Beer

Issues in the Market

Drinkers are increasingly looking for pubs to make

imaginative choices with their range of drinks and those
which stick to safe options of just mainstream brands are
likely to struggle to win over beer enthusiasts.

Q: How can the on-trade beer market better

convey value for money to curb its decline?
A: It is hardly surprising that consumers are
cutting back on their consumption of beer in
pubs/restaurants in the economic downturn, with
the on-trade RPI for beer increasing much more
quickly than for all items (excluding housing). The
impact of the tax escalator has been felt especially
keenly in the on-trade, where the average price
per pint has risen dramatically in recent years.
While the supermarkets have been able to
combat the escalator somewhat through strategic
and often deep-cut promotions, the on-trade has
suffered with volume sales slumping dramatically
over the past decade.
Indeed, 2012 may be the first year in which offtrade volume sales nudge ahead of the on-trade.
However, the on-trade is well placed to thrive
again as the economy recovers. Food-led pubs are
also proving to be robust performers, suggesting
that brewers may benefit from more actively
highlighting how their beers match with different
types of popular foods.

Certainly conveying value for money is one of the

main challenges for the on-trade, particularly as
just 53% of beer drinkers think that draught beer
tastes better than in cans/bottles. Branded/specific
glasses offer a way of adding value, with 38% of
beer drinkers preferring glasses specific to the
drink. Tasting events and beer flights are
additional ways of adding value to the experience,
particularly as one in three drinkers would like to
understand more about beer.
There is a strong demand to see new beers,
something which has helped the global beers
market to thrive, with 29% of beer drinkers
looking for something new when buying beer and
52% keen to see a wide range of craft beers in
both the on- and off-trade. Pubs should be more
vocal about their range of beers and how it
differentiates them from its competitors. Guest
ales have been useful at driving interest in the
market and are something which an increasing
number of pubs could utilise with lager,
particularly if it is made locally.

Chris Wisson
Senior Food Analyst

Chris researches and writes reports on the UK food industry. Prior to joining Mintel in July 2011, he worked for
M&S/Park Cakes as a Bakery Merchandiser and as a Business Analyst at Mot-Hennessy. Chris has a first-class BA
degree in Geography.

cwisson@mintel.com
Tel: +44 (0) 20 7606 4533
2012 Mintel Group Ltd. All rights reserved. Confidential to Mintel.

Beer

Issues in the Market

The growth of loweralcohol beers and more

flexible serving sizes
(which also lower the
price points) are viable
means of keeping beer
drinkers engaged with the
market at a less calorific
level.

Ultimately, with only a slim chance of the tax

escalator being abandoned before the scheduled
2015, pubs have little choice but to look for ways
to justify their prices and think imaginatively of
their ranges, particularly of draught beers to
differentiate from the in-home experience. The
momentum of the craft movement shows how
there is strong goodwill among drinkers;
however, these users are unlikely to be willing to
swallow price rises for no improvement to the
product and service.
Q: Can lager soften its unhealthy associations?
A: One of the trends identified by Mintel Inspire
is A Simple Balance for Health, reflected in
consumers desire to make small adjustments to
their lifestyles rather major overhauls, including
when it comes to their eating regimes. As such,
many discretionary grocery markets such as
confectionery and crisps have been able continue
growing despite the squeeze on incomes. Beer
has also benefited from its longstanding popularity
among adults, with consumers reluctant to cut it
out of their diet entirely.

Nevertheless, over half of adults (52%) state that

they have tried to lose weight in the last year,
with more indulgent items such as beer exposed
to being cut out of diets (see Mintels Dieting
Trends UK, November 2012 report). The report
also found that among adults who were looking
to maintain their current weight or lose weight,
31% had cut back on alcohol. Unhealthy,
unflattering associations such as beer bellies are
likely to deter more health-conscious groups such
as women from beer in particular. Indeed,
Mintels Beer UK, December 2011 report found
that 35% of lager drinkers think that lager is more
calorific than most other drinks, agreement
peaking among 18-24-year-olds.
While all alcohol carries empty calories, there
may be potential for the beer industry to educate
consumers not only about the negative health
effects associated with drinking (and particularly
to excess) but work towards softening the image
of lager, something which red wine has achieved
by educating consumers about the possible
circulatory benefits of drinking in moderation.

With a half pint of 4% lager typically containing

under 100 calories, less than a medium-sized glass
of red/white wine, educating drinkers that beer is
perhaps less unhealthy than they expect may help
beer to combat competition from other drinks
categories.
Unfortunately these factors are unlikely to be able
to be conveyed directly by brands; the days of
Guinness claims of being good for you are firmly
confined to the past. However, the industry may
benefit from promoting beer as a low-strength
session drink to be enjoyed in moderation which
need not be unhealthy. The growth of loweralcohol beers and more flexible serving sizes
(which also lower the price points) are viable
means of keeping beer drinkers engaged with the
market at a less calorific level (also see Mintels
Soft and Low-alcohol Drinks in the On-trade UK,
October 2012 report).

2012 Mintel Group Ltd. All rights reserved. Confidential to Mintel.

Beer

Issues in the Market

Q: Can craft brewers balance exclusivity with

wider appeal?

Successfully balancing
exclusivity with wider
appeal is therefore a
challenge for craft
brewers who should not
lose sight of the fact that
their niche positioning is
in fact one of their biggest
strengths.

A: One of the undoubted success stories in the

beer market in recent years has been the growth
of craft brewers which have rapidly increased in
number to take advantage of reduced taxation on
breweries producing volumes of under 60,000
hectolitres. Many of these brewers are able to
make modest profits by utilising this tax break
and appealing to a niche group of beer drinkers.
However, this is coming under increasing
pressure from factors such as barley prices and
the tax escalator which means that even craft
brewers may have to court the mainstream beer
drinker in order to remain profitable. Many of
these craft brewers have been successful in
tapping into the growing consumer demand for
newer and less mainstream products, something
which the controversial craft brewer BrewDog
has built its image upon, often speaking out
against the quality of mass-produced beers.
Indeed, BrewDog represents the perfect example
of a craft brewer which has shown such strong
growth in recent years that it is questionable
whether it is still a craft brand.

Based on volume production, the answer would

be no as the brewers beers can now be found in
many of the multiple grocers. BrewDog also now
makes own-label beer for Tesco, potentially
undermining the independent and rebellious ethos
which it continues to champion. While the
company continues to be independently owned,
its increasing move into the mainstream (which is
understandable considering the financial gains)
runs the risk of disillusioning craft beer drinkers,
particularly the 30% of beer drinkers who like to
drink beers which are less widely drunk.
Sharps Doom Bar is another brand which proved
popular with craft enthusiasts in its Cornish
heartland. Following its acquisition by Molson
Coors in early 2011, there were fears among
these drinkers that the brand would be
homogenised and lose its unique appeal as it grew
and extended into South East England. However,
a hands off approach has been mutually
beneficial, with Doom Bar itself able to tap into
Molson Coors distribution and marketing
advantages, while the parent company has added a
popular and profitable beer brand to its portfolio.

Despite 46% of beer drinkers thinking that it is

important for craft beers to be independently
owned, the fact that just 34% of them are less
likely to try a craft-style beer from a larger beer
manufacturer suggests that the large brewers can
tap into the demand for craft beers provided they
do not erode the ethos of the brand or the
segment as a whole. Successfully balancing
exclusivity with wider appeal is therefore a
challenge for craft brewers who should not lose
sight of the fact that their niche positioning is in
fact one of their biggest strengths. Indeed, the
fourth most cited choice factor when buying beer
is something which I havent seen/tried before,
something which has also helped the global beers
segment to achieve robust growth in the UK.
There are therefore obvious risks associated with
pursuing the mainstream beer drinker: while 54%
of beer drinkers expect craft beers to taste
better than non-craft ones, removing the
exclusivity element is a bold move in the current
climate where consumers are looking for greater
engagement with personable brands.

2012 Mintel Group Ltd. All rights reserved. Confidential to Mintel.

Beer

Issues in the Market

Beer producers could also

leverage the quality of
ingredients used to
convey premiumisation,
something which cider
has again led the way by
highlighting apple
quality.

There are certainly merits for craft brands in the

Doom Bar approach, provided they are able to
retain their craft ethos and orientation. However,
there is also potential in following the more
traditional approach of steadily building awareness
in the on-trade, particularly as on-trade usage of
craft beer is higher than for the off-trade (17%
against 13%), but also with drinkers looking for
more adventurous and premium drinks when
visiting pubs/bars.
Q: Can British brewers follow the lead of cider
and leverage regionality?
A: Arguably the strongest-performing alcoholic
drinks category over the past decade has been
cider, which has achieved remarkable growth on
the back of an improved image and flavour
innovation attracting new users. However, the
market has also used regionality effectively, as
seen in the strong quality associations with ciders
produced in South West counties such as
Somerset. Other markets such as whisky (scotch)
and wine have also used locality as a cue for
premium products, something which beer brands
have been slow to use to their advantage.

As a result, just one in five beer drinkers identify

the country of origin as one of their leading
factors influencing purchase, well behind the
equivalent number in the wine market (38% see
Wine UK, September 2012). According to
upcoming research by Mintel, this number only
rises to 22% among cider drinkers, while 51%
think that British ciders taste better than foreign
equivalents. British beer brands should tap into
the enthusiasm for British goods and use
regionality to convey premium associations,
particularly as 43% of beer drinkers prefer to
drink regional beers to support local producers.
Mintels Provenance in Food and Drink UK, April
2012 report found that over half of adults (52%)
prefer to buy British because it is fresher than
imported equivalents, indicating that British
brewers could leverage freshness and purity to
add a sense of premiumisation and improve the
perceived value for money. Beer producers could
also leverage the quality of ingredients used to
convey premiumisation, something which cider
has again led the way by highlighting apple quality.

However, there is a danger of British brewers

already falling behind on this front, as seen by the
strong growth of global beers such as Peroni and
Chang which leverage their location to convey
higher quality.
As mentioned above, the growth of a number of
new craft brewers in London suggests that there
may be opportunities for London to drive the
quality agenda and position itself as the
benchmark for quality British beer. Craft brewers
in particular are well placed to leverage their
perceived higher quality, with 54% of beer
drinkers expecting craft beers to offer higher
quality than non-craft ones. Provided they can
deliver on this perceived higher quality, British
beers may be able to tap into the popularity of
location-specific beers which are representative
of a particular standard of beer.

2012 Mintel Group Ltd. All rights reserved. Confidential to Mintel.