Cheap and Cheerful? Opportunities in Low-Cost Beer

Strategy Briefing

About This Report

Feb 2018

Premiumisation is one of the most fundamental trends in the brewing industry. Nevertheless, low-cost beers still have a role to play. Opportunities can be found in both emerging and developed markets, often centred on affordability in the former and linked to the health of the economy in the latter. Although generally limited in terms of duration or geography, the potential for generating growth in challenging situations means these opportunities should not be underestimated.

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Cheap and Cheerful? Opportunities in Low-Cost Beer

Premiumisation trends continue to dominate

Premiumisation is well-established as one of the most fundamental and enduring trends affecting the brewing industry; both globally and also within the vast majority of individual markets. As a result, it is value, rather than volume, which is providing the positive growth.

Affordability remains crucial in beer purchasing decisions in some emerging markets, particularly across much of Sub-Saharan Africa. Despite the lower margins available, strong growth prospects in many countries underline the category’s potential.

Dark beer, diversification and declining volumes

Dark beer saw reasonable growth in 2016, but its review period performance peaked in 2014, driven by the rise of craft dark beer in the US. In the early stages, craft product releases were primarily focused on dark beer, particularly IPAs. This is no longer the case, and the search for variety in core markets is benefiting a wider range of categories.

Middle East and Africa leads the way in economy expectations

Beyond generally higher growth forecasts, there are other obvious reasons why brewers tend to favour a premiumisation strategy; primarily the better margins available. Success at the economy end of the beer scale involves selling much higher volumes.

Can economic troubles provide a boost for economy lager?

In developed markets, lower priced beers tend to witness a rise during times of economic trouble or crisis. There are also, of course, huge variations between countries and patterns of financial downturn. Various different factors will contribute to such a trend, and it is worth noting that economy lager tends to hold a limited share of beer in many developed markets.

Ongoing resilience expected in economy lager

As economic growth tends to follow a cyclical pattern, there is a strong possibility of seeing a repetition of the historic trends witnessed in economy lager in developed markets.

Opportunities in Low-Cost Beer

Premiumisation trends continue to dominate
Dark beer, diversification and declining volumes
Middle East and Africa leads the way in economy expectations
Nigeria: The importance of affordability
Can economic troubles provide a boost for economy lager?
US: Trading down and switching size
Ongoing resilience expected in economy lager
Growth patterns linked to challenging conditions in Ukraine?
Private label: Key contributor to economy lager in Western Europe
In summary…

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