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The beer category in 2018 - just-drinks' Review of the Year, Part I - FREE TO ACCESS

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As the end of the year approaches, just-drinks takes a four-part look at the stories that made the headlines in 2018 across the global drinks industry. In part I, news & insights editor Andy Morton picks out the highs and the lows for the beer category.

Its been yet another lively year for the global brewing industry

It's been yet another lively year for the global brewing industry

Beer jumps into bed with cannabis

After years of fearing being upstaged by alcohol rivals wine and spirits, 2018 saw beer grapple with a much older foe. Cannabis, the use of which dates back to long before our ancestors discovered the joys of fermentation, has attracted unprecedented attention over the past 12 months, largely because of a turnaround in attitudes to the drug in North America. Both Canada and California legalised cannabis in 2018, with yet another US state - Michgan - voting to follow suit. By this time next year, almost a quarter of the US adult population will have access to recreational marijuana, proving that the US has come a long way since the 'Reefer Madness' hysteria of the last century.

How has the beer industry reacted to this potential new drain on already-strained beer volumes? By spending lots of money in the hope of joining in.

Constellation Brands, the cross-category alcohol giant which owns the Corona and Modelo beer brands in the US, was the first to move in late-2017, paying US$191m for a near-10% share in Canadian cannabis firm Canopy Growth. This year saw Constellation more than doubling down on that initial bet by buying up a further 28% holding in Canopy Growth for $4bn.

Molson Coors then followed Constellation into the cannabis category, forming a Canadian cannabis-focused joint venture with partner Hydropothecary Corp to create a new company called Truss.,

Since the purchases, both brewers have been bullish on the future of cannabis beverages. Molson Coors CEO Mark Hunter said the brewer "did not want to be a spectator" in the emerging cannabis market, while Constellation's Rob Sands, who will step down next year, said cannabis is going to be a "big market" in the future.

Heineken, by contrast, has been less talkative about its forays into marijuana, especially for a company based in the capital of light-touch drug regulation, Amsterdam. But then, that's perhaps because the group has left cannabis beverages to its California craft brewery, Lagunitas, which has a long history of collaboration with marijuana, thanks to its counter-culture founder, Tony Magee.

Indeed, even Lagunitas outsources its cannabis beverage production to its partner, Absolute Xtracts, in an example of how brewers still consider it wise to keep alcohol production separate from other mood-changing substances. After all, governments in newly-legalised regions continue to tinker with laws governing the sale and supply of cannabis. One example was Absolute Xtract's debut partnership with Lagunitas - the terpene-based Supercritical beer - being pulled from shelves during the year. In Canada, Brick Brewing told just-drinks this month that the difficulties in navigating regulations around cannabis may mean that its newly-announced cannabis beverage facility could be the only one running when the country legalises edibles in October next year.

Outside of the multinationals, interest in cannabis continues apace, with innovation boosting the category's potential. Even well-known beer industry faces are making the leap to the cannabis category - in the US, former Molson Coors brewer and Blue Moon founder Keith Villa launched his range of non-alcoholic craft beers infused with 10mg of THC, the psychoactive ingredient in cannabis.

The rise of non-alcoholic beer

Outside of cannabis, the non-alcoholic beer segment had a good year in its own right as moderation trends saw companies bolster their low- and no-alcohol portfolios. Heineken's 0.0 went from strength to strength and is now available in almost 40 markets. Lower alcohol beers also flowed more freely, one example being Duvel Moortgat's Vedett 2.7% Session IPA.

In October, Heineken's master brewer, Willem van Waesberghe, warned just-drinks that zero alcohol beer's chances of making it into draught were tempered by potential contamination issues with full-strength beer while in keg. A month later, however, we learned that keg makers are already tackling these problems.

Meanwhile, just-drinks' innovation columnist Tom Vierhile asked if hop-flavoured water could take the non-alcoholic category even further.

Politics and CO2 shortages

Most reviews of 2018 will feature Donald Trump in some shape or form, the US president having an outsized effect on many aspects of life. In beer, it was in Trump's aluminium tariffs that his influence was felt the most, with US brewers concerned the levies could increase can prices and put further pressure on the industry.

For one US craft brewer, however, Trump had a much bigger impact, albeit indirectly. In September, a UK PR firm working for Georgia's Scofflaw said in a press release that consumers identifying themselves as Trump supporters at one of six BrewDog bars would get a free Scofflaw beer. The ensuing Twitter storm lost Scofflaw its BrewDog distribution, not to mention a number of distributors in the US.

In the UK, political machinations were mainly linked to Brexit. Brewers have been merely observers of unfolding events, waiting with everyone else to see how the UK's departure from the European Union on 29 March will pan out. Perhaps of greater concern to beer this year in the UK, and across Europe, was the CO2 shortage that hit during one of the hottest summers on record, and while the World Cup was being held in Russia. Suddenly, brewers were getting a crash course in the European carbon dioxide market as they tried to secure the gas that allows bar pumps to operate, while fending off competition from soft drinks manufactures, who need CO2 for CSD production.

In the end, flow was restored and the brewers, judging from financial results, enjoyed a World Cup boost, helped by the fact that four European teams made the semi-finals, including perennial football under-achiever - but long-term beer powerhouse - England.

Asia is beer's big battleground

Elsewhere, beer's biggest players were plotting a plan of attack in a far more fertile beer market than Europe. Asia is hardly off the map for brewers, but fresh pushes in China for Anheuser-Busch InBev have sparked a land grab in the country, as seemingly anyone with a premium beer label on its books arrives to take a slice of the growing category. In 2018, both Mahou San Miguel and rival Spanish brewer Gruppo Damm told just-drinks they were heading to China.

In a bid to ignite brand Heineken's fortunes in China, its Dutch owners announced a partnership with CR Snow. Under the terms of the agreement, the Snow beer owner will control the Heineken brand in China. New competition, though, will make CR Snow's job a difficult one, as will the continued presence of A-B InBev, which is enjoying strong success with Budweiser and other global brands in China.

Meanwhile, in Cambodia, a beer war is brewing between Heineken and Carlsberg, who this year staked out their positions in the South-East Asian country. In October, Heineken, which owns a 50% stake in the Phnom Penh-based Cambodia Brewery, reported that its Cambodian beer volumes fell mid-single digits because of "intensified market competition through price promotion". This came just two months after Carlsberg upped its ownership of Cambodia's other main brewer, Cambrew, which brews the Angkor Wat beer named for Cambodia's world-famous temple complex. Could a price war between the two beer giants be on the cards?

However, as just-drinks cautioned at the time, a proxy beer war is one neither Heineken or Carlsberg should want to fight in Cambodia, especially as winds elsewhere in Asia blow firmly behind premiumisation.

Craft beer is global - but where does it go next?

The past few years have seen the craft wave roll around the world, taking root in disparate regions across China, Japan and - according to just-drinks columnist Stephen Beaumont - South America. It's a dichotomy that as beer volumes fade in many developed beer markets, there are now more brewers than ever thanks to the independents bursting on to the scene. No matter that many of them are unlikely to survive in the current climate - the best many can hope for is to make money from their own taprooms.

What is interesting, though, is that the global craft beer category looks very much like the US craft beer scene that emerged in the 1980s and 1990s. Craft's worldwide reach has yet to see its many offshoots straying far from the hoppy IPA and dive bar blueprint of Lagunitas, Sierra Nevada and others.

This may change in 2019, sending a fresh jolt of innovation through the global beer industry.

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