Flavoured/Mixed Lager Helps to Slow Beer’s Overall Volume Decline

The addition of the flavoured/mixed lager category to the Alcoholic Drinks 2014 edition has highlighted some interesting dynamics in the global beer market. According to Euromonitor International, standard lager in 2013 in developed markets posted a 3% decline in volume sales and is anticipated a stagnant performance over 2014-2018. Global brewers have looked for ways to recover some of their declining volume sales and have approached consumers by wooing them with what the industry has dubbed ‘speers’, ‘spirit-beers’ or near-beer alternatives.
In 2013 in emerging markets, Euromonitor International reported flavoured/mixed lager to be one of the fastest growing beer categories in volume terms, posting growth rates no lower than 5% on a regional level, although sales in many emerging markets are growing from a low base. As a region with emerging economies, Eastern Europe is one of the biggest flavoured/mixed lager markets and is expected to be driven by significant promotional investment from the likes of SABMiller Plc, aiming to help change drinking habits in favour of sweet or low-ABV alternatives. As a result, global brewers will be further aided in offsetting declines in volume sales of standard lager in developed markets.

Stopgap Solution to Decline in Lager

As developed market regions faced declines in 2013 in standard lager, flavoured/mixed lagers were propelled to the fore as a stopgap measure to subdue the stagnation expected over the 2014-2018 period. This category will help to maintain European volume sales over the forecast period, with an almost flat performance anticipated for top-line lager figures. As a result, 2018 lager volume sales in Europe will be close to 2013 levels as the region achieves volume gains in the flavoured/mixed lager category.

Overall, the European market is predicted a 3% CAGR for flavoured/mixed lager over the 2013-2018 period, mostly driven by the UK, Romania and Poland. Together, these markets will account for a 73% share of volume sales growth over that period. Regionally, Eastern Europe will be responsible for 61% of volume sales growth over 2013-2018 thanks to the wider acceptance of radlers and higher ABV spirit-beers among a growing number of jaded beer drinkers, as well as the development of female-centric branding.

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Source: Euromonitor International

Flavoured/mixed lager is expected to grow in significance over the 2014-2018 period as the category outperforms standard lager. Global brewers such as SABMiller Plc are already investing in the expansion of their flavoured/mixed lager ranges in Eastern Europe and Africa, with these accounting for a growing share of their new product development.

Moreover, with a focus on innovation in the beer industry, there are a growing number of near-beer brands, such as A-B InBev’s Bud Light cocktail beer range. The signs are that the growing significance of flavoured/mixed lager is not expected to continue into the long term, as observed by Heineken’s Desperados. Over 2008-2012, sales of Desperados were boosted by significant promotional activity, but in 2013 the brand faced a 4% decline. Looking to the future, the launch of Desperados in the US will boost global volume sales from a low base. Furthermore, the export potential of malt-based beverages like Lime-A-Rita from the US to Europe might boost sales in similar beer-based drinks. This category is likely to grow faster than estimated by Euromonitor International but it is not expected to maintain long-term growth without any significant marketing investment, and without gains from low-base growths from newly entered markets.

Beer Taxonomy in the US Market

A-B InBev’s flavoured/mixed lager volume sales in the US market, according to Euromonitor International, have witnessed a 5-10% decline since 2010. With the launch of the Bud Light cocktail beer range in 2012, the company began to see double-digit growth in its beer-alternative range. However, this does not reflect flavoured/mixed lager’s performance. The brewer had positioned the new Bud Light range as a malt-based RTD, supported by a marketing strategy that targeted consumers beyond the traditional gender and ethnic demographic base of beer drinkers.

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Source: Euromonitor International

Through such product development, A-B InBev has maintained a high global share in near-beer alternatives. The company’s Bud Light flavoured/mixed lager and malt-based RTD range accounted for 80% of its volume sales share in the US in 2013. Furthermore, the brewer is expected to continue to witness volume sales growth in malt-based RTDs over 2014-2018 as it expands its beer/margarita SKUs. However, the malt-based RTD category is expected to slow to be on a par with flavoured/mixed lager as the influence of new launch promotional activity from A-B InBev starts to fade.

All in all, on a global level, the flavoured/mixed lager category is expected to continue to outperform standard lager over 2014-2018. With the growing acceptance of spirit-beers such as Bud Light Lime-A-Rita beyond the US market, there is potential for these types of products to catch on in Europe. Although sales of flavoured/mixed lager and malt-based RTDs remain significantly small when compared to standard lager, they are likely to be the saving grace for brewers with stagnant lager sales in developed markets over the short term

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