The beer innovation imperative

The modern on trade is dealing with the most fickle customer base it has ever seen. Consumer repertoires are getting broader and deeper and extensively cross-category.

Spirits in particular have become increasingly alluring to the beer drinker as innovative new serves and methods of dispense draw their attention. Contemporary drinkers are unquestionably attracted to new things, and the theatre of serve and innovation in dispense within spirits creates interest in the category as well as creating a perception of enhanced reward and added value in exchange for consumers’ hard earned pub spend.

Many retailers have been quick to see the potential in the trend. More managed groups now stock five premium vodkas than stock two premium vodkas: just one in a raft of metrics that speaks to mainstream market engagement for premiumisation as retailers expand and develop profitable spirit sales in a way that enhances their customers’ experience of their venues.

All this activity is heavily impacting the beer heartland of wet led pubs. Recent CGA research found that cocktails – once the preserve of high end style bars – are now in 16% distribution growth in the sector, illustrating both the evolution of consumer demand and the end to a perception that innovation is for city centre bars alone.

Consumers’ now have increasingly high expectations of their on trade experiences: which means all operators, across all areas of the market, must up their game.

Product range​
How has this evolving consumer demand impacted the bar? It’s not just the back bar that’s seen a proliferation in product stocking. In order to provide choice for the modern customer, product range has increased. The average outlet has added five fonts and three brands to the bar in the last few years, not all of them cask, though the category’s current resurgence has certainly played a role.

Notably, the current focus on quality draught cider is now taking share of bar away from beer.

Market shakeout​
Finally, beer performance is being affected by changes in the structure of the market. The commonly quoted CGA pub closures figures of 18 pubs per week are well known. However under these headlines are some more subtle insights.

Not only are the pub closures driven predominantly by local community outlets, but the doors of a growing number of sports and social clubs are also being closed for good.

Consumer socialising behaviour and engagement with the on trade has fundamentally evolved. The traditional wet led model is under threat, with over 1,200 wet led outlets leaving the market in the last 12 months alone.

Critically for beer producers, within these outlets beer has over 70% of the wet alcohol sales mix. Replacing these venues is a new wave of continental-style bar/café outlets where beer has a much lower share of sales, at an average 52%.

With these key factors in mind a clear risk becomes evident: that the on trade universe could easily leave beer behind as it becomes a secondary priority for licensees and customers alike.

But the game is not over yet. Beer can stay relevant, and continue to recruit new consumers to the category. The good news is that it’s already doing it in some key subcategories.

Affordable luxury​
How? World lager is a great example: in 10.8% value growth in the on trade. While going through the recession and with austerity front and centre of the consumer mind, you’d perhaps assume that value categories would be the growth areas – not a product that commands a 30p-50p per pint price premium over its premium lager competition. But this is patently not the case.

While the consumer has had to change their behavior in the home to keep household shopping to budget, we have actually then seen them change the way in which they interact with the on trade in the opposite direction.

People have started to view the on trade as the affordable luxury that can provide a welcome reward after a week of hard work and cutting back. Without doubt this has resulted in people drinking less when in trade but when out, performance of premium products is ample evidence that they will drink what they perceive as “better”.

World lager has been a beneficiary of this, and when supported by high quality glass- and font-ware it provides the consumer with the theatre and quality of delivery they are looking for. As a result the price premium is not a barrier to purchase.

Cask ale has also benefitted from current trends with regional and micro producers in particular seeing volume growth in the market. The beauty of this category is that it offers many things the modern consumer is looking for: quality, provenance, heritage and authenticity.

Consumer research conducted by CGA established that consumers most likely to try new products not only respond to brands that feel like have a limited distribution base or availability, but as a group are the most frequent visitors to the on trade.

Add these facts together, and it’s no surprise that the cask category is winning: it appeals to all these levers in spades.

This same group of innovative consumers is now starting to explore the craft lager/ale category for similar reasons. Limited consumer awareness (only one in four are aware of the category) makes this opinion-forming customer base feel like they have personally ‘discovered’ the category/brands in question and as a result it has become their ‘secret’ to share with their friends.

This is very important for this consumer group, as recommendations from friends are the single most influential factor in their decision to try new products for the first time.

This is a defining period for beer. It needs to fight for share of throat to resist the multiplicity of trends that currently threaten it. The good news? That our brewers and producers are clearly up for the battle. This is a sector brimming with great ideas; with compelling new product development in the pipeline; and most importantly with a passion for the category that must inevitably shine through.

Phil Tate is chief operating officer at CGA Strategy​