Cider/Perry: Analyzing the Long-Term Potential of Recent Growth in Key Markets

Since 2005, the cider/perry market has seen a resurgence, formed on the basis of the over-ice trend, and followed by the flavouring revolution, which further stimulated demand. Globally, sales witnessed a CAGR volume increase of 7% between 2005 and 2013, as the industry resolutely focused on global sales expansion during this time. Uncharacteristically to the current global economic situation, mature markets, such as the US and Australia, were, and will continue to be, the driving forces behind global sales growth.

Consumers in these mature markets began to be less interested in beer, and so they began to seek out sweet or beer-like alternatives. Simultaneously, manufacturers were seeking diversity in their product portfolios beyond the bitter performance of beer. The main products attracting attention became cider/perry and RTDs and high-strength premixes, and more recently mixed beers, mostly deriving their popularity from current European fads for radlers.

Cider’s Voyage to New World Markets

According to Euromonitor International, global volume sales of cider/perry reached over two billion litres, up by 8% on the previous year, in 2013. Growth in that year was primarily driven by the double-digit volume growth rates witnessed in key markets such as South Africa, the US and Australia, the second, third and fifth biggest global markets respectively. Collectively, in 2013, they saw volume sales of around 500 million litres accumulatively, representing approximately 24% of the global market.

Global Cider Leaders Graph 1.jpg

Source: Euromonitor International

The US saw the most significant volume CAGR growth over the last 5 years, and the initial demand drive for cider/perry was primarily due to consumers opting for products that are perceived as different to beer. However, AB In-Bev, amongst other companies, packaged and positioned its cider brand, Michelob Ultra Light Cider, as a beer alternative by positioning it with a pseudo-craft drink look. As a result, the company placed its cider brand on a premium platform, primarily driven by a spill over effect from the craft beer movement. Craft beer has shown significant resilience in recent years, attracting value growth via premium prices in a relatively weak performing global beer market. As can be seen with brands such as Angry Orchard in the US, it has derived much of its growth from the basis of its microbrewery-style craft production, which is a selling point for these products. Major beer manufacturers found an appealing marketing strategy in this movement to revive sales of their ranges of beers, and, as a result, this strategy has crossed over into the cider/perry market. The premium craft-like image has become a more prominent marketing tool in the cider/perry industry, shedding its image as a drink for low income-consumers or women only, thus attracting a wider market and increased sales. However, in the case of Australia, cider has become a substitute product, the ideal alternative to highly-taxed spirit-based RTDs.

There has also been a phenomena arising from the cider/perry market that has been crossing over into other alcoholic drinks categories: the halo-effect of cider on sales of beer and spirits brands. A few examples have been observed in the US, such as MillerCoor’s Redds Apple Ale, a product developed to capitalise on the US’s strong growth in cider/perry demand. Such brands are flavoured and positioned with an apple cider characteristic, and they are even stocked in cider aisles in modern retailers. Redds Apple Ale will likely skew US consumers’ perception of the product away from ale toward cider, and this has been done in order to boost sales of this brand in the short term at least.

Is This Another End to Another Journey?

The question manufacturers want answered is whether this resurgence in market demand for cider is temporary? For the past 10 years, demand has been boosted by marketing innovations mixed in with product innovation, and the global growth rate is beginning to slow down, following a another global boost in cider/perry sales in 2013. However, as a shift in market positioning from over-ice to craft-like cider and ‘Real Cider’ is being seen, along with the expansion of seasonality beyond just being a summer tipple, volume growth rates will maintain a significant level of positive growth over 2014-2017. Cider/perry’s category volume share globally will grow marginally in 2014-2017, remaining at above a 1% volume share in 2017.

Graph 2 Cider.jpg

Source: Euromonitor International

The US market had significant boosts in volume sales due to new entrants in 2011, which has shifted the competitive landscape of this cider/perry market. Now, the market is beginning to see clear segmentation between the purists and mass consumers. ‘Real ciders’ use up a greater deal of apple tonnage compared to apple concentrate-based ciders, and this is why major manufacturers in the US are beginning to use more of the latter. By taking this beer-like approach in the production of higher volumes of cider, consumption habits in the US will become akin to those of Strongbow drinkers in the UK.

In addition, major players, like Carlsberg with the Somersby brand, are introducing cider into beer-intensive countries such as the Czech Republic and Poland where a growing interest in consumption of radlers is indicating a willingness amongst consumers to shift toward beer substitutes. Following these trends, the answer to the question about whether this resurgence in market demand for cider is temporary is actually no, as global cider/perry markets will face a lasting resurgence in the forecast period. Significant positive growth in cider/perry is still being observed and will continue to be expected globally over 2014-2017, with an estimated volume CAGR of 6% during this period.