Research in Focus - Global Performance and Prospects for Beer
While some signs of a relative rebound in the global beer market started appearing in 2010, following the sobering trough reached in 2009, growth has yet to return to pre-recessionary levels. Spiros Malandrakis, alcoholic drinks analyst at Euromonitor International, examines the current state of the industry, including the post-recession fallout, recovering and still beleaguered markets, and scenarios for growth moving forward.
Lager dominates, low/non-alcohol beer advances, dark beer embraces its craft potential
Unsurprisingly, lager remains by far the most important beer type internationally, accounting for 93% of global beer sales by volume and 91% by value in 2010. Although its sales are dwarfed compared to lager, low/non-alcohol beer was the best performing category in terms of both volume and value growth in 2010, with volume sales increasing by 6%, compared to 1% for lager. The former category benefits from a multitude of drivers, including religious barriers, healthier lifestyles, and stricter drink-driving regulations in a rising number of markets.
Shifts within lager would be best summarised as polarisation. While economy lager’s growth witnessed a marginal slowdown in 2010 compared to 2009, it consistently outperformed both the standard and premium segments. Premium lager witnessed a relative resurgence in 2010, while standard lager continued facing significant obstacles. Polarisation was particularly evident in the US, where economy and premium varietals saw growth in 2010, while standard lager saw a 5% decline in total volumes. Germany saw a similar trend to the US, as consumers opted for both ends of the pricing spectrum, to the detriment of standard offerings.
On the other hand, stout is the smallest category in beer, representing a comparatively minute, less than 1% share of overall volumes in 2010. Falling consumption of stout in the key markets of Ireland and the UK has contributed to overall volume stagnation on a global level, although hopes and opportunities emanate from the African continent and its booming Nigerian bastion.
Beyond these key categories, and although dark beer suffers somewhat from an old-fashioned image in many traditional beer drinking markets, it has seen growth overall, driven by the popularity of wheat variants among younger drinkers looking for sweeter and milder flavours, as well as the much vaunted craft beer renaissance. Craft offerings are becoming increasingly popular in developed markets, such as the US and the UK, challenging industry behemoths in their own backyard and spearheading innovative activity.
Emerging buoyancy and mature barriers
Global volume and value sizes are dominated by the usual regional suspects, and Asia Pacific and Western Europe are the key regions for beer. However, while Asia Pacific is the main region in volume terms (accounting for 34% of global sales), value sales in its countries account for only 25% of global sales, indicating the relatively low unit price of beer (economy lager actually makes up the bulk of volumes, at 70% in 2010). Conversely, Western Europe accounts for 15% of global volumes but 26% of values, indicating the dominance of premiumisation in the region over the review period (standard and premium lager constituted 74% of volumes in 2010, and the region enjoys a relatively high share of other types of beer besides lager).
Expectantly, emerging markets are more dynamic than developed markets, with all emerging regions with the exception of Eastern Europe growing in 2010. The Middle East and Africa, Latin America and Asia Pacific outperformed the global market in both volume and value terms, while Western Europe and North America saw underwhelming performances at best.
Eastern Europe suffered in 2010, as a result of the economic slowdown, with Russia, in particular, showing strong high single-digit declines in 2010. Beyond the apparent financial concerns, the main reason for the decline in Russia was the implementation of a 200% excise tax increase in 2010. This development significantly increased unit prices, hampering beer sales in the country, while additional legislative amendments in the pipeline might spell more trouble for the domestic beer market in the short to medium term.
Western Europe and North America did not manage to escape negative growth territory in 2010. In North America, the recession was mainly to blame, with the ongoing sales decline originating in 2009, although a reversal of the trend is expected in 2011. Western Europe, on the other hand, has seen beer sales stagnate for several years, with the recession only accelerating the slowdown. There will be continued declines in saturated major markets such as Germany and the UK. Not only are sales being eroded by ageing populations but the economic slowdown means that beer continues to suffer from falling patronage in the on-trade, as well as drinkers shifting to cider, wine and soft drinks.
What does the future hold?
According to Euromonitor International, the forecast total volume CAGR for beer is 3% for 2010-2015, as the category will gradually overcome the gravitational pull of maturity and fiscal troubles.
Beyond the Chinese juggernaut, beer sales are expected to increase in all regions except Western Europe over the forecast period, with emerging markets expected to remain the most dynamic at the same time that niche segments will play an increasingly important role to rival the once absolute dominance of lager.
Spiros Malandrakis, Alcoholic Drinks Analyst at Euromonitor International
Sectors: Beer & cider
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