The changing face of drinking

The UK beer market is diversifying. To stay ahead, brewers are moving away from traditional pubs and into other areas of the hospitality trade.

The British are one of the most open-minded and import-friendly drinking populations in the world, according to research carried out by Datamonitor on the UK and Ireland beer markets.

Between 1991 and 1999, imports increased at an average rate of 1.6 per cent per year. While this growth may not be spectacular, it is significant, given a 1.1 per cent decline in domestic consumption.

With exports of British beer increasing at an average of 9.1 per cent a year over the same period, the UK is at the forefront of moves towards a global beer market.

Datamonitor says that the UK has one of the largest and most mature beer markets in the world. But though per capita consumption in the UK is behind only the Czech Republic, the Republic of Ireland and Germany in Europe, the UK market has shown little growth over recent years, with value growth of two per cent a year since 1995 and a volume decline of 0.5 per cent a year.

In line with the move towards a more diverse and international beer market, the traditional staple drinks of the UK industry – ales and stouts – have been in decline throughout the Nineties.

Traditional staple drinks have lost ground because of the growth in the popularity of not only lager, but spirits-based drinks, ranging from alcopops in the early to midNineties and now pre-mixed spirits. In on-trade, the market has lost share not only to home (that is, off-trade) consumption but also to the leisure and entertainment sectors (that is, restaurants, cinemas).

Datamonitor’s research shows that on-trade accounts for the lion’s share in regional markets across the UK and Ireland, despite a long-term decline that began in the early Eighties. Northern England, Scotland and the Republic of Ireland have the highest consumption rates per capita, with the lowest rate in Northern Ireland.

The UK beer market is dominated by on-trade consumption, which accounts for 84.8 per cent by value and 65.1 per cent by volume of sales. But the relationship between the onand off-trade seems to vary by region. In all regions there has been a move over the past 20 years towards off-trade, because of the growth of home entertainment, which has encouraged consumption in the home.

Over the past five to ten years, however, the on-trade chains have made something of a recovery. One reason is greater investment in outlet design and the formatting of the on-trade chains, to attract a wider range of customers.

New pub formats are also proving to be highly successful, with many pub estate owners divesting their traditional pubs and focusing instead on branded bars and pubs, large format family pubs, pub restaurants and other high-growth, high-margin on-trade formats.

The British brewing industry is also experiencing a period of rapid change in its distribution channels.

Despite weak performance in recent years, off-licence chains, such as Thresher Wine Shops, are still leading players, dominating the off-licence market and accounting for 20.2 per cent of overall off-trade sales. However, the grocery multiples channel still dominates off-trade, accounting for 50.2 per cent of sales.

Vertically integrated beer companies, such as Bass and Whitbread, are selling brewing or beer distribution businesses in order to focus on high profit areas of their business. Scottish & Newcastle has sold off a significant number of its pubs.

In addition to consolidation of the on-trade sector, there is a growing international trend towards the consolidation of supermarkets. Although this has not had a major effect on the UK, pressure is growing from Europe and consolidation can be expected within the next few years.

In the grocery retail sector, the momentum for consolidation has been building ever since the formation of the single European market and the launch of the euro. Datamonitor believes that with the onset of such consolidation, already evident in the purchase of Asda by US giant Wal-Mart, many large retailers with global ambitions are likely to move quickly to achieve critical mass in the European markets, before key acquisitions or merger targets are snapped up.

It expects to see an emergence of a small number of pan-European super retailers in the next five to ten years. Given that the grocery multiples account for over half of the UK off-trade sales, the resulting rise in retailer power would place additional pressure on beer manufacturers to increase their own market power, through increased market share, price advantages, stronger brands and new product development.

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