Perfect storm for pub beer

Are the disastrous on-trade beer sales in March and April the shape of things to come or merely a short-term blip? John Harrington reports

On the face of it, the past two months have heralded the predicted "perfect storm" for the on-trade beer market. New figures from the British Beer & Pub Association (BBPA) show a 7.6% fall in volumes for March.

More worryingly, the MA understands that April's like-for-likes are expected to be down 15% — a level described as "carnage" by one senior trade figure.

The reasons given are depressingly familiar to MA readers. As Nielsen consultant Graham Page says: "We are seeing the smoking-ban effect, the huge economic turmoil in the markets, the housing marketing

cooling and consumer spending being reined back because of huge increases in food and fuel costs.

"We are almost certainly going to see poorer figures for April and May. April last year was good, with good weather and Easter falling in that month. May was also very good."

The figures reveal another key reason. While the on-trade volumes slid in March, the off-trade saw a 15.4% leap, as money-conscious customers increasingly chose the cheaper option of drinking at home.

Page says: "There's no evidence that the grocers are showing any support for Government concerns about binge drinking and below-cost selling." However, the increase — which compares to a 2% rise over the previous 12 months — is also put down to supermarkets buying huge volumes before the Budget increases take effect.

The current trading climate has impacted on some drinks categories more than others, the BBPA figures for March show.

Standard lager is the only category that outperformed the overall beer market, with volumes down 5.5%. Premium lager fell 8.9%, representing a slight improvement on the 9.4% dip for the previous 12 months.

"It doesn't surprise me that lager is doing better than beer generally," says Page. "Young people will always go out and they are predominantly lager drinkers."

Premium ale and stout had a dreadful month, with volumes down 7.7% and 12.3% respectively. Both categories easily outperformed the market over the past 12 months — during this period, premium-ale volumes dipped 2.7% and stout 3.6%.

Page says customers tend to "trade down" for less expensive, standard abv drinks when times are tough — hence the move away from premium ale. As for stout, a drinks category dominated by Guinness, Page says there is a perception that premium abv drinks offer better value than the black stuff, which has an abv

of 4.1%.

Both Page and CGA Strategy chairman Martin Curren stress that the resurgent cask-ale sector is experiencing far less of a decline; this sector is not recorded as a separate category in the BBPA figures.

And what of the rest of the year? Page points to Ireland and Scotland, where the first shoots of recovery were seen after the first full year of the smoking ban. Curren says Scotland is currently outperforming the UK beer market overall — evidence that markets do recover after the initial post-ban dip.

But Page says comparisons with other countries should be taken with caution. "The economic circumstances that exist here didn't exist in Ireland and Scotland in the year after the smoking ban."

He adds: "Good pubs with good licensees, good staff and a good retail offer will continue to do well, even in a recession. The problem is, there aren't enough of them."

Curren is more optimistic. He says comparisons with 2007 across March and April don't reflect the true picture, simply because of the early Easter and inferior weather this year. Similarly, like-for-likes could look a lot healthier this summer because of last year's wash-out.

"We are probably beyond the end of the trough. It will probably revert to normal levels of decline of 3% to 4%. It won't buck the basic trend, which is of gradual decline in alcohol consumption and a move away from the on-trade to the off-trade."

UK beer sales — on-trade by volume

March/MAT

Total beer -7.6% / -7.4%

Standard lager -5.5% / -7%

Premium lager -8.9% / -9.4%

Total lager -6.5% / -7.7%

Standard ale -9.1% / -8.6%

Premium ale -7.7% / -2.7%

Total ale -8.9% / -7.6%

Stout -12.3% / -3.6%

Total ale & stout -9.6% / -6.8%