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Beer - UK - December 2011

“Lager can undoubtedly innovate its way out of its current slump. If ever there was doubt about the importance of innovation in driving sales this can be dispelled by the value which flavoured vodkas plus pear and other fruit-flavoured ciders have added to their respective youth-orientated categories.”

– Jonny Forsyth, Senior Drinks Analyst

Some questions answered in this report include:

  • How can beer unlock the potential of off-trade sales?
  • Are UK lager sales in permanent free-fall or will they recover?
  • Can lager innovate its way out of its current slump?
  • Can lager realistically attract UK women in sufficient numbers to stabilise overall sales?

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Table of contents

  1. Introduction

      • Definition
        • Abbreviations
        • Executive Summary

            • The market
              • Figure 1: Market size and forecast of value sales for the total beer market, 2006-16
            • Market factors
              • Figure 2: Annual % change in price index (RPI) of beers, by on- and off-trade, 2005-11
            • Companies, brands and innovation
                • Figure 3: Top beer brand values sales and share in the off-trade, 2010
              • The consumer
                  • Figure 5: Net difference in attitudes towards lager, 18-34-year-olds versus 35+-year-olds, October 2011
                • What we think
                • Issues in the Market

                    • How can beer unlock the potential of off-trade sales?
                      • Are UK lager sales in permanent free-fall or will they recover?
                        • Can lager innovate its way out of its current slump?
                          • Can lager realistically attract UK women in sufficient numbers to stabilise overall sales?
                          • Future Opportunities

                              • Many Mes
                                • Free From
                                • Internal Market Environment

                                  • Key points
                                    • Beer market shaken up by consumer anti-homogenisation trend
                                      • Long-term shift to in-home drinking works to beer’s disadvantage
                                        • Figure 6: Annual % change in price index (RPI) of beer compared to other major alcohol types, in the off-trade, 2005-11
                                        • Figure 7: Annual % change in price index (RPI) of beers, by on- and off-trade, 2005-11
                                      • The necessity of realigning beer as an ideal in-home option…
                                        • Figure 8: Rank of UK’s most consumed alcohol drink types, in home and out of home, 2011
                                      • … by appealing to women as well as men…
                                        • Figure 9: Alcohol types drunk in the last six months in the home, by gender, May 2011
                                      • … developing a closer association with food…
                                        • Figure 10: Occasions for drinking alcohol at home and out of home, May 2011
                                      • … and targeting the relaxing in-home occasion
                                        • Despite duty hikes, beer remains an affordable option
                                          • Figure 11: UK excise duty rates on beer, cider, wine and spirits, 2003-11
                                      • Broader Market Environment

                                        • Key points
                                          • Declining consumer confidence and real spend conspire to dent beer sales
                                            • Figure 12: Year-on-year % change in average weekly earnings compared to inflation in the UK, and consumer confidence index, 2007-11
                                          • Aging population puts further pressure on beer revenues
                                            • Figure 13: Forecast adult population trends, by age group, 2006-16
                                          • Rise in ABs underpins importance of premiumisation
                                            • Figure 14: Forecast adult population trends, by socio-economic group, 2006-16
                                        • Competitive Context

                                          • Key points
                                            • A diminishing market leads to diminishing returns
                                              • Figure 15: proportion of UK population who are alcohol drinkers, 2007-11
                                            • Beer is struggling but retaining more of its drinkers than wine
                                              • Figure 16: Penetration of major alcohol types in order of popularity, 2007-11
                                            • Cider is the big winner over the past 5 years
                                            • Strengths and Weaknesses in the Market

                                              • Strengths
                                                • Weaknesses
                                                • Who’s Innovating?

                                                  • Key points
                                                    • ‘Standard’ Lads’ lagers looks to go more premium
                                                      • Innovation seeks to broaden lager’s appeal to women
                                                        • Lower ABV beers look to take advantage of tax incentives
                                                        • Market Size and Forecast

                                                          • Key points
                                                            • Beer revenues fall by £2.2 billion between 2006 and 2011
                                                              • Figure 17: Market size and forecast of volume and value sales for the total beer market, 2006-16
                                                              • Figure 18: Market size and forecast of value sales for the total beer market, 2006-16
                                                            • Lager volume sales have declined by a fifth since 2006
                                                              • Figure 19: Market size and forecast of volume and value sales for the lager market, 2006-16
                                                            • Better lager performance in 2010 just a blip
                                                              • Lager’s value sales decline cushioned by duty and VAT rises
                                                                • Why has the previously buoyant lager market suffered so severely?
                                                                  • Lager’s decline will continue over the next five years, albeit not as steeply
                                                                    • Figure 20: Market size and forecast of value sales for the lager market, 2006-16
                                                                  • Ale is seeing an even steeper decline than lager…
                                                                    • Figure 21: Market size and forecast of volume and value sales for the ale market, 2006-16
                                                                  • … and has even greater structural problems
                                                                    • The next five years will see an improved but still negative performance from ale
                                                                      • Figure 22: Market size and forecast of value sales for the ale market, 2006-16
                                                                    • Stout will continue to see a dramatic fall in volume sales
                                                                      • Figure 23: Market size and forecast of volume and value sales for the stout market, 2006-16
                                                                      • Figure 24: Market size and forecast of value sales for the stout market, 2006-16
                                                                    • Forecast methodology
                                                                    • Market Segmentation

                                                                      • Key points
                                                                        • Off-trade on the verge of becoming the dominant channel…
                                                                          • Figure 25: Share of total volume sales of beer in the on- and off-trade, 2006-10
                                                                        • … but on-trade remains comfortably the key revenue driver
                                                                          • Figure 26: Share of total value sale of beer in the on- and off-trade, 2006-10
                                                                        • Cask ale now accounts for one in eight draught pints bought
                                                                          • Figure 27: Volume sales of draught beer, and share, by beer type, 2006-10
                                                                        • Premium lager sales see a renaissance in the past three years
                                                                          • Figure 28: UK lager volume sales, by ABV categorisation, 2006-10
                                                                      • Market Share

                                                                        • Key points
                                                                          • Brands seek to capitalise on off-trade sales growth
                                                                            • Figure 29: Top 10 beer brand values sales and share in the off-trade, 2008-10
                                                                          • Budweiser enjoys exponential growth
                                                                            • World lagers excel
                                                                              • Sales uplift in premium ales
                                                                                • Artois 4% sees fall from grace
                                                                                • Companies and Products

                                                                                  • Key points
                                                                                    • AB InBev
                                                                                      • Carlsberg
                                                                                        • Diageo
                                                                                          • Greene King
                                                                                            • Heineken
                                                                                              • Molson Coors
                                                                                                • SABMiller
                                                                                                  • Wells and Young’s
                                                                                                  • Brand Research

                                                                                                    • Brand map
                                                                                                        • Figure 30: Attitudes towards and usage of beer brands, October 2011
                                                                                                      • Correspondence analysis
                                                                                                        • Brand attitudes
                                                                                                          • Figure 31: Attitudes by beer brand, October 2011
                                                                                                        • Brand personality
                                                                                                          • Figure 32: Beer brand personality – macro image, October 2011
                                                                                                          • Figure 33: Beer brand personality – micro image, October 2011
                                                                                                        • Brand experience
                                                                                                          • Figure 34: Beer brand usage, October 2011
                                                                                                          • Figure 35: Satisfaction with various beer brands, October 2011
                                                                                                          • Figure 36: Consideration of beer brands, October 2011
                                                                                                          • Figure 37: Consumer perceptions of current beer brand performance, October 2011
                                                                                                          • Figure 38: Beer brand recommendation – Net Promoter Score, October 2011
                                                                                                        • Brand index
                                                                                                          • Figure 39: Beer brand index, October 2011
                                                                                                          • Figure 40: Beer brand index vs. recommendation, October 2011
                                                                                                        • Target group analysis
                                                                                                          • Figure 41: Target groups, October 2011
                                                                                                          • Figure 42: Beer brand usage, by target groups, October 2011
                                                                                                        • Group One – Conformists
                                                                                                          • Group Two – Simply the Best
                                                                                                            • Group Three – Shelf Stalkers
                                                                                                              • Group Four – Habitual Shoppers
                                                                                                                • Group Five – Individualists
                                                                                                                • Brand Communication and Promotion

                                                                                                                  • Key points
                                                                                                                    • Spend on beer brands remains huge in spite of sales decline
                                                                                                                      • Figure 43: Above-the-line advertising spend for the beer sector, 2006-11
                                                                                                                    • AB InBev leads the way
                                                                                                                      • Figure 44: Top five spending advertisers on beer over the three years to July 2011(August 2008-July 2011)
                                                                                                                    • Foster’s and Carling battle it out for the middle ground
                                                                                                                      • Figure 45: Top five spending brands on advertising beer over the three years to July 2011 (August 2008-July 2011)
                                                                                                                    • Lager brands hijack the many summer music festivals
                                                                                                                    • Channels to Market

                                                                                                                      • Key points
                                                                                                                        • Supermarkets poised to overtake pubs as number one volume channel
                                                                                                                          • Figure 46: Volume sales of beer by channel, 2009-10
                                                                                                                      • Consumer Usage of Beer

                                                                                                                        • Key points
                                                                                                                          • Lager is number one drinks choice for over a quarter of the nation…
                                                                                                                            • … low alcohol beer is making progress among younger drinkers
                                                                                                                              • Lager has lost resonance among 18-24-year-old drinkers – unlike cider
                                                                                                                                  • Figure 49: Index of those who drink lager and cider most often, by gender and age group, October 2011
                                                                                                                                • Ale and stout struggle to appeal to women – much more than lager
                                                                                                                                  • A quarter of beer drinkers drink all three types
                                                                                                                                    • Cask ale needs greater nurturing to attract more younger consumers
                                                                                                                                    • Consumer – Key Influencers When Buying Lager

                                                                                                                                      • Key points
                                                                                                                                        • Consumers want quality over quantity…
                                                                                                                                          • … however, lager brands ignore discounting at their peril
                                                                                                                                            • Is the quest for value causing a swing back to premium-strength lager?
                                                                                                                                            • Consumer Attitudes Towards Lager

                                                                                                                                              • Key points
                                                                                                                                                • Refreshment and value are lager’s key selling points
                                                                                                                                                  • Women want lager to be more like wine
                                                                                                                                                      • Figure 55: Net difference in attitudes towards lager, men versus women, October 2011
                                                                                                                                                    • A huge demand for sweet-tasting lagers among 18-24-year-old drinkers
                                                                                                                                                        • Figure 56: Net difference in attitudes towards lager, 18-34-year-olds versus 35+-year-olds, October 2011
                                                                                                                                                      • Evidence that low calorie lagers have potential
                                                                                                                                                      • Consumer Attitudes Towards Ale

                                                                                                                                                        • Key points
                                                                                                                                                          • Ale can position itself as everything that lager is not
                                                                                                                                                            • Figure 57: Attitudes towards ale/bitter, October 2011
                                                                                                                                                          • Younger drinkers more likely to perceive lager as more refreshing
                                                                                                                                                              • Figure 58: Net difference in attitudes towards ale, 18-44-year-olds versus 45+-year-olds, October 2011
                                                                                                                                                          • Appendix – Internal Market Environment

                                                                                                                                                              • Figure 59: Revenue split for alcohol, off-trade versus on-trade, 2005-10
                                                                                                                                                          • Appendix – Broader Market Environment

                                                                                                                                                              • Figure 60: GDP, PDI, consumer expenditure and savings, at constant 2011 prices, 2006-16
                                                                                                                                                          • Appendix – Market Size and Forecast

                                                                                                                                                              • Figure 61: Volume sales and forecast for total UK beer market, 2006-16
                                                                                                                                                              • Figure 62: Forecast of UK beer volume sales, best and worst-case, 2009-16
                                                                                                                                                              • Figure 63: Forecast of UK beer value sales, best and worst-case, 2009-16
                                                                                                                                                          • Appendix – Brand Communication and Promotion

                                                                                                                                                              • Figure 64: Top 10 beer advertisers by above-the-line advertising spend, 2008-11
                                                                                                                                                              • Figure 65: Top 10 beer brands by above-the-line advertising spend, 2008-11
                                                                                                                                                          • Appendix – Brand Research

                                                                                                                                                              • Figure 66: Brand usage, October 2011
                                                                                                                                                              • Figure 67: Brand commitment, October 2011
                                                                                                                                                              • Figure 68: Brand momentum, October 2011
                                                                                                                                                              • Figure 69: Brand diversity, October 2011
                                                                                                                                                              • Figure 70: Brand satisfaction, October 2011
                                                                                                                                                              • Figure 71: Brand recommendation, October 2011
                                                                                                                                                              • Figure 72: Brand attitude, October 2011
                                                                                                                                                              • Figure 73: Brand image – macro image, October 2011
                                                                                                                                                              • Figure 74: Brand image – micro image, October 2011
                                                                                                                                                              • Figure 75: Profile of target groups, by demographics, October 2011
                                                                                                                                                              • Figure 76: Psychographic segmentation, by target group, October 2011
                                                                                                                                                              • Figure 77: Brand usage, by target group, October 2011
                                                                                                                                                            • Brand index
                                                                                                                                                              • Figure 78: Brand index, October 2011
                                                                                                                                                          • Appendix – Consumer Usage of Beer

                                                                                                                                                              • Figure 79: Most popular types of beer by consumption in the past 6 months, by demographics, October 2011
                                                                                                                                                              • Figure 80: Other types of beer consumed in the past 6 months, by demographics, October 2011
                                                                                                                                                              • Figure 81: Beer/cider consumed most regularly in the past 6 months, by demographics, October 2011
                                                                                                                                                              • Figure 82: Beer/cider consumed most regularly in the past 6 months, by demographics, October 2011 (continued)
                                                                                                                                                          • Appendix – Consumer – Key Influencers When Buying Lager

                                                                                                                                                              • Figure 83: Most popular key factors when deciding which brand of lager to drink, by demographics, October 2011
                                                                                                                                                              • Figure 84: Next most popular key factors when deciding which brand of lager to drink, by demographics, October 2011
                                                                                                                                                          • Appendix – Consumer Attitudes towards Lager

                                                                                                                                                              • Figure 85: Agreement with the statements ‘I find that most lagers taste quite bland’ and ‘It is more calorific than most other drinks’, by demographics, October 2011
                                                                                                                                                              • Figure 86: Agreement with the statements ‘I am interested in sweet tasting lagers and ‘I enjoy drinking lager with a meal’, by demographics, October 2011
                                                                                                                                                              • Figure 87: Agreement with the statements ‘I am more likely to drink lager when out (ie in the pub) rather than at home’ and ‘Lager is a drink for men’, by demographics, October 2011
                                                                                                                                                              • Figure 88: Agreement with the statements ‘Drinking lager is not very feminine’ and ‘Lager is more refreshing than other alcohol types’, by demographics, October 2011
                                                                                                                                                              • Figure 89: Agreement with the statements ‘Bottled lager is worth paying more for than draught’ and ‘I prefer to have one or two lagers than drink it all night’, by demographics, October 2011
                                                                                                                                                              • Figure 90: Agreement with the statement ‘Lager is good value for money compared to other drink types ie spirits, wine’, by demographics, October 2011
                                                                                                                                                          • Appendix – Consumer Attitudes Towards Ale

                                                                                                                                                              • Figure 91: Agreement with the statements ‘It makes a nice change from lager’ and ‘I like that different types of ale taste so unique’, by demographics, October 2011
                                                                                                                                                              • Figure 92: Agreement with the statements ‘I like the variety of ale types and tastes compared to lager’ and ‘It tastes more interesting than lager’, by demographics, October 2011
                                                                                                                                                              • Figure 93: Agreement with the statements ‘I see it as a better quality drink than lager’ and ‘I like that most ales are made locally’, by demographics, October 2011
                                                                                                                                                              • Figure 94: Agreement with the statements ‘I like that most ales are made by small companies, not multinationals’ and ‘Ales generally taste fresher than lager’, by demographics, October 2011
                                                                                                                                                              • Figure 95: Agreement with the statements ‘Ales are generally not as refreshing as lager’ and ‘Bottled ale is worth paying more for than draught’, by demographics, October 2011
                                                                                                                                                              • Figure 96: Agreement with the statement ‘It is better value for money than lager’, by demographics, October 2011

                                                                                                                                                          Companies Covered

                                                                                                                                                          • Anheuser Busch-InBev
                                                                                                                                                          • Arsenal Football Club
                                                                                                                                                          • Bank of England
                                                                                                                                                          • Beck's North America
                                                                                                                                                          • Belhaven Brewery Company Ltd.
                                                                                                                                                          • BrewDog
                                                                                                                                                          • British Beer and Pub Association
                                                                                                                                                          • British Sky Broadcasting Group plc (BSkyB)
                                                                                                                                                          • Campaign for Real Ale
                                                                                                                                                          • Carlsberg UK Ltd
                                                                                                                                                          • Cobra Beer
                                                                                                                                                          • Diageo Plc
                                                                                                                                                          • Diageo UK
                                                                                                                                                          • Facebook, Inc.
                                                                                                                                                          • Football Association (The)
                                                                                                                                                          • Freeview
                                                                                                                                                          • Fuller, Smith & Turner Plc
                                                                                                                                                          • Gfk NOP
                                                                                                                                                          • Glastonbury Festivals Ltd
                                                                                                                                                          • Google UK
                                                                                                                                                          • Greene King Brewing and Retailing Ltd
                                                                                                                                                          • Guinness
                                                                                                                                                          • Halewood International Ltd
                                                                                                                                                          • Heineken N.V.
                                                                                                                                                          • HM Revenue & Customs
                                                                                                                                                          • Hutchison 3G UK Limited
                                                                                                                                                          • Interbrew UK
                                                                                                                                                          • J. Sainsbury
                                                                                                                                                          • Kantar Media
                                                                                                                                                          • Marks & Spencer
                                                                                                                                                          • Miller Brands (UK) Ltd
                                                                                                                                                          • Molson Coors Brewing Company
                                                                                                                                                          • Orange plc (UK)
                                                                                                                                                          • Royal Bank of Scotland Group plc
                                                                                                                                                          • SABMiller PLC
                                                                                                                                                          • Scottish & Newcastle Plc
                                                                                                                                                          • T-Mobile (UK) Ltd
                                                                                                                                                          • Tesco Plc
                                                                                                                                                          • Union of European Football Association (UEFA)
                                                                                                                                                          • Virgin Media Ltd
                                                                                                                                                          • Virgin Mobile
                                                                                                                                                          • Vodafone Group Plc (UK)
                                                                                                                                                          • Wells & Young's Brewing Company Ltd
                                                                                                                                                          • YouTube, Inc.

                                                                                                                                                          Beer - UK - December 2011

                                                                                                                                                          £1,750.00 (Excl.Tax)