Beer brands are enjoying an upsurge in demand globally but in the UK it is a different story, with sales dropping nearly 5 per cent. Why is there such a disparity and are there pockets of potential growth?
Consumers in larger numbers around the world are reaching for a beer to quench their thirst, helping the global beer market, which includes a mixture of global and local brands, to grow 36 per cent year on year with the top ten beer brands now worth a combined $63bn (£40bn). However, it seems Brits are less likely to opt for a glass of the amber necatar – UK sales of the drink are in decline, falling 4.8 per cent year on year and causing the industry to launch an advertising drive to stem the flow.
The global figures are derived from Millward Brown’s top 100 BrandZ global brands list, which takes into account the financial value of a corporation and multiplies it by the contribution of the brand itself, as well as speaking to 2m consumers in 30 countries.
Top brands include Bud Light, Budweiser, Heineken and Corona. The beer brand performing the biggest leap in the rankings is Brazil’s Brahma beer, which grew by 61 per cent in the past year to be worth $4bn.
Guinness continues a steady brand value growth at 11 per cent in the past year and up 52 per cent since 2006. It is one of the five highest growing brands in the BrandZ top 100 list and is currently the 7th most valuable beer brand in the world at $4.5bn. However, its sales in the UK are in decline, spurring parent Diageo to launch a campaign in which drinkers get the chance to win a complimentary pint when they tap their smartphones against the harp logo on newly installed Guinness pumps.
Peter Walshe, global BrandZ director at Millward Brown, says: “Ironically the [global] beer market is one of the strongest growing – this is to do with category management and consolidation of beer brands. If that is to be sustained, the brand needs to be an even bigger part of the mix.”
According to Walshe there are three things that drive a brand to be successful: being meaningful, salient and different.
Meaningful requires that brands have a mix of emotional and rational appeal – the most important for the beer category, according to Millward Brown. Different refers to a brand being perceived not only as unique but also as having an element of the trend-setter, the second most important element. Saliency comes third and meansthat the brand is spontaneously thought of the most as the one to meet consumer needs.
At a global level, the data suggests that Guinness and Heineken are two of the most strongly performing in terms of those metrics. In the UK, Stella is doing relatively well in terms of its relationship with consumers, followed by Guinness, says Walshe.
Validation research by Millward Brown reveals that brands that score in the top 25 per cent for the three metrics of meaningful, different and salient, capture five times more volume share.
The research also indicates what brands could do in the future to ensure business growth is sustained. Walshe says: “Meaningfulness is a long-term, more sustainable route to competitive and financial advantage. It’s about seeing where your brand can be valuable to the consumer, which in term drives a better premium for your brand.”
As with many other categories, the sales figures are often also dependent on how much of the volume is on promotion, which is something the brands themselves fund. The amount of food and non-food goods sold on promotion remains highest in Europe, at 59 per cent for non-food items and 55 per cent for food items, according to Tim Eales, strategic inisight director at analyst IRI.
He says: “Promotions have helped shoppers meet the rising cost of their grocery shopping baskets but they eventually become used to them. After a while their loyalty towards brands and stores erodes, which makes it difficult to raise prices in the future.
“As manufacturers try to regain some of the margin that has been eroded since the economic downturn began, clearer definition of goals and priorities developed with retailers and which consider the multi-channel landscape are essential. The UK is just the tip of the iceberg.”
Specific IRI data on UK beer sales reveals that the top five brands by volume sales are Stella, Foster’s, Carlsberg, Carling and Budweiser in the period of June 2012 to 2013, although four out of five experienced a decline in sales. In terms of sales uplift, the top three brands in the same period are Corona, with a 31.4 per cent increase, Heineken with 20.3 per cent and San Miguel with 10.1 per cent.
This also corresponds with data on the volume each brand had on promotion in supermarkets during that sales period. The percentage of volume on promotion decreased for the top five brands compared with volume sales, but for Corona, Heineken and San Miguel, the volume the brands had on special offer remained the same.
For the top five brands, the data shows that they are easing off promotional deals and also the amount by which they discount – but this has also meant that those brands have experienced a sales dip, according to the data.
Walshe at Millward Brown believes there will always be some consumers influenced by promotions because of the amount of brand choice in the category. “Your predisposition to buy something different may well be strong but when you get in store and see something on promotion, it can divert you from what is in your head.”
He adds: “That activation in market can be a powerful force but brands pay for that and it’s how they use that judiciously. What we see is the stronger the brand, the more it can resist competitor promotions. That is the real reason for having a strong brand: you are not completely immune to it but you’ll lose less than you otherwise would if you are a weaker brand.”
The IRI data shows that UK sales of beer by litres is down by 5 per cent overall and the percentage of beer sold on deal is down from 74 per cent to 70 per cent for the year to June 2013. The actual price reduction went from 23 per cent off to 20 per cent off.
“Most of this reduction in beer sales is more to do with the economy and people struggling to pay their bills than it is to do with reduced volumes being sold on promotion,” Eales says.
“Reducing the volume [of beer that is sold on] deal and the deal ‘depth’ removes some of the impulsiveness from the purchase, but a five per cent drop in sales by litres is a big drop when you are looking at the total market.
“I think the economy is having an effect on that total movement rather than the fact the deals have dropped a bit.”
While UK beer sales are in decline, global growth is increasing and one of the greatest weapons for achieving this is the strength of the brand, according to Walshe. “Most brands start with being strong at home but being able to export that in a way that is meaningful and different is the real trick.
“Beer is one of the categories that has done this more successfully, partly because of the power and consolidation of the brewers. It is in their interest to take a brand, export it and build on the strength of the brand.”
Director of global consumer planning, beer and Baileys
Distinctiveness is really important for us. If you look at the beer market generally, is it quite homogenous. I always talk about ‘more taste and more soul’ for Guinness and the taste is distinctive and the soul has meaning for consumers. These are the things that I think are behind why Guinness does so well.
The overall market is under pressure. It’s not just volume, it’s also price, but there are sections in the market where Guinness plays that are booming. Real beer or craft beer is doing well as people are actively out there searching for brands that do what we do, with more taste and more soul.
A lot of the companies and brands are searching to expand into the developing markets because of the fast growth rate and Guinness has always been quite visionary in terms of how we do that. If you look at our biggest markets, the brand is already in places like Nigeria, the US, Cameroon, Indonesia, East Africa and the Caribbean; we already have a big global footprint.
The things consumers love about Guinness in Ireland and Britain are the same kinds of things that Guinness consumers love in Nigeria. They talk about the brand being different and distinctive.
Director of brand and insight, Carlsberg UK
Addressing the decline in beer [in the UK] requires talking about its values positively compared with other categories. Understanding trends among younger consumers and recruiting people into the category are crucial. Penetration of beer drinking in the 18-24 age-group is in decline; younger consumers tend to find the taste of beer offputting as they have have grown up on soft drinks. This has prompted beer innovations such as Carlsberg Citrus and Carling Zest, which have a sweeter taste profile than traditional beer.
Promotions are largely driven by retailers’ need, rather than the brand owners’. Many more beer brands are on promotion at the same time. For example, in Tesco there are 34 beer brands on promotion simultaneously on average.