The way forward with Craft
Beer is a simple drink with complexity. That statement is so much truer today than it has ever been in the history of the modern beer industry, say CGA’s Ashley Cairns and Mark Newton.
The complexity of beers now available comes from revolutionary thinkers and doers along with those real drivers of beer variety, the younger drinkers who have helped create and shape the demand.
The main category standard bearer for this trend is ‘Craft Beer’ – a style, descriptor and phrase which has now become almost ubiquitous in the UK on trade over the last few years. However, more recently, there have been some early signs of a backlash and fragmentation of the “Craft Beer” movement in the UK. This is evidenced by a concern based on provenance of a craft beer.
The biggest UK story in the world of craft involves popular London-based independent craft brewer Beavertown and Heineken. This is really a non-story for many traditional beer drinkers; the core of the argument should just be around the beer itself and always be to the fore.
- What does it taste like?
- Will customers try it?
- Will they like it (or get to like it – sometimes it may take a while)?
- Will it sell enough to can make a turn and be a good option for the overall business?
It is these aspects upon which the committees, individuals and companies in clubland will look to first when basing their decision to stock a new product. Nevertheless, there are other factors which shape demand and it is undoubtedly worth exploring a few of these in a little more detail.
Talk about the fashion
Although, the more mundane rationales for stock- ing craft beer are probably the most important, it would probably be remiss to ignore some of the other powerful influences which continue to help create demand. One thing craft beer is very good at is garnering column inches.
One only needs to look at the runaway success of companies like Brewdog to understand this phenomenon – and they, possibly more than any other craft brewer, have learnt how to harness the power of the media, whether traditional print, trade or social (via the Internet).
Many younger consumers also appear to particularly appreciate the eye-catching branding used by many craft brewers – especially for their packaged products. Along with the sheer diversity of choice across the market from modern riffs on more traditional styles like IPA to a plethora of weird and wonderful sours and fruit based lactose beers.
Draught versus Packaged
While for many smaller clubs packaged craft beers may be considered a more practical option, it is interesting to note that much of the current continuing growth in the sector is now coming through keg. CGA OPM total GB volumetric data (MAT at June 2018) shows that while total craft beer is up over +8% overall, it is keg (up +24.5%) which is the key driver overall.
However, when we break down craft into ale and lager, packaged craft ales still offer both volume (+1.9%) and value (+3.8%) growth.
Most regions across the country continue to experi- ence positive annual MAT volume growth for the broad craft beer category. However, there does appear to be something of a geographical divide with southern regions (apart from East Anglia) showing significantly greater growth than the North of England and Scotland.
The top performing regions are Southwest England up +26.4% (including Cornwall, Devon, Somerset and Avon – Bristol) and Southern up almost +15% (includ- ing Southampton and Brighton).
In Northern England it’s a slightly different story, with regions like Lancashire and Yorkshire seeing much lower growth at +2.6% and +1.6% respectively, while the North East is actually showing a volume decline of over -9%.
Cost, along with contrasting styles of establish- ment (from a regional perspective) are likely con- tributing factors to this trend.
Trading on up
As suggested in the trends outlined above, price is another important aspect of demand and the world of craft beer spans the breadth of beer pricing. There are more beers in the upper reaches of price but there are enough on the lower range, albeit more likely to be cask beers. The opportunity to create a coherent upward pricing ladder structure and ‘trade up’ potential for drinkers is particularly high in this sector of the category.
Looking at total GB average on trade prices for draught and package craft beer it is obvious that it provides another sensible ‘step up’ on the ladder against equivalent pricing for standard and premium lagers and ales.
Draught craft beer averages out at around £4.11 a pint. This compares with £3.34 for Standard Lager (examples would include Carlsberg and Carling) and £3.76 for Premium Lager (such as Stella and Kronenbourg) – a price differential of between 35p and 77p. Packaged craft beer comes in at £3.92, compared to premium world lagers at £3.56 and pack- aged ales at £3.55 a bottle, giving a similar level of comparative uplift.
So in summary...
Craft beer is one of fastest growing drinks categories in the total GB on trade – and this trend looks set fair to continue for the foreseeable future.
Many of the brewers who have been instrumental in developing the category are among the most dynamic and marketable in the industry and are helping to focus a genuine interest and curiosity across a wide range of drinkers – especially the young (35 and under market).
The opportunity to provide trade-ups and increase potential margins should never be under estimated, whilst bearing in mind that craft (whether draught or packaged) is not for every club outlet. There are very modest chain pubs, however, that offer a wide range of craft beers day in, day out. They do this because it makes sense for them financially and it makes sense for their customers – it can make sense for clubs too.
While growth appears to be particularly focused in the generally more affluent South, this in no way precludes the potential opportunity that stocking craft beer can have for the right type of venue, regardless of geography.
If club customers are venturing into other on-trade outlets where craft is more likely to be avail- able, then it is probably wise to assess whether those members would like something like a craft beer range in their club. It becomes a talking point and, at the end of the day, while some beer drinkers are resolved and absolutely loyal to a brand there are many who like to experiment, to try something new.
CGA, Strawberry Studios, Watson Square Stockport, Greater Manchester SK1 3AZ
T: 0161 476 8335
Source Data: CGA OPMS 2018