Really ailing?

The future looks bright for lager, but should real ale take a lesson or two from wine? Robyn Lewis investigates

IT WILL be news to nobody (unless they’ve spent the last 20 years as a housebound teetotaller) that lager dominates the UK beer scene and all forecasts indicate that this is likely to continue.

A Coors Market Insight Report predicts that by 2008 lager will account for two pints in every three sold in the on-trade and 90% of beer sold in the off-trade.  This is not, however, information that is curious enough to base an entire article on – for the intriguing facts we need to delve deeper into the sector.

Taking the lager category, we can see that, ostensibly, it is divided between mainstream and premium (5% abv or over), both of which have enjoyed a sustained period of growth over the last two decades – but it is where they have grown and where they are sold that is interesting.

"From the figures we can see that the premium beer sector is largely driven by the off-trade and mainstream lager by the on-trade," says Paul Heggarty external communication manager at Coors.

"This is driven, we feel, by occasion usage.  This is where consumers feel that when they are out in bars and pubs they are out to have a few drinks and don’t want to get too drunk, too quickly on stronger lagers.

All our research predicts that this trend is likely to continue at least until 2008.  The other interesting factor that our research threw up was that, by and large, consumer behaviour shows that the two categories are distinct from one another, and of those consumers drinking in the onpremise there is very little overlap between those consumers who drink mainstream lager and those who drink premium.

Moreover, the premium sector is further segmented into three distinct categories, within which there is also very little consumer overlap," says Heggarty.  These three categories are Easy/American, a sector that encompasses Budweiser and Coors Fine Light among others; Taste/Continental, including Grolsch, Stella Artois, Kronenbourg et al and Special Provenance, which comprises brands such as Tiger, Budvar and Hoegaarden, for example.

According to Heggarty, Coors undertook research which discovered that consumers who drank beer from any one of these sectors said they didn’t enjoy the taste of beers from either of the other two categories.

"There was very little movement from one style of beer to another and when another brewer launched a brand attempting to breach the gap no one bought into it at all.  It seems that you have to be very clearly in one camp or another and what we’ve learned from that is, with premium lagers especially, it is important to target each brand to a specific segment of that market.

So, that’s what we have done with our portfolio with Coors Fine Light in Easy/American and Grolsch in Taste/Continental etc."  Interbrew UK has a similarly diverse portfolio of brands including Stella Artois, Hoegaarden and Becks, to name but a few, and the company agrees that the premium category iscontinuing to experience something of a sea change.

"There is a definite polarisation of the premium category happening now," says Phil Rumbol, UK marketing director for the brewer, "with a definite shift towards the big brands, as consumers become more brand conscious in their drinking repertoire, at one end, and the emergence of niche brands and sectors such as speciality and imported beers at the other."

The immediate challenges in this category are based around product quality at the point of serve in the on- and off-trade, says Rumbol.  "The consumer experience is at the heart of successful retailing and the work needs to come from brewers and retailers working together to tackle the root causes of poor quality in the on-trade.

This needs to take the form of a perfectly poured draught beer and the ambience of the outlet. That sets it apart in the eyes of the consumer and makes them willing to pay more, and this is what retailers must focus on delivering.

"In the on-trade we are helping retailers improve standards through initiatives like the Stella Artois quality programme and award.  In the take-home market, quality is all about providing chilled beer that is ready to drink and trying to replicate the pub ‘pint’ at home.

We have worked with retailers on a number of chiller initiatives such as meal deals where Stella Artois is merchandised alongside ready-to-go meals. 

"We have also distributed branded glassware to takehome consumers to improve the quality of their in-home drinking experience and we developed the Draught Mini Barrel containing five-litres of either Stella Artois, Boddingtons or Tennent’s lager, which keeps fresh for up to 28 days after opening."

Generally, however, Rumbol would say that the industry lacks a certain innovative streak. "What the beer category has been lacking is an active new brand development programme," he explains.

"During the 1990s we saw the development of no- or low-alcohol beers, widget ales and lagers, dry beers, ice beers and hybrid ales such as Caffrey’s.  Most of these inventions – with the exception of widget ales and one or two brands – haven’t survived long term, but what they did do was create some much needed impetus and interest in the beer category.

We have recognised that and are now putting a lot of resources behind NPD and have established a team in the UK dedicated to bringing new products to market.  As part of Inbev we also have the support of a global innovations team, which enables us to tap into emerging global trends."

A new product on the horizon is an offering from premium imported beer Budweiser Budvar. The company is planning to launch its Budvar dark into the UK later this year, following a successful testmarket trial.

"It can be described as a designer beer as it has been created by one of Budvar’s new generation of brewers, Ales Dvorak, and he has been able to bring something new to the portfolio," explains John Harley, CEO of Budweiser Budvar UK.

Harley has also been involved with the setting up of NoFibs, the National Organisation for Imported Beers, an organisation that he hopes will start to make an impact on the sector – and beyond – next year.

"The idea is that a number of importers and brand owners should work together to counter some of the problems our category will face next year.  There’s the certain legislative hostility we face, like the whole of the beer business, aided by all the health fascists grinding their various axes.

"Also there is the gradual move from bottle to draught. In the on-trade there is a definite shift to draught and that could lead to a package versus draught conflict within the same brand. In point of fact, our research has shown that draught drinkers are different from the packaged people in the same way that the can purchaser in the offtrade is different from the bottle purchaser.

The problem is persuading the retailer that this is the case, but drinking draught from a nice glass is all part of the new drinking culture that is about drinking less but drinking better."  One of Harley’s strategies is to take ideas from wine – itself a threat to the category, he notes.

"We have to continue to address the various inroads that the wine industry has made into the traditional beer business and I think we can do this by taking a lot more of the wine industry’s ideas.  We need to get more beers out there on the shelves and in the cabinets with more information about style and country of origin complemented by tasting notes and so on."

One beer brand in the market that has established itself almost entirely through taking this approach is Innis & Gunn’s Oak Aged Beer.  Master brewer, Dougal Sharp is very keen to capitalise on the beer’s shared  characteristic with wine – the oak ageing.

"Anyone who enjoys a glass of wine or a good mature spirit can become an Innis and Gunn drinker because they will already know and like the main oak flavours to be found in it – vanilla, toffee, orange, citrus etc.

Part of what we have focused on last year was telling consumers that our beer is a good alternative to a glass of wine and that it goes very well with food."  The major difference here, of course, is that Innis and Gun is an ale, a category we have thus far all but forgotten. The question is if the rest of the British public have as well?

Sharp would say, of course, that there is plenty of potential left in ale.  "It’s a vibrant, exciting and growing category that is ideally placed to be the next big thing," he states.  However, as the statistics at the beginning of this article show the sector has been dominated by lager for some time now and, furthermore, ale is a product that finds very few younger consumers, a situation that poses a real threat to the future of the category.

A new report from research consultancy Adsearch entitled Is There A Future For Real Ale? suggests that there is a definite need for education and sampling in the younger generation if the category is to survive.

 "One of the key reasons we found that young people do not try real ale is that it is not stocked in the bars where they drink," says Peter Jackson, managing director of Adsearch.

"Furthermore, where it is stocked, real ale pumps lack prominence on the bar.  Young drinkers like to find a well known brand of lager in the first place they visit and then they want to stick with it as they travel the circuit.

Ordering something different complicates matters and customers feel they run the risk of losing their money on an unknown and potentially disappointing taste.  Young drinkers also have an older middle-class image of a real ale drinker.

They don’t dislike him; they just think he isn’t like them.  So they stick to what they know.  Our conclusions were in the long-term to widen the distribution of quality real ale but perhaps the short-term and effective solution is to tell more people, and young people, where real ale exists, is in stock and can be tried on a risk-free basis."

One of the few big brewers (indeed, as they would have it, the only big brewer) still committed to ale, Scottish Courage, says that the category is in perfectly good shape.  "The on-trade ale market has a retail sales value of £4.1bn (ACNeilsen GB ons MAT to Jan 04)," says David Jones spokesman for the brewer.

Premium bottled ales have been in growth via the speciality beer category – a sector  ncluding Hoegaarden and Leffe among others – for some time now. 

Nielsen stats from Jan 03 show brands such as Waggle Dance up a massive 118% by volume, (albeit from a small base) and, as Jones points out, the bigger brands such as Scottish Courage’s John Smith’s are doing all they can to bring younger consumers to the category, "John Smith’s has a younger profile than other ales according to Alcovision findings, and we put £20m of marketing support behind the brand, including the Peter Kay advertising campaign which has been incredibly successful."

Surviving in a changing market is never going to be an easy ride but perhaps the move to draught and the polarisation seen in the lager sector will help the ale category to move forward? It remains to be seen whether this will be at the expense of lager, or even wine, but it will be interesting to see if those 2008 forecasts can’t be proved wrong.