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Depressed consumers hit beer sales, says S&N

By Chris Mercer , 07-Nov-2006

Poor consumer confidence across Western Europe dented growth at UK brewer Scottish & Newcastle in the third quarter and is likely to continue into next year, worsened by a pub smoking ban in Britain.

Beer market decline was faster than expected in the UK, with volumes down 6.7 per cent for the quarter, indicative of a "more depressed consumer environment", Scottish & Newcastle (S&N) said in a trading statement.

Britons' Western European neighbours were similarly subdued, together managing to undermine the benefits of S&N's innovations, such as zero alcohol beer and SuperChilled technology.

 

The firm still expects to meet profit targets this year, but the announcement is another sign that Western Europe's beer market is facing terminal decline, at least in terms of volume.

 

S&N said UK sales of its four flagship brands, Foster's, Kronenbourg 1664, John Smith's, Strongbow cider, grew by two per cent in the third quarter on average. Group volumes for the quarter rose 0.6 per cent.

 

It predicted dark clouds would continue to hang over the market until at least next year. It also warned that the planned smoking ban in all pubs, clubs and bars would hit beer sales to the on-trade, despite some studies showing the majority of consumers support the move.

 

Industry observers believe the ban, set to come in early next summer, is likely to hasten the current trend towards drinking at home.

 

Around 41 per cent of Britain's beer is now bought through the off-trade, compared to 33 per cent six years ago, according to recent figures from the British Beer and Pub Association.

 

It is a trend that threatens to hurt big brewers' profit margins, and S&N has publicly criticised top UK supermarkets for selling beer and other alcoholic drinks 'below cost'.

 

S&N said this week it would mitigate ongoing cost pressures with savings initiatives, and would continue to push new products in an attempt to revitalise the beer sector.

 

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