What’s on tap for the beer market?

Archaeologists can trace evidence of beer to as far back as 13,000 years ago, yet despite its ancient roots, brewing today is an innovative activity. Novel techniques are used to source the ingredients, brew them, bottle the beer and market the drink. Today, beermaking is more diverse than ever, with more breweries experimenting with new flavours and styles. But as customers become more demanding, beermakers are facing new challenges.

At the recent Brewers of Europe Forum in Antwerp, attendees heard from beermakers about novel flavours, techniques to produce beers without alcohol or gluten, strategies to make their business more sustainable, and new ways to reach customers.

Sustainability

One of the main buzzwords at the Forum was sustainability, which is now feeding into almost every aspect of beermaking. That includes packaging, water use, recycling, and transport. For example, some big brewers are pushing for a switch from reusable plastic cups to non-plastic or even biodegradable cups – especially at venues like music festivals. Danish brewer Carlsberg has set green objectives like cutting carbon emissions from its breweries to zero. Asahi Group is aiming for 100% sustainable procurement of agricultural raw materials. Heineken’s ‘Every Drop’ strategy aims to replenish and treat all the water it uses for brewing in water-stressed areas around the world by 2030. Some brewers even say that they are acting now, in expectation of upcoming environmental regulation in their sector.

Like many other sectors, the beermakers have discovered that e-commerce can be a vital tool for direct sales. Websites have expanded the customer base, giving savvy brewers a new window for their products. Even Westvleteren, the Belgian Trappist beer often hailed as the world’s finest beer, is finally allowing online orders. At the same time and with the help of big data, they offer ways to track customers, thus helping businesses understand their market better and anticipate new trends.

These initiatives are partly reactions to a changing market. Industry trends show that while there are strong growth rates in emerging markets, consumer demand for alcohol is slowly falling in mature markets like Europe and the US, notably due to demographic changes; competition from other beverage sectors like wine, and health drinks; and tighter regulatory and taxation measures.

Quality, not quantity

Despite this, European beer production is increasing, and reached an eight-year high in 2017 bolstered by record exports, a rise in micro-breweries and rising demand for low-alcohol beer products. According to the Brewers of Europe’s latest report, production reached 39.6 billion litres (worth €3.4 billion), a third of which was exported outside the EU. Of that, nearly 900 million litres were in non-alcoholic beer (2% of all beer).

Indeed, there is an almost paradoxical situation: beer consumption has risen while overall alcohol consumption has fallen. This reflects the growth of low and non-alcohol beers. For example, AB InBev says that by 2025, it wants 20% of its global beer volume sales to have an alcohol level of 3.5% or less.

It ties in with one of the most important recent trends in beermaking: the switch from quantity to quality. Consumers may drink less, but they now go for value beers. Millennials in particular have very different expectations with regards to beer to previous generations. They are willing to try out unusual new brands – hence the explosion of craft breweries. Diversification, authenticity and European savoir faire are embraced.

As the ‘cradle of modern brewing’, Europe is home to an estimated 80 beer styles and 50,000 beer brands. But three-quarters of Europe’s 9,500 breweries are now SMEs, an increase of around 6,000 breweries in the last 10 years. Premium brewers are making their mark by selling locally, by inviting the consumers directly into the breweries for tasting and learning experiences, and by marketing online rather than through mass marketing.

Product innovation is accompanied by creativity in packaging, pricing and retail availability. Marketing is a key driver of sales, including movable shelves that can be rolled into stores fully stocked, or pack sampling, which drives the trials of new products.

Responsible drinking

Beermakers have changed in other ways, notably moving to address alcohol-related harm. The European Beer Pledge, launched in the European Parliament in 2012, includes partnerships with government authorities and NGOs, focusing on consumer information, marketing self-regulation and campaigns against drink-driving, underage drinking, alcohol in pregnancy, and binge drinking.

Marketing tie-ups with UEFA Champions League football, Formula 1 motor racing, or even cycling challenges like the Tour des Trappistes are now more careful to emphasise responsible drinking.
Indeed, industry action has helped reduce binge and underage drinking across Europe. For example, in 2014, 38% of 11 to 15-year-olds in the UK reported having had an alcoholic drink, down from 59% in 2000. The number of drink drive offenders in the Netherlands halved between 2002 and 2013.

Beermakers are currently working with the European Union on a related challenge: how to label the drink. By the end of May 2019, 85% of beers produced in the EU labelled their ingredients, and 60% of pre-packed beers labelled calorie information in the same way that other food and drink products already have to do. Brewers have also developed an online interactive calorie counter to let consumers compare different alcoholic beverages on a level playing field.

Alcoholic beverages are currently labelled under a self-regulation regime, while the European Commission considers regulation in this area. This period of self-regulation has been an opportunity for brewers. They have been able to set high industry standards to protect vulnerable consumers and play a positive part in reducing the harmful use of alcohol.

There are still many challenges ahead for European brewers. There are concerns about the possibility that e-commerce might be regulated – or that big online sellers might dominate e-commerce. Taxation, including excise duties, has become an issue. There are market barriers overseas: for example, regulations introduced last year by India’s food safety and standards authority include non-recognition of geographical indications and excessive labelling requirements, which could harm EU exports worth up to €193 million. And given the creativity of new craft breweries, which have been hothouses of invention, will next European Commission continue its support for innovative SMEs?

Beermakers have shown in recent years that they can be flexible and innovative as the markets and society change. There are challenges ahead, but as brewers adapt, customers in Europe have found the changes remarkably refreshing.

Author: Janusz Linkowski

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