The Beer Report 2021
Nigel Huddleston takes a bird’s eye view of the category
Beer was one of the big winners in the off-trade surge caused by the closure of pubs and restaurants in 2020. After the first week of the first lockdown, NielsenIQ recorded the value of take-home beer sales at 55% ahead of the corresponding week in 2019, and regular uplifts of 40-50% were seen during the rest of the year.
Cider was another boom off-trade category during the 2020 lockdowns. But while cider has lost a lot of the gains it made last year – its volumes were down 10.7% in the calendar year to August 14, 2021, though NielsenIQ says they’re up by an identical amount on 2019 levels – beer has hung on to its gains better.
Off-trade beer volumes were down just 0.4% in the year to August 2021 and are 26.9% ahead of the year to August 2019. Against this backdrop, it would be easy to reach the conclusion that beer and brewers are enjoying an unprecedented boom, but the impact of the pandemic has left a mark.
The off-trade has proved largely to be the beer industry’s saviour, with on-trade closures taking their toll on total beer volumes, which are 18.2% down on 2019 levels (NielsenIQ and CGA). While beer sales have held up in 2021, the category has lost some market share to wine and spirits – the latter attributed by NielsenIQ largely to the cocktail-making skills honed by home mixologists during lockdown. But beer is still the biggest chunk of the drinks market as a whole, accounting for 56% of all take-home BWS volumes.
NielsenIQ also finds evidence that beer has lost share of space and promotional features in stores since 2019, principally to spirits, and it has seen increased premiumisation of the market, with the average price per litre of beer in the off-trade rising from £2.38 two years ago to £2.48 in the year to September 25.
Matt Woodhouse, drinks marketing manager at Hall & Woodhouse, producer of the Badger family of beers that includes Golden Champion and Fursty Ferret, recognises the premium beer trend and says off-trade craft ales grew sales by 30% in the year to September, driven by cans, with premium bottled ales ahead by 7%.
“The take-home stout market rocketed 52% to £122.9 million in the year to March 21 [Kantar], as 31% more shoppers entered the category,” Woodhouse adds. “We expect this to continue and we were pleased with the response to our first stout, Milk Made, launched earlier this year.”
Jonny Kirkham, head of sales & marketing at Yorkshire brewer Black Sheep, says off-trade sales of its flagship Black Sheep ale rose 35.9% and its Milk Stout by 50% in its financial year that ended in March.
“The pandemic, and the lockdowns in particular, generated a culture of familiarity where shoppers wanted the comfort of brands,” he says. “In times of uncertainty, it is a human trait to seek out what we know and love, which has bolstered our brand in the sector. “Our off-trade sales, particularly to supermarkets, were at the heart of the business during the pandemic.”
TRENDS SHAPING BEER’S FORTUNES
Despite the return to relative normality, the short-term future for beer is riddled with uncertainty, just as it is for the drinks market as a whole. Rising costs, price inflation and logistics issues are as likely as drinking trends to shape the fortunes of brewers in 2022.
Those difficulties aside, Woodhouse predicts a consumer-led move towards beers with “provenance, authenticity and green credentials” in 2022.
“British brewers who show a commitment to making and packaging their beers in a more sustainable way are going to be increasingly important,” he adds. “The environmental measures we’ve put in place, such as powering our brewery with wastewater from the brewing process, will resonate with consumers.”
Kirkham predicts a continued trend towards canned beer and more consumers taking ethical issues into consideration when buying beer. He cites as an example Black Sheep’s Milk Stout’s link with the Human Milk Foundation charity to raise awareness of its work providing human donor milk to sick and premature babies whose mothers are unable to provide their own breast milk, such as those undergoing cancer treatment.
“While brand quality remains key, there is also a growing move to support ethical purchases,” Kirkham says. “This can include how the product is made, but also the ethics and social responsibility of the producer.”
Further down the line, brewers are hoping that the sweeping reform of the alcohol duty regime announced in the autumn Budget will favour beer against generally higher abv categories, such as wine and spirits.
“We were pleased with the changes to alcohol duty announced in the Budget, which are bold and far reaching,” says Rupert Thompson, managing director of Surrey ale brewer Hogs Back. “They will make the duty system simpler and fairer, which is good news for beer.
“Increasing the threshold at which lower duty is paid on beers from 2.8% to 3.4% abv is a real opportunity for innovation and NPD in lower-strength drinks, which is a socially responsible move.
“We launched a 2.8% beer, Little Swine, in 2019, which has performed well as an alternative to a full-strength beer on some occasions such as lunchtime drinking.
“We will certainly be exploring the opportunities that this increase in the duty concession presents.”
Kirkham hopes the other Budget-announced measure of a lower duty rate for draught beer won’t negatively impact take-home beer sales.
“Rather we hope it helps pubs and the levelling up of the industry after Covid,” he says.
“We think the biggest challenge to the off-trade sector, as it is for almost every retail market, is the pressure of inflation.
“Increases in the cost of everything from malt to glass, cans and cardboard will make goods more expensive and pose challenges across the board.
“This is a new reality for our industry, which encourages brewers like ourselves to be as efficient as possible to control costs, while also ensuring that the product we supply is of the highest possible quality to maintain brand loyalty among the public, even if the price point changes.”