Comment - Beer - Beer's Future: Good? Bad? Good? Bad?
Pete Brown is caught in two minds this month. Whilst looking at the global beer landscape he can't decide whether the outlook is either good or bad. That's not because he can't make his mind up; that's because he thinks it is both.
"Controlled insanity". That’s how George Orwell described the principle of 'Doublethink', a key concept of his novel, 1984. Today, the phrase has its own dictionary definition - the power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them.
If Doublethink is a form of insanity, then anyone following the global beer market must be wearing their pants on their head, stuffing pencils up their nose and howling at the moon.
Because, when I look at the beer market now, I believe I’m looking at an increasingly desperate market with bleak prospects. I also believe the opposite: that I’m looking at a market that is more exciting than it has ever been, where possibilities are boundless.
Following the global brewing category nowadays is like being shelled daily with bombs of bad news and gloomy prospects. Regulations around the availability and promotion of alcohol are tightening around the world, while global media and governments seem to have accepted without question that we have a binge drinking epidemic, and that a ban on alcohol advertising is needed to cure under-age drinking. This, despite the fact that, in the countries with the biggest ‘problems’, alcohol consumption is in long-term decline, binge drinkers tend to favour other drinks over beer, and there’s not a shred of proof linking alcohol advertising with under-age drinking.
Last month, analysts UBS predicted that emerging markets will account for 70% of all beer volume by 2016, and that European markets will continue to struggle under ‘intensifying’ pressure. Indeed, Heineken’s boss recently complained that Europe is "not an easy place to operate in". This would seem to be an understatement: Sales in Irish pubs have dropped by a third; In the UK, nearly a quarter of the beer market has disappeared over the last decade, in no small part due to duty having shot up by 40% in four years, and one of the UK’s biggest beer brands - Molson Coors' Carling - has made no secret that its margin equates to GBP0.01 per can.
Things appear so bad in Europe that a fellow just-drinks columnist recently speculated that Anheuser-Busch Inbev could be forgiven for just forgetting about Europe until its imploding economies sort themselves out.
And so, everyone shifts their attention to those developing markets. Sure there’s treasure to be had, but its not exactly easy. The saga of Heineken’s struggle to acquire Asia Pacific Breweries is starting to resemble a Tom Clancy thriller in which EGMs have replaced high-octane shoot-outs. Come to think of it, after ThaiBev’s latest plot twist, I’m not sure we can rule out a high-octane shoot-out just yet.
For Heineken, the possibility of losing out on this deal must be almost too painful to contemplate.
When we look at the beer world from a business perspective, we see an almost daily diet of gloomy predictions that leads to a sustained and increasingly frantic scramble in developing markets, which offer the only hope for survival – and survival is by no means guaranteed.
But, I also look at the beer world from a consumer perspective, and that’s where I see a completely different picture. In the UK, over the same period that all that volume and margin has disappeared, the number of breweries has doubled. The new edition of the Good Beer Guide, launched last week, revealed that there are over 1,000 breweries in operation in the country, more than at any time since the 1930s, with over 100 opening for business in the last year alone. Quite rightly, but still somewhat surprisingly, this made national news, and we were treated to that rarest of phenomena – positive mainstream media coverage about beer.
You have to ask where this collision between unstoppable momentum and solid reality is going to end: As the rate of new brewery openings continues to accelerate, how much longer can a declining market continue to subdivide its volume among smaller players?
Of course, most of these new breweries are craft beer microbrewers – although the growth rates of the best suggest that they might become major players before too long. I’ve always told myself that craft beer will always be a tiny niche of the market, but I’m no longer sure how small that niche will remain. There now seems to be a sustained trickle of craft-focused offerings from mainstream brewers and, if I were a betting man, I’d stake my house on the claim that there isn’t a single major player in beer who is not currently developing a point of view on craft, and mulling craft-focused acquisitions, reinventions or new product development.
Craft has become a global reality, and it’s not just limited to its traditional mature markets where people are drinking less but better. It’s easy to forget that developing markets don’t develop in a single straight line. The average income in India may be less than US$1 a day, but the real estate prices in Mumbai are among the highest in the world. A bottle of Kingfisher may be an unaffordable luxury to a Bengali rice farmer, but an IT whiz in Bangalore is desperate for something classier and pricier to help him demonstrate his affluence.
At the same time, India – still very much a developing market – already has a thriving craft beer niche. And, last time I was in Kenya, where national brand Tusker pretty much owns the market, I also visited Nairobi’s first craft brewery. Developing markets can start to resemble mature markets much quicker than we might think.
I’m not claiming craft is going to be the saviour of the beer market or solve all of the problems above - although it could certainly help tackle one or two, such as margin. My point is that beer remains popular, and retains the capacity for evolution and innovation. We’re also only at the beginning of exploring the possibilities offered to any kind of beer brand by social media and global communication generally.
I’ve got no idea how the beer market is going to evolve over the next ten years. By turns, I tell people it’s screwed and I tell them it’s never been better. The only thing I do know is that, good or bad, its controlled insanity means it will never be boring.
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