UK: Battle for beer market domination likely to be fought in low alcohol sector over the next decade
The ingredients contained in the longest surviving beer recipe found in a nearly 4,000-year-old Mesopotamian poem are essentially unchanged today.
The Hymn to Ninkasi, the Sumerian goddess of beer, breaks down the brewing process so that it can be repeated by subsequent generations. However, the brewing giants of today are risking the wrath of the ancient gods with a major alteration to the finished product – removing the alcohol, the Telegraph reported.
This is where the battle for domination is likely to be fought over the next decade and beyond.
Growth in conventional beer sales is stalling around the world as an increasing number of people become more focused on health and well-being. Zero or low-alcohol beer could be a saving grace not only for calorie intakes but also the finances of big beer.
At the moment, it is a fairly niche market that makes up just a small part of sales at the brewing giants such as Budweiser brewer Anheuser-Busch InBev, Heineken and Carlsberg, but these behemoths are starting to up their efforts.
AB InBev, the biggest of all the brewers, aims to make a fifth of its sales from low or no-alcohol beer by 2025, investing in new products such as Budweiser Prohibition, the alcohol-free version of the famous American brand.
Its decision to bring Bud Light (3.5pc ABV) to the UK last year involved a multi-million pound campaign and the company credits it with reigniting growth in conventional beer sales in the United Kingdom.
In January, Carlsberg produced its first ever adverts for San Miguel 0.0% in the UK, something UK marketing director Liam Newton says proves it is investing greater amounts into the sector. The move is working, with sales of the drink up 78pc in January this year compared to the same month in 2017.
More advertising for its no-alcohol and low-alcohol brands will be created this year, Newton adds, and industry data supports the case for it. Analysis from investment bank UBS shows global volumes of such drinks have risen roughly 4pc per year between 2011 and 2017 – quadruple the rate of traditional beer over the same period.
“The category is very attractive from a margin perspective owing to both its higher than average revenue per hectolitre and lower excise,” UBS analyst Nik Oliver said. “Major brewers are therefore placing increased emphasis on the category.”
But Heineken’s senior director for low and no-alcohol, Jonnie Cahill, says the proverbial cash pump can’t be pulled straight away.
“If you take a 0pc beer, of course you have the benefit of no or lower excise in countries that charge it but it does require some extra technology, extra brewing expertise and some extra ingredients, as is the case with our mid-strength Radler, which has lemon juice in,” he says. “It isn’t price minus excise equals jackpot.”
AB InBev’s Irini Komodikis describes no-alcohol beer as a “big bet” but now the technology has improved to create better tasting products, so the industry just needs to persuade consumers to get over the perception it “won’t taste like real beer”.
AB InBev has given out 200,000 samples in the UK in an effort to encourage traditional drinkers to develop a taste for it.
Heineken’s Cahill says nearly two thirds of its operating companies (75 locations) make low or non-alcoholic beer.
Spain is the leader in Europe with roughly 13pc of the total beer market low – or no-alcohol products – well ahead of the UK (0.5pc), France, (1pc), the Netherlands (3pc) and Austria (4pc). Pub sales will be crucial if the UK is to catch up with its overseas cousins.
At present, just a fifth in the UK is sold in public houses with supermarkets, which usually sell drinks for a lower price, accounting for the lion’s share. Heineken is well placed. It boasts the third largest pub estate in the UK after buying nearly 1,900 sites from Punch Taverns last year to add to its 1,100-strong Star Pubs and Bars estate. And this year, Guinness brewer Diageo announced the launch of Open Gate Pure Brew non-alcoholic (0.5pc ABV) lager in 250 Irish pubs.
The demographics are improving. The latest data from the Office for National Statistics showed just under 21pc of people in England, Scotland and Wales said they did not drink alcohol in 2016 – equivalent to approximately 10.6m adults. But the proportion of 16 to 24-year-olds who claimed not to drink accelerated at four times that pace, rising from 19pc in 2005 to 27pc in 2016.
“The UK needs to evolve so people are buying these drinks because they want to rather than have to, and when that happens it will become more dominant,” Carlsberg’s Newton says.
21 February, 2018
