Brewers Droop

It is still the world’s favourite tipple, but beer sales are suffering in the traditional markets. The good news, says Patrick Schmitt, is that the decline is slowing

IT SEEMS Britons’ taste for their national drink, like their national dish, has been dwindling. Nowadays, it is curry not cod we consume with chips, and chilled Chardonnay rather than local beers we down at dusk.

The figures say it all. While 1990 to 2000 spelled a decade of decline for beer consumption in this country, dropping by some 13%, wine intake doubled. Furthermore, in the 1980s around 90% of pubs’ turnover in drinks was from beer, now it is more like 60% according to The British Beer and Pub Association.

In terms of actual quantity, beer consumption in Britain has dropped from 118 litres per head in 1980 to 97 litres per head in 2001. 

A downward trend has also been experienced in other large beer consuming countries such as the Czech Republic and Ireland, while Germany, once Europe’s biggest beer drinker, has experienced a per capita consumption drop of over 25 litres between the mid-1980s and 2000.

There are, of course, a number of reasons for this category contraction beyond just the rise in popularity of wine.  Explanations include a shift to non-alcoholic health drinks as well as cocktails and ready-mixed drinks, a decrease in the number of beers available, continuing pub closures, a concern beer is fattening, persistent unregulated consumption and the decline of industrial areas, where workers would once have had four or five pints post-shift to replace the liquid lost through sweat.

However, it is important to note that currently the rate of decline in beer consumption is slowing, with certain branded beers experiencing surging sales, especially at the premium end, and the take home market proving increasingly buoyant.

Furthermore, brewers are doing their best to rejuvenate the image of what is – after all – the world’s most popular alcoholic drink (it accounts for some 80% of the global market). 

"There has been a gentle decline in beer volume but in the last couple of years the category has been more resilient and there has been a move to higher value properties," says a spokesman from research consultants Canadean.

And much of this so called "resilience" in recent times when it comes to beer consumption can be attributed to growing off-trade sales, which currently account for around a third of the total UK beer market (their share rose by some 50% between 1990 and 2000).

The reason for this growth in sales is directly due to a decrease in the personal import market, which subsided at the end of the 90s, having surged at the beginning of that decade.

This hump-like curve in personal imports correlates with the proliferation and then reduction of cross channel ferry deals because, as ticket prices rose, the cost savings of buying beer abroad became less significant, especially for bulk white van traders who switched to more lucrative tobacco smuggling.

Furthermore, recent take home prices in the UK have been extremely attractive, with regular promotional offers appearing in offlicences to reabsorb the demand lost to beer traders abroad.

The on-trade market for beer on the other hand is still in decline, but at a slower rate than in the past.  This could be due to slowing sales increases in Flavoured Alcoholic Beverages (FABs), which have been blamed for stealing some of the market share for beer, especially premium packaged lager (PPL).

Currently at around 6% of the market, FABs are believed to be levelling off in growth terms, partly because of the Chancellor’s increase in duty on these colourful bottled pre-mixed drinks and partly because – as some suggest – there is a strong fashion element to their success and it is possible the fad for FABs is passing.

Another reason for the increased buoyancy of beer in the on-trade is the more professional approach taken by retailers.  Standards have been constantly improving in both the way beer is served and also the environment in which it is drunk.

Glassware, point-of-sale, and the condition of the pint – in terms of temperature and head – have all been targeted by brewers to encourage resurgence in interest in beer.

Then again, aside from the above explanations, some have simply suggested the demand for beer is in a different part of a cycle.  But while falling personal imports, slowing FAB sales increases and improved presentation of beer might explain a decrease in the rate of change in volume and value of Britain’s national drink, there are some changes within the sector that have different causes.

For instance, much to the concern of CAMRA (Campaign for Real Ale), there has been a notable decrease in the consumption of real ale in British pubs as consumers switch to lager.

According to Canadean, in 2001, ale accounted for as little as 28% of the market, while lager made up 66% and stout 6%.  This is a notable decline in share considering in 1960 lager was only about 1% of the total UK market.

However, there is still more ale consumed in Great Britain than anywhere else in the world, bar Belgium, and there are several brands doing well despite an overall market decline.  These include, for example, John Smiths, Adnams and Worthingtons, as well as Greene King and Youngs.

And basically it seems whereas once there were many locally important brands, for instance Charringtons with its IPA for southeast England, now there are fewer, but nationally available, successful and well supported brands, like Old Speckled Hen and Spitfire.

A similar reduction in the number of brands has occurred at the premium level as exemplified by the rise and fall of Irish ales.  Intense activity surrounded this sector when Caffreys was launched in 1994 and then quickly followed by three other national Irish ale brands, Kilkenny, Calders Cream and Beamish Red.

However, by the late 90s the category was already in decline.  And overall, the market is slipping away from old unsupported regional ale brands, for example Albright Bitters in South Wales, as well as national premium brands, reducing choice for consumers and driving a long-term decrease in the consumption of ale.

Nevertheless, within the category there are still a handful of successful nationally available brands like Boddingtons.  As Rupert Thompson, chief executive of Refresh UK, sums up: "The decline in ale compared to lager is a long running trend but some of the strong ale brands are actually growing, and we believe it is possible to grow brands in a profitable way even in a sector that is declining."

Hence the company’s thriving Wychwood range and recent launch of the Duchy Originals organic ale.  Now to lager, which although enlarging its share of the beer market at a rate of about 1% to 2% a year is experiencing a falling share of the overall alcoholic drinks market in Britain.

This has much to do with the initial reasons given for the overall slight shrinkage of the total beer category’s share of alcoholic drinks, ie the popularity of FABs (even if plateauing), a shift to wine and a decline in the number of traditional beer drinkers.

However, unlike the demand for ale, in which the premium sector in particular has suffered slowing sales, in lager, it is the top end that’s showing the strongest growth, helping to steady any marked decline in value for lager.

This is most probably because consumers are increasingly demanding more choice when it comes to picking out a lager, and manufacturers have reacted by experimenting with more premium brews.   These usually have a higher alcoholic content as well as different hop blends and are often expensively and appealingly packaged. 

Brands in this price bracket also tend to draw on heritage or provenance, for instance the implied Frenchness of Stella (even though it’s Belgian).

As Joao Pedro, director of Portugalia Wines, owners of Super Bock and Sagres beers says: "There is very much a move to higher price premium brands proved by a growing proportion of high strength Belgian beers and brands like Peroni and San Miguel and our own Portuguese brands."

A sentiment supported by Thompson who admits Refresh UK’s business model "is based on the assumption there is a shift occurring to higher value premium brands," because, as he says, "the overall market as it matures will move towards more premium and differentiated products."

In volume the decline in lager has been near static in the last couple of years possibly because people have moved from bottled lagers to pints, driving the consumption (in liquid terms) of lager slightly.

This is because retail standards have improved – brewers have concentrated on the quality of draught beer for instance by improving dispenser technology and introducing innovations such as Carling Extra Cold.

But overall, although beer sales have been declining for around 20 years, UK brewers have been successful at building brands – which now account for over 50% of the market. And it is these few heavily supported brands that will decide the success or failure of the future beer market, not a series of small-scale initiatives which only lead to short term blips in beer consumption.

 In fact, Tim Corvin of brand design consultancy SiebertHead even believes "growth in the premium sector is almost entirely driven by Stella," and although there are certain niche and special occasion brands, for instance Lowenbrau and Hoegaarden, which provide choice for consumers and create interest in the category overall, the disparity in size compared to the major brands is too great for them to make any real difference to category level growth.

Tomorrow’s beer market will certainly contain a combination of scale brands complemented by some niche ones but it is only the background work done by the major brands – for example on the presentation and condition of beers served in the on-trade – that will really have an effect on category level growth quite simply because of their market share.

Making the hop hip Beer may be "the ultimate global alcoholic drink, not a fashion or a fad," according to Karan Bilimoria, founder and chief executive of Cobra Beer, but the category needs some serious marketing to prevent other drinks encroaching on its share.

This is something the major brewers are beginning to realise at last, recently embarking on a number of campaigns to raise the profile of the drink.  Coors in particular has been tackling category level marketing with its "Beer Reverence" promotion, known to the  onsumer as "Beer Naturally".

This has two prongs, one prodding the media, encouraging coverage of the health benefits of beer and how to match beer and food, while the other is nudging pubs and bars, making sure the condition of the beer they pour is perfect.

"The way the beer is presented is important and we say at Coors we hope people will be ‘surprised and delighted’ when served a beer," comments Paul Hegarty, external communications manager, Coors Brewers.

They are also trying to get more women interested in beer (90% is drunk by men) – for instance, Coors are introducing 1/2 pint branded glasses – and attempting to promote more occasions when beer could be seen as a suitable choice, rather than just with curry or at a barbecue.

The brewer is also approaching the government about the importance of beer to the UK economy – it contributes 2% to this country’s GDP – and it is felt strongly within the industry that beer should be poured for instance at official functions.

As Hegarty says: "When foreign dignatories come over and they are entertained we should serve our national drink. The French wouldn’t serve British beer, why should we be serving French wine?"

The other aspect brewers are targetting in the hope of increasing interest in beer is education, which at the moment is at best sketchy.

For example, Rupert Thompson, chief executive of Refresh UK, the founder sponsors of Beer Academy, notes that although "many beer salesmen will have done a WSET course they will not have done any formalised and examined beer training".

He continues: "Beer still represents 60% to 70% of alcohol sales and the amount of training given to staff is massively disproportionate to the profit that sector generates."  And it is hoped greater knowledge will help barmen sell beer more effectively.

At the Bierodrome chain of bars and restaurants in London, which stocks over 80 different Belgian beers, the staff undergo an intensive training programme and are expected to suggest beers to complement certain foods.

"The bartenders will pair up a dish with a beer – and a lot of customers won’t have heard of the beers and if they don’t like our recommendation we will take it off the bill. 

But, most are pleasantly surprised, people are looking for something more interesting, niche, because they’re bored with massproduced beers," says Paul Gilchrist, operations manager, Bierodrome.

However, it seems any suitable staff are increasingly scarce.  As Gilchrist comments: "Good barmen are hard to find and keep as most want to serve cocktails, be Tom Cruise.  It is rare to find the right people.

They need to be sophisticated, it is not just about pulling a pint. We need someone keen and hungry to learn – but those types tend to want to be a bar tender, rather than on the beer side of things."

Lastly, aside from raising the profile of beer and educating both consumers and bar staff, beer is freshening its image and attracting increased interest with several not so subtle packaging redesigns.

For instance, SiebertHead has revived Carlsberg’s image (it was a bit dowdy) by blowing up the "C" on the cans and developing striking beer taps.  It is even hoped the brand will eventually simply be represented just by the "C", like Nike is by the swoosh.

But already, the makeover has helped Carlsberg Export become the fastest growing beer brand in the UK last year, its sales rising in the off-trade by 87% – impressive in a market in decline. 

Case study

HAVING considered category level changes in the market for beer and come to the conclusion it’s brands that are booming – if not overall consumption – it only seems sensible to pick one and chart its history.

And what better brand to analyse but Budweiser, the very ‘King of Beers’, or rather, the brew responsible for a nation screeching ‘What’s up’ at each other like demented school children (which of course some might claim we already were and hence the success of the campaign).

Anyway, let’s look at the secret behind this beer’s extraordinary success. For instance, it is currently the top selling bottled beer in bars and restaurants, commanding a 35% share of the on-trade premium packaged lager business, according to AC Nielsen.

It’s been around for 125 years and its parent company – Anheuser Busch – has become the largest brewer in the world.  Furthermore, it’s still growing, with a 3.2% sales increase last year in the off trade in the UK.

And not surprisingly much of the brand’s sales supremacy is due to marketing – oh, and of course a drinkable product – although Randall Blackford, Budweiser UK’s marketing director insists the company’s promotional plans are "simple".

This however doesn’t prevent Budweiser having several strains to its strategy, which, by the way, is to build a "quality and contemporary image" for the brand.  The first of these strains is sponsorship, which has two elements, sport and music.

To tackle sport, Budweiser hardly does things by half, being the official beer of the World Cup, as well as the official sponsor of Manchester United, Chelsea Football Club and Manchester City.

Then, last December, Budweiser agreed to be the official beer of the FA Premier League too, allowing the brand to use the League’s lion logo as well as the collective use of the 20 teams in its point of sale, advertising and promotions.

As Blackford says: "All this has given us something that’s really relevant to our consumers – the young guys going out in bars and enjoying their football."

However, although there is a natural link between alcohol and football because "people enjoy a beer when they are watching sport," according to Blackford, there is a similar connection between booze and music, a second key area of sponsorship activity for Budweiser.

"Music along with sport," explains Blackford, "provides us with another way to build relevance to consumers in their 20s.  Some of the things we do are large festivals – we are the official beer of Glastonbury and of V – as well as holding parties like the King of Clubs in London and King of the Castle in Scotland."

And apart from associating the brand with activities relevant to the beer’s target market, Blackford also envisages both its sponsorships in football and music as being both premium and high quality, something Budweiser wants to be, or rather already is.

The company as a whole has also sensibly developed a responsible image by investing heavily in recycling and in fact is the world’s largest recycler, according to Blackford.  At Glastonbury last year, for example, the brand not only sponsored people to pick up litter but also donated 5 pence from every pint sold to recycling causes.

But enough of the caring and friendly side of the brand’s marketing techniques, and let’s look at its advertising, which has always had a rather original edge. 

"Budweiser has a long history of really pushing towards the next new exciting thing in advertising," says Blackford. "From the frogs and lizards which were a wild success in the UK and US to ‘What’s up’ which just became a global phenomenon.

"After that in the UK we moved onto ‘real men of genius’ and last September we kicked off to a new series called ‘True’." 

And the True campaign – "which is really about celebrating all the small things in life that you look at and think that is so true or that’s me" – actually came out of the old ‘What’s up’ advertising.

"They were all shouting ‘What’s up’ at each other," Blackford explains, "and then one of the guys says ‘I’m just at home having a Bud’ and the other guy says ‘true, true’ and it was just really a few words which opened up into a whole new campaign."

But, that’s not to suggest the advertising is totally unconnected to the brewers overall brand message, rather it’s a clever way to position the beer as being "genuine, honest, high quality and premium," according to Blackford.

However, while the above approaches are all about developing a particular brand character for Budweiser, there’s another tactic to the brewers marketing measures which targets simply the product.

And currently Budweiser is "really driving home freshness," according to Blackford, "because we believe fresh beer tastes better."  This has spawned the "Born on" idea, which involves printing a date on the bottled beer to let the consumer know when the drink was ‘born’.

Apparently, the beer is best within 110 days of being brewed and it is a message Budweiser is communicating through television as well as point of sale in bars and the brand’s delivery trucks.

And talking of delivery, Budweiser has extended the idea on a smaller scale by even erving ‘day-fresh’ beer by hauling the lager straight from the company’s brewery in Mortlake to bars for consumers to try – and apparently this has been done as far away as Scotland and Northern Ireland. The point?

 "It really brings the freshness message home and it’s fun and exciting," notes Blackford.  In fact, the beer is particularly effective at bringing its major campaigns to a local level, especially with its sporting sponsorships.

For example, at the grassroots level the brand recently held a Budweiser Cup, which "is a six on six tournament made up of fans of Manchester United and Manchester City," says Blackford. 

 The winning sides are trained by professional coaches from the two teams and the top Manchester United fans then go on to represent England in another global tournament in New York and the Manchester City fans get to tour Europe with their team.

"It’s a good way of taking big sponsorships like Manchester United and Manchester City and really making it local and relevant for the fans," says Blackford, "and the point of sale really ties into the emotion of the sport with the line: ‘Ever dreamt of playing for Manchester United?’ – or Manchester City?"

And this is key to the brand’s success both in the UK and globally – it has managed to engage its target audience using activities that are both relevant to them and that play on their emotions.

Furthermore, at the same time, it has also pushed the quality message hard, proving the importance of the product as well as the image to long term sales success.  

However, these marketing messages whether through sponsorship or advertising don’t come cheap, proved by the fact Budweiser has the highest media spend of any premium lager in the UK.