UK brewers to tap overseas markets

To those reared on the tweedy, tired image of ale in the UK, the idea that brewers want to turn the warm, flat liquid into a designer drink in overseas markets may sound slightly farcical.

But last week, Bass Beers Worldwide, the export arm of Bass Brewers, appointed Mustoe Merriman Herring Levy as its agency (MW January 14) with plans to spend some 10m on advertising its beer brands abroad.

While ale sales in the UK decline – and indeed, the whole British beer sector goes flat – selling it abroad appears to be an ideal way of soaking up the spare capacity. After years of approaching international markets with timidity, UK brewers claim they are making a strong commitment to putting British beer brands on the world stage.

Mustoe Merriman is to handle all advertising for Bass’ key export brands, Bass Ale and Caffrey’s Irish Ale, in 12 markets except the US. They include Australia, South Africa, Scandinavia and Iberia, where Bass intends to boost marketing spend.

Dominic Harrison, marketing director of Bass Beers Worldwide, says: “International [markets] are where our focus is increasingly going to be. Investment will be very significant. We would expect to commit money above the line.”

The Mustoe Merriman account represents a partial consolidation of Bass Beers Worldwide’s previously fragmented marketing arrangements following Harrison’s arrival in 1997, from his previous position as head of marketing for Pillsbury UK.

It also follows six months of intense activity for Bass in the US, which has seen Bass Ale air on TV for the first time and Caffrey’s launched through a joint venture with Guinness.

But Bass is not alone in stepping up its overseas activity. Tetley’s English Ale, the UK Smoothflow version of Tetley’s Bitter brewed by Carlsberg-Tetley has been launched widely in the US through importer Barton Beers. Whitbread’s Boddingtons is available in 30 countries and exports more than 40,000 barrels a year.

Although rival brewer Scottish & Newcastle is far from explicit about its own plans, Richard Keith, managing director of the company’s export division, says: “In the US there is a likelihood that we will put the foot firmly on the accelerator [this year]. The pace is hotting up, there is no question of that.”

By the end of its financial year this April, S&N expects to have reached 1 million hectalitres of beer exports for the first time. Its Newcastle Brown Ale is now the 13th biggest beer import in the US and the company is also boosting foreign sales of Foster’s lager, for which it holds the European licence.

One City analyst says exports by the UK brewers rose from about 3 million hectalitres in 1997 to an estimated 3.5 million hectalitres last year. It is perhaps no accident that in this same period consumption of beer in the UK dropped from 61 million hectalitres to about 59.4 million last year, and imports from foreign brewers rose to an estimated 6 million hectalitres.

However, Keith says that although a dwindling and oversupplied domestic market has stimulated exports, the primary reason for boosting activity is a “dramatic change” of attitude among 18- to 40-year-olds in primarily Westernised markets, such as the US and Australia. Ten years ago 95 per cent of the world beer market was lager but now growing numbers of young people are looking for new and different flavours. As a result, English ale is growing in popularity overseas, despite suffering in its domestic market.

The trend is a fortunate one for the UK brewers. With a few exceptions, ales are the main brands they own outright. They are also their main point of difference in the international beer market.

If they were to expand internationally with just a lager, they would either have to acquire an already established brand – Scottish Courage has allegedly been in talks to buy Kronenbourg 1664 – or spend heavily on marketing and distribution in an extremely fragmented and crowded market. Ales, with their uniquely British appeal, age and authenticity, can, as Keith says, ride the crest of a wave. They are sold at premium prices, offering healthy margins.

But Mustoe Merriman business development director Damian Horner says: “We must ignore what we know about ale. In a lot of markets we are talking about, they have never seen ale before, never tasted it. They approach it with no preconceptions. Ale is a fundamentally different product in new markets.”

Although ales are providing UK brewers with a useful gateway into international markets, their very nature may eventually restrict growth. Guinness is an example of a niche product that has achieved international status. It is brewed in more than 50 countries, but therein lies the difficulty with ales. Their taste depends on where and how they are brewed, given the importance of water in the process.

Furthermore, brewers are emphasising the authenticity of their ales in overseas markets. Bass, for example, has been marketing Bass Ale in the US with a campaign that describes how Napoleon liked it so much he tried to brew it in Paris but found that it tasted different.

Should ales become the success that brewers hope, brewing them overseas to meet demand would change their taste and contradict their brand character. They are restricted to exporting them in bottles and kegs.

Industry observers are split about the prospects for UK brewers overseas. Some view exports as a useful source of profits for the companies in the short term but wonder whether the international popularity of ales is a fad that will die out in the long term. Others believe that Bass Ale and Newcastle Brown may do well in the US, but remain sceptical about other markets. Most highlight the massive distribution problems the brewers are likely to face.

“The problem is that there are not really beer brands [other than lagers] that are internationally recognisable,” says one analyst.

If UK brewers are looking at international expansion as a long-term goal, they could have a long wait. As the analyst says: “It takes years and a phenomenal amount of money to really build the kind of brand penetration they are looking for. Guinness has been at it for 100 years.”

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