Research in Focus - Growth Opportunities for Beer Suppliers

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Beer brewing is a process impacted by a combination of endogenous variables, such as market maturity and changing consumer preferences, as well as exogenous factors such as the economic climate, consumer confidence, spending power and demographic shifts. Euromonitor International’s latest report, ‘Growth Opportunities for Beer Suppliers’, provides an overview of global beer production, while focusing on both how it influences - and is influenced by - general market performance in the context of an increasingly volatile world. This report takes a closer at when it is most appropriate to produce beer locally or brew abroad, while at the same time focusing on a case study of the Chinese market. Spiros Malandrakis, alcoholic drinks analyst at Euromonitor International, investigates.


Importers versus exporters: Positioning as important as logistics

One of the key findings of Euromonitor International’s latest report is that beer production is ‘glocal’ – the category operates in a 'local global' market, with the majority of beer actually being consumed where it is produced. Imports and exports only account for a very small proportion of worldwide beer production - less than 10% on average.

At the same time, beer supply and demand have historically seen very similar volumes and parallel performances, with their respective trajectories effectively showing a degree of equilibrium. Unlike certain spirits (such as whisk(e)y) and wine, which often require many years to age, beer can be made relatively quickly, meaning brewers can react to an increase in demand much faster than distillers or vintners. This helps explain why globally beer supply has continued - and will largely continue - to meet demand.

Intriguingly, five of the largest beer-producing countries are also heavy importers of beer - namely the US, the UK, Germany, Russia and Spain; a fact highlighting that being a relatively large importer of beer is more of a choice rather than a necessity in the majority of cases.

In these five markets, with the exception of Russia, imported premium lager dominates, with standard representing either a small fraction or a negligible share of sales, as in the US. Nevertheless, there are reasons why brands are imported and not simply produced in-country. One is the premium image associated with an imported brand. Consumers like the idea of drinking a foreign brand and are prepared to pay the higher price associated with this. On the other hand, as volumes are relatively small, it is more cost effective to export the brand rather than set up local production. Once a brand achieves a relatively high level of sales, brewers will look to either have it produced under licence or even produced locally by setting up their own facilities, although such a development would depend heavily on the availability of resources.

Conversely, for the majority of beer-producing markets, exports account for less than 15% of production, with most being nearer 0% to 5%. There are, however, a few countries where exports account for a larger share of domestic production, such as the Netherlands and Belgium, where a long brewing heritage and strong regional credentials steeped in tradition lend a glowing brand halo to their offerings. The presence of Slovenia, Estonia and Croatia – countries that are not internationally renowned for their beer brewing tradition – on the list of large exporters is partly explained by recent territorial and economic changes (for example, Croatian and Serbian lager exports have impacted the beer market in Bosnia-Herzegovina).

Overcoming the challenges

Putting these findings into context, brewers are facing numerous and constant challenges while targeting markets ranging from saturated Germany to overly-dynamic China. However, the global beer market remains highly localised, with brewers constantly looking for new ventures and opportunities to sustain growth in what is a relatively stagnant market overall. As such, they will need to look to diversify, be it in the short, medium or long term.

For example, in Germany, a saturated beer market with consumers increasingly preferring lighter and 'healthier' beers over traditional varieties means that many brewers have already expanded into the more lucrative malt-based RTDs category. Malt-based variants boast a perceived healthier positioning and lower alcohol content, while consumers associating such products with beer can provide a new direction for brewers.

Similarly in Russia, with increased pressure on the domestic beer market, which witnessed a significant decline in 2010 due to a 200% excise tax increase, brewers are looking to be less dependent on beer and find new growth areas. Even in relatively high growth markets such as China, brewers are looking further afield with strategies to further diversify their gradually maturing urban consumer base. Female-targeted products represent one potential option, along with further expansion into under-served provincial and rural areas.

The future will nevertheless remain 'glocal'.

Sectors: Beer & cider

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