Beer - UK

Lager can undoubtedly innovate its way out of its current slump. If ever there was doubt about the importance of innovation in driving sales this can be dispelled by the value which flavoured vodkas plus pear and other fruit-flavoured ciders have added to their respective youth-orientated categories."

- Jonny Forsyth, Senior Drinks Analyst

Some questions answered in this report include:

How can beer unlock the potential of off-trade sales?
Are UK lager sales in permanent free-fall or will they recover?
Can lager innovate its way out of its current slump?
Can lager realistically attract UK women in sufficient numbers to stabilise overall sales?

Table of contents

INTRODUCTION
Definition
Abbreviations
EXECUTIVE SUMMARY
The market

Figure 1: Market size and forecast of value sales for the total beer market, 2006-16

Market factors

Figure 2: Annual % change in price index (RPI) of beers, by on- and off-trade, 2005-11

Companies, brands and innovation

Figure 3: Top beer brand values sales and share in the off-trade, 2010

The consumer

Figure 4: Key factors when deciding which brand of lager to drink, October 2011
Figure 5: Net difference in attitudes towards lager, 18-34-year-olds versus 35+-year-olds, October 2011

What we think
ISSUES IN THE MARKET
How can beer unlock the potential of off-trade sales?
Are UK lager sales in permanent free-fall or will they recover?
Can lager innovate its way out of its current slump?
Can lager realistically attract UK women in sufficient numbers to stabilise overall sales?
FUTURE OPPORTUNITIES
Many Mes
Free From
INTERNAL MARKET ENVIRONMENT
Key points
Beer market shaken up by consumer anti-homogenisation trend
Long-term shift to in-home drinking works to beer’s disadvantage

Figure 6: Annual % change in price index (RPI) of beer compared to other major alcohol types, in the offtrade,
2005-11
Figure 7: Annual % change in price index (RPI) of beers, by on- and off-trade, 2005-11

The necessity of realigning beer as an ideal in-home option…

Figure 8: Rank of UK’s most consumed alcohol drink types, in home and out of home, 2011

… by appealing to women as well as men…

Figure 9: Alcohol types drunk in the last six months in the home, by gender, May 2011

… developing a closer association with food…

Figure 10: Occasions for drinking alcohol at home and out of home, May 2011

… and targeting the relaxing in-home occasion
Despite duty hikes, beer remains an affordable option

Figure 11: UK excise duty rates on beer, cider, wine and spirits, 2003-11

BROADER MARKET ENVIRONMENT
Key points
Declining consumer confidence and real spend conspire to dent beer sales

Figure 12: Year-on-year % change in average weekly earnings compared to inflation in the UK, and
consumer confidence index, 2007-11

Aging population puts further pressure on beer revenues

Figure 13: Forecast adult population trends, by age group, 2006-16

Rise in ABs underpins importance of premiumisation

Figure 14: Forecast adult population trends, by socio-economic group, 2006-16

COMPETITIVE CONTEXT
Key points
A diminishing market leads to diminishing returns

Figure 15: proportion of UK population who are alcohol drinkers, 2007-11

Beer is struggling but retaining more of its drinkers than wine

Figure 16: Penetration of major alcohol types in order of popularity, 2007-11

Cider is the big winner over the past 5 years
STRENGTHS AND WEAKNESSES IN THE MARKET
Strengths
Weaknesses
WHO’S INNOVATING?
Key points
‘Standard’ Lads’ lagers looks to go more premium
Innovation seeks to broaden lager’s appeal to women
Lower ABV beers look to take advantage of tax incentives
MARKET SIZE AND FORECAST
Key points
Beer revenues fall by £2.2 billion between 2006 and 2011

Figure 17: Market size and forecast of volume and value sales for the total beer market, 2006-16
Figure 18: Market size and forecast of value sales for the total beer market, 2006-16

Lager volume sales have declined by a fifth since 2006

Figure 19: Market size and forecast of volume and value sales for the lager market, 2006-16

Better lager performance in 2010 just a blip
Lager’s value sales decline cushioned by duty and VAT rises
Why has the previously buoyant lager market suffered so severely?
Lager’s decline will continue over the next five years, albeit not as steeply

Figure 20: Market size and forecast of value sales for the lager market, 2006-16

Ale is seeing an even steeper decline than lager…

Figure 21: Market size and forecast of volume and value sales for the ale market, 2006-16

… and has even greater structural problems
The next five years will see an improved but still negative performance from ale

Figure 22: Market size and forecast of value sales for the ale market, 2006-16

Stout will continue to see a dramatic fall in volume sales

Figure 23: Market size and forecast of volume and value sales for the stout market, 2006-16
Figure 24: Market size and forecast of value sales for the stout market, 2006-16

Forecast methodology
MARKET SEGMENTATION
Key points
Off-trade on the verge of becoming the dominant channel…

Figure 25: Share of total volume sales of beer in the on- and off-trade, 2006-10

… but on-trade remains comfortably the key revenue driver

Figure 26: Share of total value sale of beer in the on- and off-trade, 2006-10

Cask ale now accounts for one in eight draught pints bought

Figure 27: Volume sales of draught beer, and share, by beer type, 2006-10

Premium lager sales see a renaissance in the past three years

Figure 28: UK lager volume sales, by ABV categorisation, 2006-10

MARKET SHARE
Key points
Brands seek to capitalise on off-trade sales growth

Figure 29: Top 10 beer brand values sales and share in the off-trade, 2008-10

Budweiser enjoys exponential growth
World lagers excel
Sales uplift in premium ales
Artois 4% sees fall from grace
COMPANIES AND PRODUCTS
Key points
AB InBev
Carlsberg
Diageo
Greene King
Heineken
Molson Coors
SABMiller
Wells and Young’s
BRAND RESEARCH
Brand map

Figure 30: Attitudes towards and usage of beer brands, October 2011

Correspondence analysis
Brand attitudes

Figure 31: Attitudes by beer brand, October 2011

Brand personality

Figure 32: Beer brand personality - macro image, October 2011
Figure 33: Beer brand personality - micro image, October 2011

Brand experience

Figure 34: Beer brand usage, October 2011
Figure 35: Satisfaction with various beer brands, October 2011
Figure 36: Consideration of beer brands, October 2011
Figure 37: Consumer perceptions of current beer brand performance, October 2011
Figure 38: Beer brand recommendation - Net Promoter Score, October 2011

Brand index

Figure 39: Beer brand index, October 2011
Figure 40: Beer brand index vs. recommendation, October 2011

Target group analysis

Figure 41: Target groups, October 2011
Figure 42: Beer brand usage, by target groups, October 2011

Group One - Conformists
Group Two - Simply the Best
Group Three - Shelf Stalkers
Group Four - Habitual Shoppers
Group Five - Individualists
BRAND COMMUNICATION AND PROMOTION
Key points
Spend on beer brands remains huge in spite of sales decline

Figure 43: Above-the-line advertising spend for the beer sector, 2006-11

AB InBev leads the way

Figure 44: Top five spending advertisers on beer over the three years to July 2011(August 2008-July 2011)

Foster’s and Carling battle it out for the middle ground

Figure 45: Top five spending brands on advertising beer over the three years to July 2011 (August 2008-
July 2011)

Lager brands hijack the many summer music festivals
CHANNELS TO MARKET
Key points
Supermarkets poised to overtake pubs as number one volume channel

Figure 46: Volume sales of beer by channel, 2009-10

CONSUMER USAGE OF BEER
Key points
Lager is number one drinks choice for over a quarter of the nation…

Figure 47: Consumption of beer among the UK population, by type,

… low alcohol beer is making progress among younger drinkers

Figure 48: Index of consumption of beer among the UK population, by type, by gender and age, October
2011

Lager has lost resonance among 18-24-year-old drinkers - unlike cider

Figure 49: Index of those who drink lager and cider most often, by gender and age group, October 2011

Ale and stout struggle to appeal to women - much more than lager
A quarter of beer drinkers drink all three types

Figure 50: Crossover in consumption of beer among those drinking beer in the past 6 months,

Cask ale needs greater nurturing to attract more younger consumers

Figure 51: Crossover in consumption of beer among drinkers,

CONSUMER - KEY INFLUENCERS WHEN BUYING LAGER
Key points
Consumers want quality over quantity…

Figure 52: Key factors when deciding which brand of lager to drink, October 2011

… however, lager brands ignore discounting at their peril
Is the quest for value causing a swing back to premium-strength lager?
Consumers value a smooth, cold taste over softer brand attributes
Women influenced by sweeter-flavoured lagers

Figure 53: Net difference in factors when deciding which brand of lager to drink, men versus women,
October 2011

CONSUMER ATTITUDES TOWARDS LAGER
Key points
Refreshment and value are lager’s key selling points

Figure 54: Attitudes towards lager, October 2011

Women want lager to be more like wine

Figure 55: Net difference in attitudes towards lager, men versus women, October 2011

A huge demand for sweet-tasting lagers among 18-24-year-old drinkers

Figure 56: Net difference in attitudes towards lager, 18-34-year-olds versus 35+-year-olds, October 2011

Evidence that low calorie lagers have potential
CONSUMER ATTITUDES TOWARDS ALE
Key points
Ale can position itself as everything that lager is not

Figure 57: Attitudes towards ale/bitter, October 2011

Younger drinkers more likely to perceive lager as more refreshing

Figure 58: Net difference in attitudes towards ale, 18-44-year-olds versus 45+-year-olds, October 2011

APPENDIX - INTERNAL MARKET ENVIRONMENT

Figure 59: Revenue split for alcohol, off-trade versus on-trade, 2005-10

APPENDIX - BROADER MARKET ENVIRONMENT

Figure 60: GDP, PDI, consumer expenditure and savings, at constant 2011 prices, 2006-16

APPENDIX - MARKET SIZE AND FORECAST

Figure 61: Volume sales and forecast for total UK beer market, 2006-16
Figure 62: Forecast of UK beer volume sales, best and worst-case, 2009-16
Figure 63: Forecast of UK beer value sales, best and worst-case, 2009-16

APPENDIX - BRAND COMMUNICATION AND PROMOTION

Figure 64: Top 10 beer advertisers by above-the-line advertising spend, 2008-11
Figure 65: Top 10 beer brands by above-the-line advertising spend, 2008-11

APPENDIX - BRAND RESEARCH

Figure 66: Brand usage, October 2011
Figure 67: Brand commitment, October 2011
Figure 68: Brand momentum, October 2011
Figure 69: Brand diversity, October 2011
Figure 70: Brand satisfaction, October 2011
Figure 71: Brand recommendation, October 2011
Figure 72: Brand attitude, October 2011
Figure 73: Brand image - macro image, October 2011
Figure 74: Brand image - micro image, October 2011
Figure 75: Profile of target groups, by demographics, October 2011
Figure 76: Psychographic segmentation, by target group, October 2011
Figure 77: Brand usage, by target group, October 2011

Brand index

Figure 78: Brand index, October 2011

APPENDIX - CONSUMER USAGE OF BEER

Figure 79: Most popular types of beer by consumption in the past 6 months, by demographics, October
2011
Figure 80: Other types of beer consumed in the past 6 months, by demographics, October 2011
Figure 81: Beer/cider consumed most regularly in the past 6 months, by demographics, October 2011
Figure 82: Beer/cider consumed most regularly in the past 6 months, by demographics, October 2011
(continued)

APPENDIX - CONSUMER - KEY INFLUENCERS WHEN BUYING LAGER

Figure 83: Most popular key factors when deciding which brand of lager to drink, by demographics, October
2011
Figure 84: Next most popular key factors when deciding which brand of lager to drink, by demographics,
October 2011

APPENDIX - CONSUMER ATTITUDES TOWARDS LAGER

Figure 85: Agreement with the statements ‘I find that most lagers taste quite bland’ and ‘It is more calorific
than most other drinks’, by demographics, October 2011
Figure 86: Agreement with the statements ‘I am interested in sweet tasting lagers and ‘I enjoy drinking lager
with a meal’, by demographics, October 2011
Figure 87: Agreement with the statements ‘I am more likely to drink lager when out (ie in the pub) rather
than at home’ and ‘Lager is a drink for men’, by demographics, October 2011
Figure 88: Agreement with the statements ‘Drinking lager is not very feminine’ and ‘Lager is more refreshing
than other alcohol types’, by demographics, October 2011
Figure 89: Agreement with the statements ‘Bottled lager is worth paying more for than draught’ and ‘I prefer
to have one or two lagers than drink it all night’, by demographics, October 2011
Figure 90: Agreement with the statement ‘Lager is good value for money compared to other drink types ie
spirits, wine’, by demographics, October 2011

APPENDIX - CONSUMER ATTITUDES TOWARDS ALE

Figure 91: Agreement with the statements ‘It makes a nice change from lager’ and ‘I like that different types
of ale taste so unique’, by demographics, October 2011
Figure 92: Agreement with the statements ‘I like the variety of ale types and tastes compared to lager’ and

‘It tastes more interesting than lager’, by demographics, October 2011

Figure 93: Agreement with the statements ‘I see it as a better quality drink than lager’ and ‘I like that most
ales are made locally’, by demographics, October 2011
Figure 94: Agreement with the statements ‘I like that most ales are made by small companies, not
multinationals’ and ‘Ales generally taste fresher than lager’, by demographics, October 2011
Figure 95: Agreement with the statements ‘Ales are generally not as refreshing as lager’ and ‘Bottled ale is
worth paying more for than draught’, by demographics, October 2011
Figure 96: Agreement with the statement ‘It is better value for money than lager’, by demographics, October
2011

APPENDIX: UK RESEARCH METHODOLOGY

Statistical Forecasting
Statistical modelling
Qualitative insight
The Mintel fan chart
Weather analogy

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Related research categories

By sector: Beer (in Beer & Cider)

By market: United Kingdom (in Europe)