Spanish brewer Damm is no stranger to global trade, with a presence in roughly 130 markets worldwide, marketing a portfolio that includes flagship brand Estrella Damm.
More recently, the group has been building its presence in markets like the UK, through a distribution deal with Japan’s Kirin and local brewer Northern Monk, as well as in China where it has a tie-up to sell Japanese brand Orion.
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Damm has also been working to expand its portfolio beyond beer. In December, the company struck a deal to produce, market and distribute Nestea for Nestlé in its domestic market.
Just Drinks sat down with the head of Damm’s international business, Juan González Gil, to discuss the brewer’s growth plans, including adapting to the changing needs of beer drinkers.
Fiona Holland: What are the main challenges and opportunities you see in Damm’s markets?
Juan González Gil (JG): We operate, give or take with our full Damm portfolio in close to 130 markets, so pretty much everywhere in the world, and with Estrella with close to 85 markets on a stable basis. You have many different dynamics. It’s not the same when you are in Europe or when you are in Africa or America.
I would say a thing that is common across all markets is the appetite for premium beers and more exciting brands with heritage but, also with that, brands that resonate with consumers, with young consumers, which is helping us a lot to be honest with Estrella. Of course, we have a big association with Barcelona, and so we have the partnership with Football Club Barcelona, which opens a lot of doors in any country of the world.
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By GlobalDataThe traditional beers that have been there forever, they are important and they will always continue to be relevant, but there is the appetite for different beers, for different tastes, for different origins beyond the traditional.
In the past, the only beer that you could export was German beer, or Czech beer, because of the heritage… We [now] have this new generation of world beer lagers, they are cross-pollinating and attracting new consumers.
FH: Are you seeing a consumer shift towards off-trade consumption in beer? Is this something Damm is adapting to?
JG: In the lens of well-developed markets like UK or US, of course, there is a big shift towards the off-trade, which elevates the sophistication that you need to bring to attract consumers. Again, an example you have now in the UK is the limited edition with FC Barcelona with special cans that we have. This is something that has to be eye-catching.
You need to really understand that consumer journey. It varies from consumer to consumer, so you need to have that broader spectrum of packs in the off-trade, you need to add to activate way more. In the past, also in UK, for example, retailers, they refused to be open to activations. Now they are more and more open to allowing brands to showcase in the point of shelf.
If you move to other parts of the world, our example that we have is Inedit. Inedit is a gastronomic beer that we sell in China and it’s our fastest-growing beer. It is a luxury product. It’s not something that’s in a 75cl bottle, so we can sell it at the price of a good wine in the UK. [In China], I would say 90% of our volume is on-trade, because there they are in a status of maturity where on-trade is exploding.
We are developing a full world of luxury around Inedit beer in China
In China, [Inedit is] doing quite well, because consumers don’t perceive that as a beer. They perceive that as a luxury product. Hence, it’s about the status and for them, it’s about having the chance to showcase that they can afford having this beautiful beer. We are developing a full world of luxury around that beer… That would never work in Europe, or at least the way we see that evolving in Europe, but in China is exploding.
In the US now the main beer that we have is Daura. That is a gluten-free beer. Why? Because you tap into a different consumer need. The US has moved from premiumisation or sophistication or fragmentation, into, let’s say in different states, people are looking at functionality within beer. Elements like… 0.0%, vegan, low-cal, low carb, high protein. All these things are becoming the relevant and the trendy part of the market.
FH: Does the US have higher demand for functionality in beer?
JG: US for me is the most developed one, it is not the only one. Australia is another market that that also taps a lot into [it]. There they have a category that is between 3 and 3.5 [% abv] and but it’s not perceived as a low-abv category, more on the low calories or low carbs category. It’s a huge category.
There are some other markets it didn’t work. So for example the UK, that trend we thought it would pick up. I mean, we are not there yet but that doesn’t mean that we won’t be there and that’s why I say that there is no unique answer to every single market. That’s why having a broad portfolio helps a lot to tap into the needs of the different consumers, of the different markets, definitely.
FH: On the US, how do you expect tariffs to impact Damm?
JG: For us, working in the international business unit, every year there is a country that decides to increase the tariffs, 30%, 50%, 100% even more than that. We are used to [working in] that type of environment. That’s why we always say that for every country we open there is always a risk of two countries shutting down because there is always political instability.
What happens in US is not different from what happens in many parts of the world on one side or the other. Of course, it’s not the same when your beer is a mainstream beer, or when your beer is a premium beer, so their consumers are less inelastic. When their beer of choice is a premium beer, or when their beer of choice is Daura, that is a functional beer, so if you’re gluten-free, you are still willing to pay more for that, and you are less sensitive, too. In that sense, I think we are more protected than others.
Then on the other side, things can go in the completely different direction. There are regions that now are not accessible for many of the imported beers, because tariffs are just completely ridiculous, which is a way of protecting the local beers.
Europe and the Mercosur countries, after 15-20 years negotiating, they are close to [closing] a deal that we will be implemented in the coming years, and that will reduce drastically the tariffs. We can expect that there will be, not massive, but there will be more chances for international beers to play on that arena. This is our day to day, so again, it could all change.
FH: What are your main growth ambitions for the international business at the moment?
JG: We are meant to be a vector of growth for the company. Our goal is to become 25% of the total turnover of the company in the in the next couple of years. We are already 20% of the turnover, so we’re already big. But we want to lead that growth, and that means that we need to move from a traditional export business to a full international business because that’s what protects you in a way to all these tariffs, or let’s say change in the macroeconomic space of many of the countries.
We have a big team in China right now, and we changed the operating the route to market there. We have now a big team in the UK, we changed the route to market there. We’re also exploring in different regions of the world different projects that also will help us to basically consolidate these core markets but also accelerate markets where we see there is a potential for our products, either beer or beyond beer products.
FH: Thinking about Damm’s consumers, or more specifically Gen Z, how is the business adapting to attract these drinkers into beer? Do you think these consumers will continue to drive premiumisation?
JG: To be honest, it’s making our life more and more complicated. In the past you would have a summer campaign with Estrella Damm like an ATL campaign and that would be everything that you had to do, because that campaign would talk to everybody. Now it’s quite different. You need to really… tailor to the different consumer and consumer types without falling into a dystopia of confusing everybody.
The UK is stagnating as a market and we see some brands are basically disappearing from the market. Again, this is not something that all of a sudden is new. We have seen many brands being the number one and now being non-existent but you need to talk to generations in a different way from what we were using before.
Even the pure definition of premium, or what consumers consider to be premium, and the different elements of association, they are not the same…. of course, heritage is very important and the concept of being true and honest, so, you go to Barcelona, then you will see that 60% of the beers that you will drink in Barcelona are Estrella Damm.
You used to compete only with beer brands. Now we compete with all sorts of different beverages.
In the past, heritage was important in the sense of brewing heritage. That’s why German beers… had a licence to play because they were German and German was considered to be quality. Now for consumers, that concept of heritage has evolved to other elements. Like in our case, I mean, Barcelona is an aspirational city. Young consumers, they love to travel, they love to showcase how cool their life is. Our beer is a beer that allows you to play on that angle.
Experience… in the past, you didn’t have to tap [into] experiences or not so heavily. Young generations, they live based on experiences. Being present in places like Primavera Sounds that we sponsor in Barcelona, or the Sonar Festival, [where] 60% of the people who come or who attend the Sonar Festival in Barcelona, they are not from Spain. These things are quite relevant.
The difference is that you used to compete only with beer brands. Now we compete with all sorts of different beverages. Grabbing the attention of consumers is way more difficult. That’s why also many companies [like us] are also like looking at extending and broadening our portfolio so that we can tap into the different moments of the consumer journey, even within the same night.
For example, in Spain, we have started a partnership with Nestea, so we are also, broadening our spectrum in terms of beverages.
You cannot solve all the consumer needs with one beer, so you need to be open to basically to provide a full portfolio of beverages that cover most of the consumer needs.
FH: Plenty of major brewing players are growing their ‘beyond beer’ portfolios. It seems to be an essential part of the portfolio nowadays.
JG: It’s difficult to accept that some of the lead players are being or will be challenged. You see it everywhere in the world. Some markets where there was a brand that might have 60, 70% market share in the market, and now they lost 20 points of market share. And as brewers, sometimes we fail to, or we used to fail to react to those things.
We have seen that in so many places around the globe that now we are starting to prepare ourselves, and we are way more open-minded about these things… It’s about having non-alcoholic, [or] Rosa Blanca now in the UK with 3.4 [%], it’s about launching a Damm lemon in the UK, a 3.2 [%] lemon-infused beer. Understanding that Estrella Damm is going to be the backbone of everything that we do, but you need to have that full portfolio of choices, of credible choices for consumers.
