Beer and the European market – Innovative solutions building on wellness trend may be the key out of the crisis

market monitoring Industry Insights series_Beer and the European market business intelligence

Similar to so many other industries, the beverage industry has faced grave challenges due to the coronavirus outbreak in 2020. According to IWSR, specialized in drinks market analysis, 2019 was in many ways perhaps the last “normal” year for the drinks industry.

In Beverage Daily, IWSR predicts a double-digit decline in global beverage alcohol volume consumption in 2020. It will take until 2024 for the industry to recover to pre-COVID-19 levels of 2019. “The pandemic is set to cause a deeper and more long-lasting after-effect to the global drinks industry than anything we’ve experienced before”, says Mark Meek, CEO of IWSR Drinks Market Analysis.

Is there a way out of the crisis? We will examine evidence of the latest beer trends in the European market, the beverage industry developments in different countries of Europe in the context of Covid-19, as well as the ways of coping with the crisis that different actors in the brewing industry have resorted to. News produced by M-Brain’s Industry Insights service has been used as background material for the text.

Evidence from the north: health trends explain popularity of alcohol-free beers

Craft beers, organic and flavoured beers are increasingly popular, but it is the low-alcohol and no-alcohol beers that are really riding the wave of the trend. The evidence is clear: prior to the Covid-19 crisis, the demand for non-alcoholic drinks increased across Europe and the crisis has not changed this. Let’s begin from the north: according to Charlotte Hansson, CFO of the Swedish state-owned chain of liquor stores Systembolaget interviewed in Dagens Industri, the segment of non-alcoholic drinks saw the biggest segment growth in Sweden in 2019, with 8 % year-to-year increase. The boom experienced in non-alcoholic beers is already beginning to take off also in other alcoholic products, such as wine and gin. In general, interest in non-alcoholic drinks has opened up space for new players in the Swedish beverage industry.

In neighbouring Norway, sales of alcohol-free beers were 10 per cent higher in the first three weeks of January compared to the same period a year before. In Nationen, Marketing Manager Henrik Lund at Ringnes, the largest brewery in Norway, attributes the growth to health trend, particularly noticeable in the aftermath of Christmas and New Year celebrations. Reports from Denmark tell a similar story: statistics from the Danish Brewers’ Association referred to in Berlingske reveal that the consumption of non-alcoholic beer is now five times as large as it was in 2014. Again, experts attribute the increased popularity to prevailing health trends which also include drinking less alcohol.

Interestingly for Denmark, the popularity of non-alcoholic options as trendy and healthy alternatives coincides with debate on alcohol sales to young people. Under the current law in Denmark, 16-17-year-olds are allowed to buy unlimited volumes of beer, cider and alcopops in retail stores. Wine & Spirits Denmark (VSOD), the trade organization for wine and spirits importers in Denmark, is calling for a total ban on the sale of all types of alcoholic beverages to young people under the age of 18 years. The Danish parliament, however, has objected to this. Denmark currently ranks number one among all EU countries when it comes to binge drinking, leading to calls from the EU to the country to focus more strongly on public health issues, Berlingske reports.

The UK: wellness trend getting fresh impetus from the crisis?

Reports from the UK indicate that the consumers are increasingly seeking for low-alcohol and no-alcohol alternatives to support their wellness goals made during the Covid-19 imposed lockdown. The Morning Advertiser refers to Data from Nielsen which shows that the public stocked up on low and no-alcohol drinks prior to lockdown restrictions being announced. With Brits getting out and about to do their daily exercise and participating in online workouts, could this trigger a reduction in drinking alcohol once restrictions are lifted, the paper asks.

In The Morning Advertiser’s article, brand manager Rosie Fryer from cider producer Kopparberg concludes that operators should ensure that they take steps to support the ever-growing wellness agenda. According to Fryer, prior to the Covid-19 pandemic, 67 % of British consumers said they were proactively trying to lead healthier lifestyles. Fryer believes the figure to have increased since. To support this belief, she says Kopparberg has seen a 37 % year-on-year growth in April-May 2020 figures concerning the sales of low and no-alcohol options. To Kopparberg, this translates as having an alcohol-free version of their best-performing variants available. Fryer says this is natural progression to the brand, in line with the current wellness trend.

Evidence from the south: health and curiosity as driving forces

Moving the focus to the south of Europe, Alimarket reports that according to the Spanish beer producers’ association Cerveceros de España, the sales of non-alcoholic beer in Spain increased in 2019 by 7,3 % compared to the previous year. In France, which according to Points de Vente newspaper has experienced a 79 % growth in beer sales in the last ten years, breweries are adding a number of organic and alcohol-free options in 2020. Rayon Boissons reports that the year 2019 was disappointing in terms of beer sales in the French hypermarkets: double digit growth in turnover from craft beers was unable to compensate for the decrease in traditional beer sales.

Bernard Farges, president of the Inter-professional Council for Bordeaux Wine (CIVB), gave an interesting account in LSA magazine on the changing consumption habits of consumers, as he explained the drastic drop in the sales of Bordeaux red wine last year. These changes in consumption patterns include a general move away from alcoholic beverages, lower consumption of red meat, associated with red wine, a preference for beer over wine, and the tendency towards appetizer-style dinners rather than traditional meals, which tend to attract lighter wines. Young consumers often prefer light, fresh wines, while Bordeaux wines generally do not fit this description. Additionally, the Bordeaux region has a very traditional image, while customers today are in search of surprise in their consumption, according to CIVB vice president Allan Sichel.

Interestingly, the same element of surprise is something that Maija Ankkuri, Head of Consumer and Market Intelligence at Hartwall in Finland also mentions, pointing out that 41 % of active consumers of non-alcoholic beer choose non-alcoholic beer out of curiosity to try new flavours. 40 % of active consumers of non-alcoholic beer cite health reasons. In Finland, non-alcoholic and low-alcohol beers are popular among the age group 18 to 34, while the share of total population in Finland who drink non-alcoholic beer more than once a year stands at lowly 19 %.

 

Industry Insights series_Beer and the European market business intelligence

Assorted craft beer varieties.

So what is the current market share for alcohol-free beer?

What about the current market share of non-alcoholic beers in different countries? In Danish newspaper Borsen, Christina Aniko Földes, brand manager for beer at Carlsberg in Denmark, notes that non-alcoholic beer only accounts for about 2-3 % of total beer sales in Denmark. This figure actually is at the level of most western European countries, but pales in comparison to Spain’s 12-13 %, or Sweden’s 9-10 % market share. According to Christina Aniko Földes, the popularity in Spain is due to non-alcoholic beer having been in the market longer than in other countries, while in Sweden legislation helps explain the large percentage share. She hopes that in the next 2 to 5 years, the domestic market share for non-alcoholic beers climbs to between 5 and 7 % of total beer sales.

In Germany, the market share of alcohol-free beer in total production increased to around 7,3 % in 2019, according to the German brewers association cited in Süddeutsche Zeitung. In The Netherlands, the market share for non-alcoholic beers stands at 3,1 %, while for Poland the corresponding figure is 5 %.

Corona crisis – what do future sociologists make out of people’s drinking habits?

In general, beer sales across countries have dropped during the corona crisis, as increased retail sales have not been enough to compensate for the loss of sales in pubs, restaurants and other catering establishments.

For future sociologists, alcohol consumption habits and other alcohol-related behaviour in different countries during the Covid-19 lockdown may prove an interesting field to research. In France, alcohol sales were down (-1,7 %) in the first week of lockdown measures. According to Nielsen data referred to in BFM TV, the only other category to experience a drop in sales was hygiene-beauty (-3,4 %), while toilet paper and paper towel sales grew by 92 % and canned ready-meals by 159 %. One explanation for the drop in alcohol sales, offered by experts, is that for the French people, the situation just isn’t conducive for alcohol consumption due to the lack of social interaction.

According to Nielsen poll referred to in Rayon Boissons, liquor sales in France reached record levels on May 9, two days before the easing of coronavirus measures. This record was linked to the French people’s desire to celebrate the end of the lockdown. In Spain, social interaction also seems to be the key: normally, as much as 86 % of spending on beer takes place outside the home. The increase in sales at supermarkets and hypermarkets did not make up for the loss in business from sales at restaurants and bars, and sales of beer have taken a 40 % tumble during the Covid-19 crisis, Expansión – Spain reports. Meanwhile, in the Czech Republic, panic buying due to the coronavirus crisis resulted in a 30 % year-on-year increase in alcohol sales in the second week of March 2020, according to Prague Monitor.

Corona crisis – what actions have different countries taken to cope with the situation?

The Covid-19 pandemic has forced the beverage sector to come up with creative ways to ensure the continuity of the business. In France, beverage sector companies and trade unions have partnered to support restaurants and cafés by launching an online platform called “J’aime mon bistrot”. The platform allows customers to purchase vouchers ranging from 1,50 € to 50 € to be used when the restaurant reopens. The beverage sector companies and trade unions will pay the impacted restaurants a sum corresponding to the value of the first 10 000 vouchers purchased, Rayon Boissons reports.

E24 writes that in Norway, restaurants and pubs in the municipality of Verdal received temporary approval to sell alcohol beverages at the same price level as charged by the retail stores. The permit, limited to beverages with alcohol content up to 4,7 %, was granted to help restaurants and pubs to sell off their stocks of beer and cider before expiration date. In Denmark, brewer giant Carlsberg has launched “Adopt a Keg” project. According to the concept, Børsen newspaper informs, customers who buy a Carlsberg beer bottle or a can in a supermarket are able to scan the labels on these and virtually fill up a digital keg on Carlsberg’s webpage. By scanning four beers, the customer has filled the whole beer keg, which can then be exchanged for two free draught beers once the restaurants and bars are open again.

Government actions, of course, have a key role to play in how the situation of the beverage industry will pan out. Brewery trade association Brasseurs de France has been vocal in demanding the French government for aid. According to BMF TV, the actions suggested include exemption of breweries from employer contributions in 2020, a reduction in VAT and compensation for the destroyed stock. The Guardian reports that similar calls have been heard in the UK where The Society of Independent Brewers (SIBA) has been urging the government to cancel monthly beer duty payments. SIBA warns that a failure to do so will put thousands of jobs at risk. In Germany, the German federal ministry of finance and the state finance ministries have agreed on the deferral of the beer tax in 2020 to improve the liquidity of the breweries and to protect jobs in the current difficult situation surrounding the coronavirus pandemic, Süddeutsche Zeitung writes.

Is there light at the end of the tunnel?

To return to the beginning of this text and Beverage Daily’s prediction that it will take five years for the beverage industry to recover from the impact of the coronavirus, is there any light at the end of the tunnel?

Mark Meek, CEO of IWSR Drinks Market Analysis, admits it’s incredible how a few months of lockdown will result in several years of recovery, but points out that beverage alcohol has proved to be a relatively resilient category in previous crises. Beer is expected to recover quicker than wine or spirits. What then can the alcohol beverage industry do to help its recovery effort?

Firstly, ecommerce in the alcohol industry was already growing pre-COVID-19 and is becoming even more important. As a new route to market, ecommerce is one of the three factors Mark Meek mentions that will help contribute to the industry’s rebound and future growth. Two other factors are strong focus on innovation and premiumization, “the action or process of attempting to make a brand or product appeal to consumers by emphasizing its superior quality and exclusivity”.

So perhaps there is indeed light at the end of the tunnel, instead of just the light of an oncoming freight train. Cheers to that.

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