Focus - Intoxicating prospects for low-alcohol beer
Concerns over health and drink-driving are fostering growth in the low- and non-alcohol beer categories. Spiros Malandrakis, drinks analyst at Euromonitor International, assesses the progress and potential of key markets for low- and non-alcohol beers in Europe and the Middle East.
Low- and non-alcohol beer accounted for sales of some 29.5m hectolitres in 2008. While that is a figure dwarfed by total beer volumes of 1.85bn hectolitres, stringent legislative initiatives, health concerns and religious issues are all providing a significant boost to this sub-sector, making it the most dynamic beer category globally.
According to Euromonitor International's latest global beer report, Beer - Opportunities in Niche Categories, global beer volumes grew at a compound annual growth rate (CAGR) of 5% between 2003 and 2008, in line with value growth over the period.
However, with per capita beer consumption in general decline, Euromonitor's research suggests the best long-term opportunities lie in imported premium lagers, low/non-alcohol beer, wheat and craft beers and flavoured beers, if supported by effective marketing.
In particular, low- and non-alcohol variants are spearheading global growth in the overall beer category in a number of markets, and closer inspection of key markets in per capita terms reveals the prime factors driving buoyant growth rates.
Spain, with a per capita consumption of 15 litres, has emerged as the leader in the global rankings for low/non-alcohol beer. Stricter drink-driving legislation, increasing health awareness and a mature beer sector in need of innovation are the main growth drivers of the category.
According to Euromonitor International, what started as a niche in Spain now accounts for around a 20% share of total beer volumes, and the success of new product launches, such as Cruzcampo Light from Heineken España, is further evidence of the category's potential.
Germany is another innovation-thirsty, mature beer market. With per capita consumption standing at 3.5 litres and rising, the health and wellness aspects of low/non-alcohol variants are increasingly coming to the fore.
Leading manufacturers of so-called 'alkoholfreie biere' have re-launched their products with no alcohol content at all, and stress the wellness aspects of beers with natural B vitamins, magnesium and essential amino acids. Furthermore, ageing consumers tend to drink less alcohol and the middle-aged segment of traditional beer drinkers is diminishing, providing space for experimentation with alternatives for the younger generation of beer drinkers.
Although it still remains a small niche, accounting for only 1% of beer sales, low/non-alcohol beer in Italy is currently spearheading overall sector growth, registering a 15% volume CAGR over 2003-2008. Government authorities are investing heavily in campaigns to stress the category's advantages in the face of the country's problems with drink-driving. Manufacturers are including non/low-alcohol beers in their ranges and are supporting them with elaborate advertising initiatives. Examples include Moretti Zero and a new non-alcoholic beer from Carlsberg Italia under the Swiss Feldschlösschen umbrella brand.
Lithuania comes third in the global rankings for low- and non-alcohol beer, with per capita consumption of 7 litres. Rising health concerns in the context of westernisation trends, along with advertising restrictions, have provided a boost to the category. Furthermore, an increase in the excise duty on high-alcohol drinks has proved to be a key growth driver. A zero-tolerance policy with regard to alcohol for the first two years after passing the driving test, implemented in January 2008, has paved the way for the introduction of the category to a new generation of young consumers.
Looking towards the Middle East, religious factors clearly become more pertinent. The United Arab Emirates can be used as an influential case study for the entire region. With no alcohol sales allowed to Muslim residents, expatriates are only allowed to purchase alcohol through luxury hotels, while a special licence is required to buy from a liquor store. Moreover, no advertising of alcoholic drinks is allowed due to religious constraints. In this context, non-alcoholic beer, which constitutes the vast majority of sales within the low/non-alcohol category, is riding the westernisation bandwagon while overcoming religious barriers. With per capita consumption standing at 4.4 litres and rising, there is still room for impressive growth in the country.
In Iran, the low/non-alcohol beer category accounted for sales of 2.6m hectolitres in 2008, and registered a 27.5% volume CAGR over the 2003-2008 period. Recent domestic media coverage of the alleged health benefits of non-alcoholic beer, along with government restrictions on the sales of cola carbonates suggest a positive outlook for the category over the short and medium term.
As growth rates for the majority of beer subsectors weaken, low/non-alcohol variants are emerging as potential growth drivers for the sector.
Although 2009 will be a difficult year, the long-term outlook is positive.
Euromonitor International expects the low/non-alcohol beer category to grow by a 5% CAGR in volume terms over the next five years. The category will face mounting competition from non-alcoholic drinks for share of throat, although stressing the flavour aspect along with the health benefits will assist in retaining consumers. Potentially stricter drink-driving laws will further stimulate growth.
Euromonitor International expects manufacturers such as Heineken and Anadolu Efes to take advantage of their established and loyal consumer base in the Middle East region, hence securing strong growth rates on the back of westernisation trends and the lack of alternatives.
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