World class

12 May, 2014

The world beer fixture has emerged as arguably the most diverse and exciting space in the FMCG market in recent years, and it has finally dragged the struggling lager category back into growth.

After years of nose-diving sales the long- suffering category is now up 1.9% in volume and 3% in value to £3 billion (IRI, year to March 1). But, while standard lager’s performance is flat, world lager is up 18.6% in volume and 21.3% in value and driving all the growth.

It commands a higher price than standard lager and offers stronger margins, causing retailers of all sizes to give it more shelf space.

“Growth in world lager demonstrates the progression of consumers from point-of-entry into more premium and complex products,” says IRI analyst Steve Jones.

The economic downturn has led to people eating and drinking at home more. They also have more sophisticated taste buds than ever, fuelled by the foodie revolution led by primetime TV, and inspired by their travels in an age of globalisation, backpacking and Easyjet.

This means they are more experimental when making food at home while ready meals have evolved from tasteless TV dinners into stunning feats of artistry, such as three Michelin-starred chef Heston Blumenthal’s Waitrose range.

Just as soggy kebabs and TV dinners don’t seem to cut it any more, neither do cans of standard lager.

Shoppers are increasingly prepared to fork out on premium drinks – which are still far cheaper than on-trade offerings – so they can pair them with a host of international cuisines.

“Provenance, authenticity and quality continue to be key to the UK’s increasingly experimental, discerning and well-travelled consumer,” says importer Morgenrot’s national account director, Graham Archibald.

World beer has capitalised on these trends and is reaping the benefits. Shoppers can buy Singha to go with Thai curry, Asahi for sushi, San Miguel for paella, Tsingtao for Chinese food, Quilmes for steak ... the list goes on and on.

Nowhere else in FMCG are shoppers dazzled by such a colourful range of exotic products from so many different countries. Browse the aisle at Waitrose and you can find Cusqueña from Peru, Estrella Galicia from Spain and Nils Oscar God from Sweden.

These beers intersect classics from around the globe – the chic Peroni, the iconic Kronenbourg 1664 – with the likes of Corona evoking lazy days on a Mexican beach and Cobra stirring up thoughts of the colourful vibrancy of Indian food and culture.

The labels are bright and vivid, from the eponymous beast on Tiger to the sparkling peaks of the Rocky Mountains on Coors Light.

Growth in this sector is accelerating, and suppliers say the only way is up.

In the past year it surged past the £400 million mark and Nielsen estimates it could be worth more than £500 million by the end of the year – accounting for around a sixth of the £3 billion lager category.

Miller Brands, supplier of Peroni, Miller Genuine Draft and Pilsner Urquell, reckons it could be worth an extra £1.8 billion to the trade if retailers champion it.

Sales director Tim Clay says: “It is great to see retailers recognise and are making the most of the trade-up opportunity world beer offers and, in line with our research, we expect this to continue.

“Retailers should aim to have a selection of world beers available alongside their mainstream and everyday premium lager selections to encourage consumers to trade up and take advantage of the higher margins and profit opportunities these brands offer. By maximising the trade-up opportunities available, this could add £1.8 billion in value to the category.”

But not everybody is happy with the rise of the sector. One supplier, Budvar, believes the term “world beer” is nonsense, because so many of the beers that fall into the category are actually brewed in the UK.

A major retailer may have a world beer section containing German, Danish, Spanish and Japanese beers. What consumers may not know is that all four could be brewed in the UK.

Budvar marketing director Ian Moss says consumers are being conned, adding: “There is an argument that the great ‘world beer’ boom and the rise and rise of ‘craft beers’ have given drinkers more choice than ever before.

“The only problem with this is that, to exercise choice, it is necessary to have access to quality information about the nature of the product based on some universally accepted criteria and this simply doesn’t exist in the beer business at the moment.

“What does world beer mean? That it wasn’t brewed in the UK? Well sometimes it is – under licence. A lot of consumers don’t understand that world beer doesn’t always come from the country it claims to.”

The issue came to a head when the Advertising Standards Authority banned a Kronenbourg 1664 ad for falsely implying the beer was brewed in France.

Dutch giant Heineken brews the Kronenbourg sold in the UK at its Manchester plant, but the ASA ruled that the ads suggested it is made in France. The TV slots feature ex-footballer Eric Cantona waxing lyrical about the French hop farmers that are idolised for helping make Kronenbourg.

Budvar said the ASA decision “screams out for our industry to get a grip on this whole world beer issue and to seriously define what it means”.

Nigel McNally, managing director at rival Brookfield Drinks, said it was “time the big brands come clean and be up front” on topics such as provenance and traceability because “British drinkers are being misled”.

But Heineken simply brought Cantona back, changed the script a little and released a new version of the ad, and its press manager David Jones hit back at rivals. “As long as those beers are brewed to the same recipe they are brewed to in their original countries I don’t think there’s a consumer problem,” he says.

“The product will tell you where it’s brewed and advertising has to. We know Kronenbourg is brewed to the same recipe as it is in France. If we were brewing a different beer and calling it Kronenbourg I could understand that.

“Beer is an expensive thing to ship around the world. Think of the environmental cost. Would people want it to be shipped? The answer is often ‘no’. We are all aware of green issues. People just want the facts.

“Foster’s was imported to the UK from Australia when it was a tiny brand. But there’s a tipping point [it is now also brewed by Heineken in Manchester]. When a brand reaches a certain volume it’s not sustainable. If beers are big and popular enough there comes a point where you have to look at producing in the country you are selling in. There are far more important things to worry about.”

But Moss at Budvar wants a proper classification system for “world beer” based on “universally accepted criteria”. He says: “Why have the wine and spirits businesses managed to sort themselves out so well but beer hasn’t?

“Scotch can only be called Scotch if it is produced in Scotland. You can’t call a drink a Bordeaux wine unless it comes from Bordeaux, or a sherry unless it comes from Jerez.

“In the past few years there has been a lot of talk about beer deserving to be treated with the same respect as wine and we should have a classification system to ensure it is.”

It’s certainly a murky category: it appears to include almost all lagers that have provenance connected with another country, regardless of where they are brewed, but for some reason excludes big hitters Stella, Foster’s and Carlsberg, which have as much heritage in Belgium, Australia and Denmark as Kronenbourg 1664 has in France.

It also can exclude the likes of Samuel Adams and Sierra Nevada, along with Belgian brews such as Duvel and Chimay, which sometimes get lumped into another murky category – craft beer.

The terms are driven in part by analyst firms. Nielsen told OLN it has come up with an internal definition of world beer: “Beers that have a perceived heritage outside the UK, primarily sold in bottles with a four or six-pack in play and at a price index of around 120 or higher versus total beer.”

Subjectivity obviously arises in the “perceived heritage” and this is what Moss wants to see stamped out.

But the likes of Nielsen and IRI are flexible and can change the boundaries of terms such as “world beer” based on the client’s specifications.

Retailers are the real drivers of the categories. The major grocers all divide lager into “standard”, “world” and “speciality”.

Tesco stocks bestselling brands such as Stella, Foster’s, Carlsberg and Carling together in a cluster, then to the right you find a “world beer” section including slightly smaller brands that have a foreign provenance, such as Peroni, Corona and Heineken, and finally you come to the “discovery and speciality” section, where shoppers can “discover” lesser-known beers such as Sapporo, Vedett and Singha, along with craft and spirit-flavoured beers.

Waitrose also clumps beers such as Peroni, Moretti and Tiger together in a world beer section, and has a speciality beer section featuring Leffe, Hoegarden and Samuel Adams.

When searching for an actual definition of world beer, Clay at Miller Brands says: “World beer is a group of international lager brands which consumers perceive to demonstrate quality and provenance and are worth paying more for. They are going from strength to strength.”

There is plenty of room for smaller brands to muscle in and carve out a healthy share of the growing category.

James Wright, sales and marketing controller at Tsingtao supplier Halewood International, says: “Tsingtao is the UK’s only genuinely imported Chinese beer, rather than being brewed under licence, and remains the world’s second largest beer brand.

“As Tsingtao is a beer which compliments food particularly well, the brand has performed particularly well with retailers who have combined food and drink promotions.

“Tsingtao appeals to younger, more affluent consumers and this is where we see further growth in the category.”

Aside from all the arguments about what constitutes a world or a craft beer, Archibald at Morgenrot simply believes UK consumers are “extremely lucky” when it comes to beer choice.

“Not only is the UK craft sector producing some fantastic beer but we have a wealth of talent from all four corners of the globe available to us,” he says. “It’s difficult to pinpoint just one country or region which is hot at present, as the consumer’s search for variety and the trade’s quest for a point of difference means an eclectic mix of brands is prospering in independent off-licences.

“Our Windhoek brand from Namibia is one I would recommend in 2014 and with the North American scene still creating a lot of excitement, our Sleeman brand is also one to watch.

Spanish beers will continue to flourish in the UK as well and, with increased investment in our Alhambra brand last year, we hope to take advantage.”




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