Analysis - Global brewers face 'small is beautiful' approach to tackle craft creep
Craft beer is still a slim proportion of the overall global market
How will global brewers – particularly in the US - cope with the on-going threat of craft beer in the coming years? And, what impact is the rise of craft having on the market?
The big challenge for the international beer producers is to get to grips with the “'small is beautiful' approach after years of focus on efficiency gains from scale”, Nomura analyst Ian Shackleton noted earlier this week.
“With the likely slower volume outlook and less benefit from consolidation, we see an increased focus by all the major brewers on developing price/mix,” Shackleton writes. “However, to achieve this, brewers will have to focus on craft-type products, as well as active innovation around existing brands.”
In the US, the likes of Anheuser-Busch InBev, with Budweiser Black Crown and Bud Light Platinum, and MillersCoors with its Tenth & Blake division have been focussing on this area for some time. A-B InBev appears to have been having some success with these off-shoots, while MillerCoors has also talked up the performance of its craft division.
Tellingly, craft's rise means that the beer category is becoming evermore like the wine sector, Shackleton suggests. “Consumers like to drink differently from the next consumer, as opposed to the traditional beer model where consumers aspire to the same brands, often with an international heritage”, according to the analyst.
However, it must be remembered that the craft segment worldwide is still relatively small, accounting for just over 1% of the global beer market. And, the US is by far the largest region for sales, accounting for around half of global craft volumes.
According to Nomura, at current growth rates, craft beer will still only account for around 10% of overall US beer volumes by 2017. Add imports into the mix, however, and the overall 'super-premium' segment will have 25% of the market.
It is not just the US where global brewers face this problem. Shackleton notes that big brewers are seeing a threat from craft in other mature markets. Sweden, for example, has seen craft grow to 4% of the market, helped by the ease of a small brand gaining entry through the state-owned wholesaler Systembolaget. "Even in markets where distribution is mainly controlled by established brewers (Ireland), smaller operators are finding entry to market,” Shackleton states.
All of this is likely to mean the major brewers looking to further muscle in on the craft "revolution". In that respect, expect more battle lines being drawn between small players and 'Big Beer' over the definition of 'craft'.
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