run beermaker spends only $1 million a year on conventional advertising, small change compared with the dollars poured into media-buying by the national breweries that dominate the industry. And for the time being at least, Pohl has declared the company will "hold the line" on its ad budget. Not so, however, with Hudepohl's rapidly growing commitment to special events. Fireworks displays, tennis tournaments, bluegrass concerts, and ski races now make up a promotional budget of $200,000 annually.
Make no mistake, Pohl intends to accomplish more than just selling some "Hudy" beer during those events. Hudepohl is one of the few small companies that have begun to use special events as marketing tools. But it is a tactic already popular with a host of larger companies -- many of them such consumer-product giants as General Foods, R. J. Reynolds, and Anheuser-Busch. Lesa Ukman, publisher of Special Events Report, based in Chicago, estimates some 5,000 special events and festivals will be staged in North America this year, to the tune of more than $850 million in corporate sponsorships. Most sponsors see special events as a way to put their products directly before a target market. As Ukman puts it in the argot of the 1980s, "special events reach consumers at the lifestyle level."
Hudepohl has plenty at stake in the lifestyle department. Lee Oberlag, Hudepohl's advertising director, says brand loyalty in beer "is all image." The right image, she says, is youthful and sporting. It is an image carefully nurtured by such slick and expensive advertising campaigns as the ex-jock soap operas that elevated Miller Lite to the number two brand in America. That image is fundamental to the beer business, and while Oberlag says Hudepohl cannot hope to compete with the prime-time media-buying of larger brewers, she believes the company can generate the same kind of "feeling" through the right special event. Perhaps more important, Hudepohl needs to reestablish local allegiance to its brand name in its home market. Hudepohl's image in Cincinnati in recent years has been all wrong.
"Hudepohl has come to be perceived by younger people as a local, old-fashioned beer," says Oberlag. "They see it as the beer of past generations. And we think our ads have not overcome that tendency."
But Hudepohl does think a well-chosen series of special events can help overcome that stodgy image. At $70,000, the fireworks are far and away the company's biggest single special event to date. Eight years old, the Labor Day fireworks celebration was until last year the sole property of WEBN, a top-rated local rock-music radio station, which broadcasts a simultaneous music program timed to the display. WEBN has a virtual stranglehold on Cincinnati's young adult population, a market Pohl and Oberlag believe is crucial to reversing flagging sales of their standard-bearing regular beer, Hudepohl Gold. When WEBN decided to expand the fireworks program this year, Hudepohl jumped at the chance to co-sponsor.
"We want to get top-of-the-mind awareness with the youth market that listens to that station," says Oberlag. "Beyond that, we're also associating Hudepohl with the largest event in Cincinnati. We're reaching more than a half-million people on site, not to mention what comes through TV coverage and the advance promotion."
The key to Hudepohl's involvement is a partnership with WEBN. This, says Oberlag, is what makes event sponsorship fundamentally different from simply buying ad time on the station. The airwaves are crowded with advertising, short messages that say, "Buy our product," Oberlag explains. The impact of an event is broader: "See who we are and what we do to have fun." It is a bit of a surprise for listeners to hear stodgy old Hudepohl linked up with youthful WEBN. In theory, at least, the effectiveness of that exposure will grow over time as the phrase "Hudy GoId/WEBN Fireworks" becomes planted in the public consciousness.
"We're not in this for a one-year deal," says Oberlag. "And we expect to get more for our money with each succeeding year." Hudepohl, in fact, has committed to at least a five-year sponsorship of the fireworks -- regardless of cost.
Hudepohl has good reason to continue its marketing strategy well into the future. The beer industry has undergone major contractions in recent years, with small, independent brewers among the heaviest casualties in a war of attrition and acquisition. There are fewer than 25 small breweries still operating in the United States, not counting the newer "micro breweries," which produce beer for very limited, usually local, distribution. Hudepohl, with annual sales of $18 million to $22 million by INC. estimate, will be 100 years old next year and is one of only 2 brewers left in Cincinnati, once a major brewing center.
And competition is only going to get tougher. Although federal legislation appears certain to force the drinking age to 21 nationwide many industry analysts contend such a move will mainly result in more underage drinkers. Whether they are right or not the target market itself is shrinking. Persons between the ages of 18 and 24 -- just over 17% of the drinking-age population -- consume about 25% of the beer sold in the United States. But the size of that age group peaked in 1981 at a little over 30 million, and will head steadily downward until the mid-1990s, when there will be just over 23 million people between Chose ages. The effect of the shrinkage is already being felt: In 1982 and again in 1983, growth in U.S. beer sales was essentially flat -- the lowest growth rate since 1958.
Those realities only compound the endangered-species status of the independent brewer. In 1980, following the death of its general manager, Hudepohl was already suffering after a string of "very tough" years. The board turned to a young and untested Bob Pohl to run the company. The great-grandson of founder Louis Hudepohl (the name similarity is a coincidence of marriage; Hudepohl had five daughters), Pohl had his own notions about how the company ought to change, following what he saw as a period of potentially disastrous complacency.
"The company felt insulated and protected because of so many years as a dominant brewer in Cincinnati," recalls Oberlag. "There was no feeling here that we had much to worry about."
Bob Pohl's concerns, however, were largely confirmed by an internal study of the company completed that year by a group of students from Harvard University Graduate School of Business Adminitration. The study found that among the problems facing Hudepohl was a monumental disparity between the resources national breweries had to spend for advertising and what Hudepohl could afford. Hudepohl had, in fact, already lost one of its most important advertising venues -- a longtime radio and television contract with the Cincinnati Reds baseball team -- to the deep pockets of Anheuser-Busch. That left the local "King of Bowling" television show as Hudepohl's most visible mediabuy.
"For every dollar I have to spend on advertising, Anheuser-Busch has $300," says Pohl. "They can literally blow us away."
Hudepohl is trying to counter by concentrating its special-events efforts in the Cincinnati area, where the company still sells 60% of its beer, claims to have about a 25% share of the local market -- and is under heavy siege. Coors, the enormously popular brew from Golden, Colo., entered the fray in Cincinnati earlier this year, and is expected to make substantial inroads in the local market, as it has in expansions throughout the country. Other new competitors have arrived in the form of several cut-rate brands from major brewers looking to capture the bargain-hunter. Says Pohl: "This market is in tremendous flux right now. I don't think anybody knows how it will all shake out."
Hudepohl is also using special events -- including an $11,000 sponsorship of a stop on the pro tennis tour -- to introduce Bob Pohl's personal project, a new "super premium" brand on which much of the company's future may well ride. Christian Moerlein beer, named for an old and now defunct Cincinnati brewery, is a full-bodied beer with a hefty price tag intended to compete with imported beers. Tennis, says Oberlag, delivers just the right prospective customer.
"The importers are into the same kind of events," she says. "They draw an admittedly upscale crowd. These are people who want to lie seen drinking Heineken or Beck's, which is exactly where we want to position Christian Moerlein."
The first American-made beer to pass Germany's 500-year-old purity standards, Christian Moerlein was brought out in Cincinnati in 1981. Hudepohl has since taken it into 25 states west of the Mississippi and is now looking at the eastern United States. In the first three months of distribution outside the Cincinnati area, Pohl says Christian Moerlein was already at 80% of its first year's sales projection.
Pohl's gamble with a "snob appeal" brand is substantial. He says Christian Moerlein is currently "eating up about half" of Hudepohl's sales and marketing resources. And while imported beers continue to be a growing category in this country, U.S. beermakers have seen their own super premiums sagging of late. Sales of Anheuser-Busch's Michelob are off and Miller Brewing Co. pulled its Special Reserve brand after a less-than-enthusiastic reception in test markets. Even so, Bob Pohl is convinced that the high end may be one of the last niches for a small, independent brewer.
"The beer analysts will tell you we don't have a chance," he says. "And if you look at the numbers, you'd have to agree. But logic tells you the big companies are more efficient than we are. In a price war, we're always going to lose. People don't know who we are. They're going to have to taste the product and form an opinion based on the product's merits. And that's a plus for us."
Lesa Ukman says special events provide just the right context for a company with a good product and a low profile. In addition, she says, "editorial mention" of the company's name in news reports of an event give the sponsor visibility that simply can't be matched dollar for dollar by conventional advertising. Ukman concedes that companies go into special events mainly on intuition. "It's still pretty much a visceral judgment," she says. But she estimates that, done correctly, an event sponsor can expect to get as much as 10 times the media exposure for its money as it would buying regular ad space and time.
Clearly, however, special events may not be for everybody, just as every even is not right for a potential sponsor. The choice of events open to sponsorship is enormous, including everything from jazz concerts and rock tours to triathlons, bike races, food festivals, marathons, minimarathons, almost-marathons, and a swarm of civic-boosting celebrations taking place in virtually every burg around the country. The events range in size from such nationally televised blockbusters as the New York City Marathon, to the sublime lunacies of Toad Suck Daze in Conway, Ark., where participants race babies as part of the program, or the Calamari Festiyal in Santa Cruz, Calif., where an orgy of squid cookery is capped by a screening of the movie 20,000 Leagues Under The Sea.
No surprise, then, that Bob Pohl says Hudepohl has become "much more selective" in looking at sponsorship opportunities.
"Our name has to be prominent and we have to reach beer drinkers," he says.
Even then, Oberlag adds, Hudepohl has had to look before leaping. The company was recently approached to sponsor a powerboat regatta. They demurred when they realized a likely winner among the entrants was a boat named Miss Budweiser.