UK: AB InBev to target the on-trade

The man about to take the helm of AB InBev’s total European market may well be focused on achieving growth for his company’s portfolio of brands, but Jason Warner is a person who thinks well beyond the confines of his corporate world, The Morning Advertiser reported on October 30.

World domination may be a phrase too far for AB InBev’s (AB InBev) north Europe president Jason Warner, but the soon-to-be promoted beer boss does have his eyes set on significant growth within his territories – although, he is acutely aware of the challenges that must be met, should the global brewer achieve its desired UK market share.

It has been just over a year since Warner and I last met. The circumstances, however, are the same as they were in 2017. It is the brewing giant’s customer day, which sees hundreds of people with various vested interests in beer gather at Wembley Stadium for a conference and showcase of AB InBev’s brands.

In a bright and airy hospitality suite that looks out across the stadium’s football pitch, Warner awaits with his head of PR Louise Fernley and on-trade sales director Rory Mclellan. Despite the early hour and the fact he has been rehearsing for the day’s conference since the crack of dawn, Warner is chirpy and prepared to talk shop in the 30 minutes he has set aside for our interview.

AB InBev is the largest brewer in the world and reaches multiple countries, which means it also encounters substantial criticism as its market share increases. Much of the judgment received is from those who bemoan the way corporate giants such as AB InBev dominate markets and take up trade and share from smaller brands.

Supermarket shelves, for instance, are packed full with Stella Artois, Budweiser, Bud Light and Corona. To the despair of some, the brewer has plans to increase this presence with new launches, as well as a renewed focus towards the on-trade – more on that later.

At the head of this Goliath, for north Europe at least, is not a scruple less evil villain, some may be surprised to learn. Warner does not let out wicked cackles, nor does he stroke a cat while chatting.

Even cynics would quickly see that, after a few moments of talking, he is genuine, welcoming and interested in the world outside of AB InBev, as well as the wider trade and brewing industry.

His attitude and approach to life, as outlined in a previous interview with The Morning Advertiser, stems from a tragedy in his earlier life. When he was 21, Warner’s sister died of leukaemia atthe age of 18, driving him to steer his life in a particular direction. “She was told she had two weeks left to live,” recounted Warner at the time. “It was absolutely horrible, but her strength of character and her courage, especially the way she dealt with [the diagnosis] left an indelible imprint on me.

“At that stage in my life it made me question everything. Everyone asks those questions at some point in their lives, but I did it at 21. I just asked myself: when I’m 80, what will my life be like? What will I be proud of?” With every decision Warner makes, you get the sense he asks himself whether he will be proud of his choice.

Responsibility is a big part of his decision-making process, which comes from the belief that he and everyone working for AB InBev are “global citizens”.

“The thing that I’m most proud of this year was what we did with Matthew Clark and C&C, because we’re not a bank, we’re a business,” says Warner who is talking about the significant sum the brewer paid to help C&C buy beleaguered alcohol distributor Matthew Clark earlier this year when its parent company Conviviality went bust.

“For us, Matthew Clark was very important, especially in terms of route to market. But when I look back on my career and the position that I’m in now, the fact that we were able to help around 25,000 pubs will be something good,” he continues. “It wasn’t just about Matthew Clark, it was the long-term impact of what was about to happen [people losing their jobs and supplies not getting to pubs] and that’s the kind of thing we can do as a company.”

Goodwill gesture angst Something Warner is not particularly happy about, though, is AB InBev’s lack of response to the recent CO2 shortage. Its three UK breweries have been built “fully green” and capture the naturally released CO2 from the brewing process, making them self-sufficient in the gas.

“We were sitting there with CO2 and we couldn’t get it out of the breweries because they weren’t designed to be tapped like that,” recounts Warner.

“We couldn’t load CO2 onto trucks and send it out to offer relief and support to our peers as a goodwill gesture.” But teams at the brewery are now working on a solution to avoid a similar situation in the future, he confirms. “It’s great that we’re green and looking after ourselves and the environment but, as a global leader, it’s important that we think about others as well and in that moment it was a real low for me and the team – we were fine but, as a human being in this world, saying we’re fine doesn’t feel right.”

Although thinking of others appears important to Warner, his core function is to grow beer sales within the UK and his other European territories. Even in his new role as Europe president, which he will begin on 1 January 2019, this will be his primary focus.

Mainstream lager sales, however, have been looking a little peaky for some years now. Although the segment maintains the lion’s share of overall beer sales, it’s a story of mixed fortunes.

That said, Warner is optimistic about lager and especially, perhaps obviously, when it comes to the brands at his disposal. Bud Light, which relaunched in the UK last year, has performed well for the business. In the past year, according to CGA data, on-trade sales volumes of Bud Light have grown by more than 75,000 hectolitres to 115,800.

“We’ve invested heavily to build a fun and irreverent brand that’s connecting really well with consumers,” says Warner.

“We now have a penetration of around 2.6% and that’s steadily increasing.”

According to the beer boss, Bud Light also has a repeat purchase rate of 38%, while 20% of its drinkers had never consumed beer before taking their first sip of the brew.

Targeting the right audience He sees the brand and its success as a rallying cry to other lager brewers to do more to recruit newer drinkers into the category, which he argues has too long been marketed towards the wrong audience. “It’s not such an interesting category to a younger crowd and the problem is it’s become ‘dad’s’ beer, because they’ve [the brewers] been talking to the same guy for the past 20 years.

“It’s clear that, if you’re prepared to put the investment and effort in [to market a beer], you can connect with Millennials and that segment of the market and, I believe, it is fundamentally important the industry recognises that.”

By targeting a younger crowd with a more vibrant brand that fits with the wants and needs of Millennials, the lager category could turn its fortunes. With brand building and the right marketing, Warner believes this is achievable, citing Budweiser as an example.

“I took over Budweiser in the United States nine years ago and 85% of its volume was sold in the States. At that time, people thought beer was local and that brands couldn’t be localised,” he says.

“But today, more than 80% of Budweiser’s volume is sold outside of the United States.”

On-trade suffering noted Many would argue that much of AB InBev’s lager success is a result of increasing off-trade sales, which causes issues for pubs. A fact Warner doesn’t deny. The brewer has great relationships with the off-trade and has a 33% share of that market, which sometimes spikes at 42% when promotions run, and was the case during this year’s World Cup. But Warner wants an overall and steady 35% share of the entire UK beer market, including the on-trade.

“We have, historically, underperformed, and I’m talking about the past 10 years, because 20 years ago we were very strong in the on-trade,” Warner admits. He has said before that pubs and bars are an important market for him and AB InBev, which will gain more focus in the next 12 months. Despite a need to grow more in the on-trade, the business is clearly increasing brand sales on all fronts, just some faster than others, as Warner says, with a chuckle, they’re seeing growth everywhere.

With such success, it’s understandable why the beer boss seems confident about almost everything, but will Brexit throw a spanner in the works? No, he believes. Warner arrived from the US to take on his current role roughly a month after the Brexit vote was announced, with everyone asking him what it would mean for AB InBev’s UK operations.

“The UK is a very, very important beermarket to us and we are committed to here. So, first and foremost, we’re here and here to stay,” he says. To limit as many potential impacts that Brexit could throw up for the brewer, much of the production processes have been localised, he explains. Budweiser is currently made using 75% British barley, but that will increase to 100% by the end of 2019, which is just one example of how AB InBev is safeguarding against Brexit.

“We’re doing everything in our power to offset any potential risks that may come and a lot of people talk about the risks [of Brexit], but there are also positives. We can’t say exactly what is going to happen until it does happen. Every week we hear something new [about Brexit] and that has an implication and [requires] an action. But I think we have insulated ourselves well enough [from many issues].”

Other parts of the ‘insulating’ will undoubtedly come from brand launches and innovation. For instance, AB InBev’s incubator arm ZX recently acquired the Atom Group, which owns spirits brands including Bathtub Gin along with postal drinks service Drinks by the Dram. This isn’t because, Warner claims, the brewer wants to get into spirits, but it will help AB InBev learn from other segments, since it’s hard to innovate if your focus is solely on beer.

When it comes to beer innovation, Warner has recently drawn on the wider AB InBev portfolio. The biggest launch was Bud Light, which feeds into the wellness agenda the brewer is very keen to drive forward. Just last month, Michelob Ultra was relaunched in the UK after a failed attempt a decade ago, and will help AB InBev dive further into the wellness market.

Both brands fall into the lower-alcohol occasion market, which AB InBev is keen to champion, aiming to have 20% of its beer sales come from the low or no alcohol category by 2025. Currently this stands at 7%, but Warner seems sure the target will be hit “a couple of years” ahead of deadline.

“If you look at low alcohol, it’s still relatively small in the UK, with sales at around 43m pints,” he explains. “But the fact it’s growing at 27% is very interesting, but what’s even more interesting is the 3.5% ABV segment, which we call the low-alcohol responsible choices segment, and that is working really well for us.”

The reasons Bud Light and Michelob Ultra didn’t work when they first launched is because of timing, he claims.

“My mum told me when I was younger that, ‘sometimes you can have the right idea or you could be right about something at completely the wrong time’. The team behind Bud Light and Michelob in the past noticed a trend, took the bet, pulled it and moved on when they realised it wasn’t the right time. That’s how you manage a business.”

Perhaps now is the right time to launch more products that fit into the low and no-alcohol category. The trends, stats and industry commentators seem to point in the direction of a healthy future for the seemingly emerging segment.

It is clear AB InBev has plans to take hold of a bigger chunk of the beer market, to shake up the lager category with products aimed at a younger audience and to spread a little love to others every now and then. But, world domination?

You can make up your own mind about that.

01 November, 2018