Beers through the years

OPINION – THE BEER MARKET

20 Pub & Bar | 29.08.2016 pubandbar.com

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Chris Holden, trade analyst and consultant, looks back on his 30 years of industry experience and reflects on the beer market

of the modern on-trade

OPINION – THE BEER MARKET

29.08.2016 | Pub & Bar 21pubandbar.com

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OPINION – THE BEER MARKET

22 Pub & Bar | 29.08.2016 pubandbar.com

Some blasts from the past…

Percentage of total UK beer sales split between ale/stout and lager • Lager becomes the country’s

biggest selling beer

• The Beer Orders restrict the number of tied pubs that could be owned by large breweries to 2,000

Scottish & Newcastle acquires Courage from Fosters for £473m

Allied pub estate split between Bass and Punch

1980s

1999

1989

1988

1995

This month sees the 30 year anniversary since I first began to work in the UK beer and pub industry. As

you can imagine, the world and the industry was a very di� erent place back in August 1986 when I joined Bass North in their regional o� ices at Headingly O� ice Park.

That said, some things from back then will sound remarkably similar. The England team had not long been knocked out of a major football tour-nament, albeit with more sympathy, as a result of Maradona’s ‘hand of god’, and Britain had a female prime minister who was negotiating what sort of commercial relationship the country would have with the Euro-pean community!

Looking at beer and pubs more specifically, again there are a num-ber of things which sound all too fa-miliar. The authorities were looking into a major merger of drinks com-panies – Allied-Lyons plc and Elders IXL Ltd in 1986 read AB InBev and SAB Miller in 2016. Carling (Black La-bel) was the No.1 selling beer brand in volume in the country, as I be-lieve it still is today, and consumers were enjoying an increasing range of brands from which to choose from. Back in 1986, this was very much driven by higher strength continen-tal style lagers, which were growing by nearly 20%, whereas today in-creased choice is across the board although most notably from more local craft beers and microbrewers.

A more open marketAll joking aside about the similarities, the di� erences from an industry point of view are quite marked. Structurally the beer and pub industry looked very di� erent to what it does today.

In 1986, there were around 80,600 pubs and other venues with a full-on license, with just over 42,000 of these being owned by brewers. That meant that in nearly 60% of all pubs and clubs the beers available to consumers were most likely only from the owning brew-ery and, as such, o� en quite limited in the choices available.

Roll forward to today and we see a very different picture. The number of outlets with a full-on license has increased by over 12%, whereas the number of pubs owned by brew-ers is less than 10,000. A key reason for this difference was that most of the major brewers stopped being vertically integrated businesses in the 1990s and the industry saw the emergence of pub only companies as a result of the MMC Report on the ‘Supply of Beer’ in 1989. There have also been an alarming number of pubs closing over this time with the latest figures from CAMRA suggesting that this is still at over 20 per week, although that is an improvement on where things have been. More posi-tively, the industry has also seen a

significant increase in the number of independent operators, both big and small. These independents have been more entrepreneurial, helping to inject energy into a sector through being more innovative and flexible when it comes to meeting the chang-ing needs of consumers.

This evolution in pub ownership has had a material impact in opening up the route to market for many brands and drink producers which previously wouldn’t be available to them. While it would be naive not to acknowledge that the major players have also been ben-eficiaries of this change, consumers have definitely benefitted from having visibility and access to an increasing number of brands from smaller and o� en less well established companies.

From the grain to the grape (and other fruits)Looking at what we are drinking from a category perspective has also changed quite significantly over the last 30 years. While it is o� en tricky comparing con-sumption across di� erent categories, for the purpose of this article I intend to keep things simple.

Back in 1986, as a nation on average we drank around 240 pints or 135 litres of beer per person, per year. This com-pared to just over 12 pints or 7 litres of ci-der and 14 litres of wine. Looking at the

latest published figures from the British Beer & Pub Association, the change in our consumption habits is quite con-siderable. Our consumption of beer has dropped by 50%, down to 119 pints or 68 litres per head. In contrast, we are drinking over 70% more cider, (21 pints) and over 40% more wine now (over 20 litres) per person, per year.

As someone who is particularly fond of the beer industry, while these figures sadden me they also raise a number of questions in terms of what they say about us as consumers and in the context of this piece how we are consuming alcohol.

Let’s get the obvious out of the way first of all. In most cases, both cider and wine are higher strength drinks compared to beer. The average ABV of beer is just over 4.1%; for cider this rises to 4.9% and wine is current-ly just under 12.6%. So it would sug-gest we are all drinking more alcohol. This is a commonly held belief and one which is perpetuated by certain newspapers and content-desperate TV programme makers.

“The decisions we make are based

on very different criteria and

reference points to what we would have

done in the past”

“The industry has seen a signifi cant increase in the number of independent operators, both

big and small”

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OPINION – THE BEER MARKET

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The Beer Orders are revoked

The Licensing Act comes into e� ect

Number of breweries in the UK exceeds 1,000

• The Pubs Code comes into force

• AB InBev acquires SAB Miller

• Theresa May is prime minister

Progressive Beer Duty introduced by Gordon Brown, meaning small-er breweries pay less tax

2003 2012 20162002

2005 2013

While historically this was indeed the case, the last 10 years have seen a very di� erent picture emerging. Since 2004, the litres per head of 100% alcohol, the measure the government o� en use, has been steadily coming down. Recent fig-ures show the current levels are now similar to what they were in the mid-1980s. So it can’t all be about the ABV or number of units of alcohol, can it?

Why we don’t all order the obvious In September last year, Channel 4 broadcast a show called ‘It Was Alright in the 1980s’. Many of those sitting down to watch it in the spirit of nostal-gia were soon appalled at what back then was considered to be acceptable mainstream television. The point is now we are in 2016 and the decisions we make are based on very di� erent criteria and reference points to what we would have done in the past.

The same is as true for our choice of alcoholic beverage as it is of our media consumption. Back in the mid-1980s and right through the 1990s, the strength or alcoholic content was a key driver for both consumers and brew-ers. While regulations prohibited the outright prompting of drinks based on their alcoholic strength, the way in which the trade talked about and even measured beer was very much driven by ABV – a higher ABV usually around 5% meant a more premium brand.

Interestingly there has never re-ally been such a link between ABV and premium when it comes to other drink categories. For example, when it comes to wine, the decision on what brand/bottle to choose is very rarely made on alcoholic con-tent but more likely on colour, grape, country of origin and price. An even more clear example of the lack of a link between ABV and premium can be seen when one looks at Cham-pagne at 12% ABV and more recently Prosecco at 11% ABV – both seen as premium offerings.

As our society has evolved, my assertion would be so has our de-cision making when it comes to buying beer. For more and more consumers, provenance, beer style and taste are increasingly the main drivers of choice, particularly when it comes to buying in a pub or other on-trade venues.

This move away from strength as a significant element can also be seen when it comes to those who brew the beers we now enjoy. Over the last 10 years or so, the ABV of brands such as Stella Artois, Bud-weiser and Coors Light have all come down from their previous 5% levels. There has also been an increase in the number of brands launched with notably lower strengths, right down to low and no alcohol, with Fosters

Radler, Carling Zest and Carlsberg Citrus all around the 2.8% mark or lower.

But it’s not just the big players who are recognising that ABV now has a walk-on part at best, rather than being centre stage. In its lat-est members survey, SIBA reported that the average beer strength of its members was 4.1%, with golden ales being the most popular style. Talk-ing to individuals across the trade, it’s clear that quality and consist-ency of product as well as an engag-ing and credible back story are all far more important to licensees and consumers alike when it comes to making their choice as whether or not to buy a particular beer from a particular brewer or supplier.

Let me be clear, it’s not that I am saying there isn’t a role for beers around or even above 5% ABV, far from it – it is just that to be suc-cessful these brands can’t sim-ply be defined by their alcoholic strength alone as may have been the case in the past. For example, Peroni is one of the best-selling beer brands at the moment as a result of how it has been positioned and its

marketing. It has looked to project premium cues at every consumer touchpoint, be that its bottles, fonts on the bar, the glasses it is served in or even the price you would expect to pay for it. I would even go as far as suggesting that many of its drinkers are blissfully unaware of how what ABV it is, because that just isn’t why they are drinking it.

This more wine-like approach to buying beer is even more pronounced when one looks at consumers who are under 50, so Generation X, Y and the millennials. For these consumers, ABV plays little or no part in the decisions they make when it comes to choosing which beer brand to buy.

Despite this, ABV or units of al-cohol continue to dominate much of the thinking that the government has in this area. I can’t but wonder whether part of this is because many of those engaged in these discus-sions are individuals whose refer-ence points relate to another era. In the same way that what we watch, where we watch it and how we watch TV has evolved, so has the way we decide what to drink and where we drink it.

“As our society has evolved, so has our decision making when it comes to buying beer”

Over 25 years, Chris Holden has held a series of senior marketing positions, including insight director and latterly head of market analysis at Molson Coors. During that time he was also chairman of the British Beer & Pub Association Statistics Panel for over 10 years. In 2012, he set-up Ashdale Business Consulting Ltd, an independent consultancy providing strategy, insight and analysis.ashdale-consulting.com

George Osborne cuts Beer Duty by 1p

Image: Frederic Legrand - CO

MEO

/ Shutterstock.com

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