As Good As It Gets: Low/Non-Alcoholic Beer In Mature Markets
Comparative performance of low/non-alcoholic beer against total beer sales shows a mixed result amongst the top, mature markets. The relatively low base of the low/non-alcoholic beer category partially explains its performance, especially in countries such as Japan, UK, and Canada, where maturity of demand has only become evident in recent years. However, the underlying growth drivers, that stimulate demand, work in a different manner. In the context of the US and Germany, we see a level of company-driven demand stimulants that have revived the market, but in the past this had been temporary.
There is the impression that consumption of low/non-alcoholic beer in mature markets has been superficially driven by the implementation of stricter legislative penalties on drink driving. This is still unclear with the example of Spain. In July 2006, the Spanish Government began to implement a driving license-points system intended to impose stricter limits and penalties. Before full implementation of the legislation, in 2007, the Spanish low/non-alcoholic beer market witnessed growth rates of around 9% but, after implementation, consumption of low/non-alcoholic beer began to decline.
In the past, health fads around non-alcoholic beers have inspired short-lived upsurges in demand. In some instances the strength of a marketing campaign of low ABV alcohol brands in conjunction with the brand strength of its alcoholised version would stimulate blips in demand. What will drive consumption in mature markets on a long-term basis?
The Push-Effect is Key
As discussed in Middle East and Africa: An Optimistic Stance for Non-Alcoholic Beer, perception is key to exploiting demand in that region. But mature markets do not provide the same cultural context to stimulate demand for low/non-alcoholic beer. In the US, after facing years of declining performance in non-alcoholic beer companies decided to split out the category and launch a low-calorie/low-alcohol hybrid in order to take advantage of health and wellness demand.
The entry of Miller Genuine Draft 64 and Budweiser’s Select 55 in 2008 and 2009 respectively, had significantly reshaped the US market, forming almost 55% of total low/non-alcoholic beer sales by 2010. Miller Genuine Draft 64 and Select 55 volume sales seem to be mostly pushed by company activity to stimulate demand. However, performance in the last three years has shown this could be a short-lived blip in demand, as we see low alcohol beer volume drop by 14 million litres between 2010 and 2012.
Note: In this graph Non-alcohol beers <0.5%; low alcoholic beer 0.5%+ to 3%
Non-alcoholic beer in Germany, unlike the US, has a natural progression based mostly on the halo effect of its alcoholised cousins and the premium status of their brands. Take the example of Krombacher, when compared to its better-performing non-alcoholic variety. The comparison of the alcoholised and non-alcoholic varieties can highlight a correlative attitude between the sales of both sub-brands that is connected to the peaks and troughs of the macroeconomic situation. The market in 2010 and 2011 saw a relatively higher performance in non-alcoholic beer that was partially driven by the concentrated positioning of brands toward young adults. Moreover, activity outside non-alcoholic beer in related categories, such as fassbrause and Radler, has a halo impact.
Unlike the US, boost in sales within the German market was supported by the traditional popularity of premium low-alcohol brands, such as Clausthaler and Erdinger. Low/non-alcoholic beer market performance in 2012 attained modest growth, coming from a low base, and outperforming the rest of the German beer market in 2012; but as seen in the US market, this can become a short-lived resurgence.
What’s on the Horizon for Low/Non-Alcoholic Beer?
Positioning a beer as non-alcoholic option in a mature can produce a relatively higher performance when compared to the total beer market. Some companies in mature markets like the US momentarily circumvented the slow decline in low/non-alcoholic beer by utilising a low calorie product positioning. In other markets this will not necessarily work, as loss of flavour in this type of drink does not seem to go down well with consumers in beer-intensive consumer markets, such as the UK and Germany. Convincing consumers that low calorie and low alcohol beers can maintain the full flavour of the beer is key, and to this end, excluding the calorie-guilt marketing that is inferred from such products may be prudent.
Companies have to push the boundaries of definition when it comes to the marketing and positioning of non-alcoholic beers. As the lines are blurred between a non-alcoholic beer and soft drink it would be astute for companies to explore malt-based soft drinks rather than flavoured non-alcoholic beer. In one example, markets like Spain imbibe non-alcoholic beers – 1% ABV and below – almost as a soft drink, and they water-it down further with lemonade to make their own version of shandy.
Companies can look at shifting the non-alcoholic brand positioning toward the malt-based soft drinks style, through the use of packaging that imitates a soft drink, as long as companies strictly follow the legal criterion of their respective markets. We are starting to see glimpses of this in the German market, with the growing popularity of faussbrause, a hip drink aimed at young adults. There are some examples in the Middle East and Africa, such as Fayrouz, where Al Ahram Beverages Company (ABC) have removed the beer association by altering the tipple’s near-beer look and as a result ABC were able to access a wider market and attain relatively higher sales.