Down, but not out: while lager sales may have fallen in recent years, the future is giving cause for optimism
If you were to put the lager category on the psychiatrist’s couch and ask why it is so depressed, you would be met with a litany of reasons.
After decades as top dog, lager has been overtaken by cider in the popularity stakes, according to Mintel research which shows 47% of Brits now drink cider and only 46% drink lager.
The situation is not helped by the fact that cider’s duty is lower than lager and it has exploited the tax advantage.
Mintel says sales of lager fell from £12.7 billion in 2006 to £11.4 billion in 2011.
The weather has made things even tougher – it didn’t stop raining throughout Euro 2012 and the Diamond Jubilee, and lager sales were down on the same period the previous year.
Like every other category, lager is feeling the pain of the duty escalator. Bottled ale has seized some of its shelf space and there is a fear that Britain is falling out of love with lager. However, a closer examination of the sales data reveals the situation is, in fact, far from bleak, and there is cause for optimism.
Lager’s decline has been arrested. Nielsen data compiled for OLN shows volume sales are down 1.3% (year to 13/10/12, compared with 2011) but this decline has slowed – in 2011 lager was down 3.1% on 2010.
“The decline of 1.3% puts lager ahead of total liquor, which is down 2.2% year-on-year,” says Nielsen analyst Helen Stares.
Cider is still way behind lager in volume consumed. And its overall revenue of £2.4 billion in 2011 is a fraction of the UK lager market’s total revenues of £11.4 billion.
Lager’s value is up, although that is to be expected given the increase in duty rates.
But just this month, MPs called for the duty escalator to be scrapped after a vote in the House of Commons – and the policy that has dogged lager for years will be reviewed.
World lager is flying off the shelves – it added £28 million to the off-trade lager category in the past year (Nielsen MAT, year to August 8) and is set to be worth £500 million in the off-trade by 2014. “World beers continue to flourish, driving the marketplace in a premium direction,” says Andy Wingate, category controller at Miller Brands, supplier of Peroni, Pilsner Urquell and Miller Genuine Draft.
“It’s not the saviour of lager but it’s a positive movement.”
While eight of the top 10 lager brands saw volume sales fall last year, Kronenbourg is up 13.7%.
“Kronenbourg is reaping the rewards of a new marketing campaign designed to position the brand as the lager of choice for self-confident men who put taste first,” says Martin Porter, off-trade sales director at brand owner Heineken UK.
When asked how the Heineken brand might replicate Kronenbourg’s success, Porter points to its sponsorship of the Olympics, Champions League football and the latest Bond film, Skyfall, in which Bond is seen drinking Heineken.
“These platforms have driven the brand to a 19% year-on-year value increase (IRI MAT to August 4) which
represents a truly outstanding performance for a mature brand such as Heineken,” he says. “Continued sponsorship and innovative marketing campaigns will help to raise the brand’s profile. Innovation continues to shape the lager category as manufacturers strive to develop new brands, flavour extensions and pack formats that keep lager relevant and exciting to the evolving lager shopper.
“We expect this innovation to continue, giving retailers plenty of opportunity to drive sales and reason to remain optimistic.”
And while Stella sales fell, AB-Inbev’s other big hitter, Budweiser, saw a 0.4% sales growth.
Simon Harrison, off-trade sales director, at AB-Inbev, says: “Our business in the UK continues to perform well despite challenging economic conditions and record duty increases. We are really pleased with Budweiser’s performance. Its market share growth demonstrates the success of our partnership with the FA Cup.
“Stella Artois is one of the best-loved beer brands in the UK and, by continuing to innovate and deliver excellent consumer campaigns, I believe we will be able to grow our brand loyalty and market share.”
Sales of flavoured lagers are also booming – Amigos tequila-flavoured beer sales grew 113% this year (Nielsen MAT to October 31).
Simon Green, sales and marketing direc- tor at Global Brands, says: “Lager drinkers are moving towards fruit cider and that drinker has a sweeter palate, so there is a market for something premium, flavoured and different.
“World beer has seen value and volume growth and, from a retailer perspective, stocking premium lagers such as Amigos delivers value.”
Green, who previously worked at Heineken and Carlsberg, says he is confident in the future of the lager category provided there is continued investment and innovation.
David Scott, marketing director at Carlsberg UK, adds: “A double-dip recession coupled with appalling weather led to the beer market as a whole slipping a bit this year. However, the future is bright. The IMF forecasts that GDP will grow at 1.1% in 2013, which has a positive effect on the beer market.
“The off-trade beer market will decline to a lesser degree at 0.9% per cent, and lager will be the best performing category, declining just 0.6%.
“Looking at 2014, the forecasts are even more promising, particularly for lager with the World Cup due that year.”
The lager category will just have to hope the weather becomes its friend.