Convergence starting to show in beer markets

Related tags Alcoholic beverage

Panic reports of the demise of beer in the US and Germany are a
part of the trend for convergence that will see beer sales decline
in traditional beer drinking countries but continue to grow
globally, writes Kim Hunter Gordon.

It started with the US trade publication Beer Marketer's Insights that estimated that beer's share of alcoholic drinks sold in the US dropped 3 per cent between 1995 and 2003.

Then came the news that people in Germany are drinking more mineral water than they are beer. The Brits are drinking less beer in pubs, the Danish; even the Irish are losing are their tastes. But are these really a reason for beer executives to be looking shocked and worried?

Beer still remains by far the most popular alcoholic beverage in the US, but reaction to yesterday's headline-grabbing estimate did seem to stimulate some concern.

"The single biggest threat is that we will allow the American consumer to get bored with beer,"​ said Miller president Norman Adami. "We believe there is an overall image crisis with beer,"​ said Smith Barney Citicorp analyst Bonnie Herzog, "it has lost its 'sexiness'"​. Anheuser-Busch, America's largest brewer, announced a budget increase on promotions of 150 per cent.

The 3 per cent drop is easily attributable to, and rather modest in light of, the take-off in the US wine trade in recent years. In addition, the spirits industry spent almost $100 million on broadcast advertising in 2004, compared with "almost zero" in 1999, according to the Washington-based, Distilled Spirits Council of the US.

Datamonitor analyst John Band explained that the situation in the US is particularly unique. "Spirits have had a stigma and taboos derived from Prohibition that are beginning to disappear. They are becoming more acceptable and taking market away from beer."

While this may have dented beer sales in the US, there is also, said Band, a global trend of convergence at play.

Sales of beer are dropping in most traditional beer drinking (Northern European) countries as people start to buy other less typical drinks, such as wine. "But, global beer sales are still on the rise. Russia and China are rising fast, as peoples' incomes start to increase. Even European countries such as Italy are seeing growth - countries in which, historically, beer didn't use to be of importance."

In turn, more wine is being sold in Northern European markets. Band expects drinks markets to continue to converge and beer to grow globally through emerging markets.

But, now that beer is on its guard, consumers in the US, Germany and other beer-consuming countries can expect a barrage of advertising from all camps in what could be a hard fought battle - but one that is unlikely to make a dent to the overriding global trend.

Related topics Markets Beer, Wine, Spirits, Cider

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