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Sector Insight: Ale and stout - Losing out to lager
(Marketing Via Thomson Dialog NewsEdge) Ale and stout's share of the beer market has declined despite innovation into new formats.
THE BACKGROUND
During the World Cup, supermarket chains have been promoting countless deals on major beer brands. But, indicative of the decline in popularity of ale and stout, nearly all the cut-price offers are for lagers. Sales of ale and stout, traditionally the choice of older drinkers, are struggling, so it is vital for brands to attract younger drinkers. New product development, especially by smaller brands, and investment in advertising, alongside raised prices, should help to curb the market's decline.
Ales and stouts are consumed typically by older drinkers, but even an aging population is failing to boost sales. What's more, the sector is still struggling to attract younger consumers, with just 7% of 18-year-olds drinking ale, according to Euromonitor.
Although beer remains the nation's favourite alcoholic drink, its share of the overall market has dropped more than 10% over the past 10 years, and within the beer sector, lager dominates ales and stouts, accounting for 70% of sales, according to Euromonitor.
Volume sales of ales and stouts dropped 21% between 2001 and 2005 to an estimated 1.7bn litres.
Value sales performed slightly better due to raised product prices; they fell by 9% in the same period in a market that is estimated to be worth u5.9bn this year.
AB men aged 45 and above are the biggest consumers of ales and stout, with consumption highest among those living in Yorkshire and Humberside.
Although people are drinking more at home and less in pubs, draught ales and stouts still account for almost three-quarters of total volume sales, while bottled ales and stouts have grown 3% since 2003.
This increase is largely due to the fact that packaged ales enable pubs to stock a wide range of ales to suit different occasions, as they are much easier to distribute and sell.
Although draught stout sales declined 7% between 2001 and 2005, they have been buoyed by investment in advertising, especially by Guinness, which had a media spend of u15.4m last year, more than five times that of its nearest rival in this regard, John Smith's.
The latter belongs in the portfolio of Scottish & Newcastle, which is the biggest drinks company in this sector. Its brands include Newcastle Brown Ale, McEwan's and Beamish. It recently revitalised John Smith's with the introduction of Extra Smooth and Extra Cold draught variants and supported the brand with high-profile TV ads starring comedian Peter Kay.
The number-three brand in the on-trade, after John Smith's and Guinness, is Carlsberg-owned bitter Tetley's. It too is available in a variety of formats, including Smoothflow in widget cans, Extra Cold, Imperial and Dark Mild.
Diageo's Guinness dominates the stout sector as one of the few brands that has successfully marketed itself to younger drinkers.
It has led the way in innovation and was the first to introduce the widget can in the UK in the late-80s when Guinness Draught was launched in the off-trade. In February it introduced Guinness Surger, a unit that uses sound waves to create the creamy head of the draught product in a glass of Guinness from a can.
Outside the big breweries, smaller, regional beers have not been deterred from extending their reach. As well as chasing on-trade sales they have also entered the premium bottled-ale arena to target consumers drinking at home.
Greene King's Old Speckled Hen and Theakston's Old Peculier lead this sector, while Charles Wells' Bombardier and Shepherd Neame's Spitfire and Bishops Finger brands have also improved their performance.
Greene King has experimented with bigger bottle sizes and in 2003 introduced The Beer to Dine For light ale in wine-sized 75cl bottles to encourage consumers to drink it with their meals.
Seasonal ales are popular, and many brewers have toyed with organic beers such as Fuller's Organic Honey Dew, although fewer of these products are launching as the price premium associated with organic hops is not easily transferred to the consumer.
To tempt lager drinkers, brewers are experimenting with lighter ales, and brands such as InBev's Leffe continental beer are proving popular.
Targeting youth
The older demographic of ale and stout drinkers should ensure this market benefits from the aging population. However, the next generation of 45-plus men have grown up with lager, and there is no guarantee they will switch their drinking habits as they age, so it will be vital for brewers to attract younger drinkers.
Mintel forecasts a continued decline in ales and stout, with the market dipping by about a fifth in volume terms in the five years to 2011.
The value market will hold up better due to price increases, and in 2011 it is predicted to be worth u6.1bn; however, in real terms, this equates to a 9% fall over the period.
ALE AND STOUT BRANDS BY MEDIA SPEND
Brand 2005 2003 03-05
u000 u000 % chang
1 Guinness 15,418 11,504 34.0
2 John Smith's 3063 4668 -34.4
3 Boddington's 2300 2699 -14.8
4 Bombardier 2083 300 593.8
5 Tetley's 1842 1258 46.4
6 Greene King IPA 1799 1501 19.9
7 Newcastle Brown Ale 989 n/a n/a
8 Abbot Ale 828 618 34.0
9 Leffe 790 n/a n/a
10 Old Speckled Hen 428 545 -21.3
Others 5219 5334 -2.2
Total 34,759 28,426 22.3
Source: Nielsen Media Research/Mintel
ALE AND STOUT BRANDS BY ON-TRADE DRAUGHT VALUE AND VOLUME SALES,
2005
Brand Brewer um m litres
1 Guinness Guinness 828 187
2 John Smith's Scottish & Newcastle 675 190
3 Tetley's Carlsberg 372 100
4 Worthington Coors 365 94
5 Boddingtons InBev UK 175 48
6 Caffrey's Coors 173 43
7 Greene King IPA Greene King 1148 33
8 Stones Coors 106 29
9 McEwan's Scottish & Newcastle 96 26
10 Bank's Bitter W&DB 86 22
Others n/a 1808 464
Total n/a 4797 1235
Source: Mintel
BOTTLED ALE BRANDS BY OFF-TRADE VALUE AND VOLUME SALES, 2005
Brand Brewer um m litres
1 Old Speckled Hen Green King 25
7
2 Old Peculier Theakston's 23
7
3 Newcastle Brown Ale Scottish & Newcastle 18
6
4 Spitfire Shepherd Neame 16
5
5 Marston's Pedigree W&DB 15
4
6 London Pride Fuller's 15
4
7 Hobgoblin Wychwood 14
5
8 Black Sheep Ale The Black Sheep Brewery 13
4
9 Bombardier Charles Wells 12
5
10 Bishop's Finger Shepherd Neame 12
4
Others n/a 375 122
Total n/a 538 173
Source: MintelANALYST COMMENT - KEVIN BAKER ALCOHOL DRINKS DIRECTOR, CANADEAN
Lager continues to grow at the expense of ales and stouts, but although ales are in long-term decline, with volumes falling by about 5% annually, premium ales are performing better than mainstream ones.
Traditionally the preserve of local brands, the ale sector now comprises a handful of national brands and a number of increasingly successful regional brands.
With the exception of Scottish & Newcastle, the main players have tended to focus on their lager portfolios, resulting in a slump in sales of their ale brands.
S&N's support for John Smith's has maintained volume sales in a declining overall market. In contrast, Tetley's (Carlsberg), Worthington (Coors Brewers) and Boddington's (InBev) all experienced a significant decline.
Despite the woes of the sector, a number of regional cask brands have seen strong growth.
Improved distribution, both through pub chains and in supermarkets keen to stock regional ales as a way of boosting their 'local' credentials, has witnessed brands such as Adnam's Broadside, Fuller's London Pride, Greene King's IPA and Old Speckled Hen all register significant, and in some cases, double-digit, growth.
For a sector steeped in tradition, there has been a relatively high level of innovation, with many regional brewers producing speciality beers and seasonal ales.
Stout has proved more resilient in the face of lager's advance. Guinness' creation of a contemporary image for the brand, which accounts for over 92% of all stout volumes, has helped it hold its ground, even as other stout brands such as Beamish and Murphy's fade fast.
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