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Craft and big beer brands striking European balance - industry

By Neil Merrett , 06-May-2009
Last updated the 06-May-2009 at 19:02 GMT

Regionally made craft beer brands are retaining national and even global importance to some of the world’s largest brewers, as the industry raises concerns over possible declines in sales, say brewers' groups.

In the second and final part of a report into the prospects for the craft - or ‘real ale’ segment - BeverageDaily.com looks at the significance of these smaller brands to big business.

Just last month, the US documentary film ‘Beer Wars’ was released in the US suggesting that the country’s own smaller brewing groups are locked in an almost David vs Goliath struggle with their multinational counterparts to survive.

However, from a European basis at least, trade group the Brewers of Europe (BOE) suggests that the relationship between craft and internationally sold brands was part of a delicate balance between the image of niche appeal and market availability.

Across European brewing, overall beer consumption at both pub and retail level is thought to be falling amidst consumer spending fears, though regional and craft brands are to some extent helping to buck the trend, albeit on a niche basis.

Balance

“Customers want these niche [craft beer-style] products,” claims Rodolphe de Looz-Corswarem, BOE secretary general. “So it is important for good relations between craft and multinational brewers, there is no interest to kill off small brands.”

De Looz-Corswarem, claimed that the inclusion and support of craft beers and brewers through a multinational’s portfolio allowed larger companies to benefit from more local associations, while smaller groups could boost their products’ profile.

Pointing to a more direct example, the BOE suggested that brewers also rely on regional and craft beers to ease their own expansion ambitions into emerging or new beer markets.

De Looz-Corswarem says that multinationals buying into new national markets will often retain production of certain ale brands over their own flagship labels to retain consumer interest and loyalty to local beers,

Multinational focus

Scottish & Newcastle (S&N), now owned by the Netherlands-based multinational Heineken, reiterated the importance of the craft segment in the UK market, claiming its significance goes beyond its own operations to the entire wider pub and bar trade,

Looking specifically at the cask-conditioned ale market in the UK, a term

used for beers that are served from barrels with additional gas pressure, Gareth Turner, senior brand manager for S&N’s ales, said there was a major significance for all brewers.

“Whilst the cask ale category remains in decline, it is outperforming the rest of the on-trade beer market,” he states. “A good range of well maintained cask ale signifies "quality" in the consumer's mind and, while regular cask ale drinkers tend to be older men, there is a growing "occasional" following for cask ale among the under 35 age group. Cask ale represents a significant profit opportunity for many licensees in the current tough trading climate.”

In attempts to maintain the tradition of some of these cask brands, S&N said that it had actually opted either to sell or contract out the operations to brewers such as Wells Young's and Theakstons.

Although the maunfacturer stressed that it retained brands such as Magnet Ale and Deuchars IPA in its portfolio of on-trade available beer, the strategy was designed to better ensure the segment’s success.

"We believe that the brands will best prosper under the stewardship of regional cask ale brewers," stated a spokesperson for the company.

Multinational headaches

More recently, major brewers have suggested they are experiencing some difficulties in 2009 linked to sales of branded lager and other alcohol.

Since the turn of the year, SABMiller said that sales volumes of its lager brands were down by a single per cent globally.

The claim reflected similar concerns by groups like Diageo, which suggested back in January that it was ‘re-evaluating’ a €650m investment plan in its production first unveiled in 2008 to test feasibility in the economic downturn.

The company produces Guinness and a number of branded ales and spirits.

The first part of this report can be found here .

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