Big brewers find ways to profit from the growing culture of drinking less, drinking better

Though smaller than ever, Australia’s beer market has ‘never been more profitable’

By Richard Whitehead

- Last updated on GMT

What beer goes with best with your barbie? The answer may be changing from lager to something else... pic:getty/kolbz
What beer goes with best with your barbie? The answer may be changing from lager to something else... pic:getty/kolbz

Related tags Beer Australia Craft beer NABLAB Alcohol

The iconic image of the larrikin lager drinker cracking open an endless succession of cold ones couldn’t be more wrong, going by long-standing trends in the Australian beer industry, which is seeing consumption slump to a four-decade low.

Instead, as the quantity they consume continues to drop, Australians are increasingly opting for premium beers and brands with lower alcohol levels — to the point that Carlton United Breweries launched the first non-alcohol beer, Carlton Zero,​ in its 180-year history this month.

What we are seeing in the beer market is that non-alcoholic beer has been growing in Australia by about 57% over the past five years, and individuals are looking for the opportunity to moderate, or on occasion to enjoy beer more responsibly​,” Kellie Barnes, CUB’s trade marketing director, told BeverageDaily.

Following consumer research and trends that we have been monitoring, we thought it was an ideal opportunity to be the leader in the category, to actually provide consumers with an option to enjoy beer where alcohol may not be appropriate​.”

CUB figures show that low and mid-strength beers now represent 20% of its sales, as consumers increasingly moderate their alcohol intake. This reflects wider data from the Australian Bureau of Statistics, which revealed that Australians consumed 3.6m fewer litres of all alcohol last year than they did in 2015-16, at 185.8m litres across the nation—the latest in a 40-plus year downward trend.

Yet though beer consumption is now 60% lower than it was at its peak in 1974-75, this decline has translated to opportunity for Australia’s brewery majors.

'The classic beer drinker is thinking more about moderation than before'

The big three have histories dating back more than 150 years in one form or another, which has given them a wealth of experience in perfecting the equation between variety, quality and price. Over the generations they have been forced to roll with adverse trends by using their resources and scale to move into relevant new directions.

The last year has been a case in point, as marketeers discern a strengthening in trends towards lower alcohol, lower carbs and higher quality as these send shockwaves throughout the market.

In addition to the release of Carlton Zero, for instance, CUB has also launched Rusty Yak, an alcoholic ginger beer for the premium craft market, this year. Meanwhile Iron Jack, a new Lion Beer Australia brand, went to market last August as a low-carb mid-strength beer that targets the “classic beer drinker who is thinking more about moderation than he has before​,” according to Lion’s brand director, Jack Mesley. The brewer claims the launch was Australia’s most successful in the last decade, with over 9.8m litres of Iron Jack sold in the first six months.

For its part, family-owned Coopers, Australia’s third-biggest brewery, released its flagship Original Pale Ale in cans in July to tap into growing demand for the format. This month, it also launched Coopers Dry for the low-carb market, which represents 15% of Australian beer consumption.

Craft beer

'The beer sector has never been more profitable as consumers are attracted to premium products'

Brett Heffernan, Brewers Association of Australia

The beer sector has never been more profitable as consumers are attracted to premium products​,” Brett Heffernan, chief executive of the Brewers Association of Australia, which represents Australia's leading beer makers, told BeverageDaily. He added that these brewers still dominate a market with many new craft entrants.

The major breweries represent some 90% of all beer sales in Australia, but, interestingly, they also account for around 65% of the so-called craft beer market. So while much is made of the rise of craft or independent beers, the numbers show that the 450 or so small breweries make-up about 3.5% of total sales​,” said Heffernan.

With annual growth predicted at 5.3% from 2017-2025, when it will be worth around A$340m ($242m), according to Goldstein Research, the craft market is vibrant, despite its minuscule share of the market.

And there is still room for new entrants and brews, even though independent craft brewers have been on the rise for about a decade, says Ewan Brewerton, chief brewer and director of craft brewery Mismatch Brewing Co. in Adelaide.

The market has aggressively grown, but it still hasn’t reached its peak, which is quite interesting because you’d think it was almost at saturation point​,” he told BeverageDaily.

People are drinking less but they are drinking better. You will still find the traditional drinkers and young people who are consuming mainstream beers, but they are in a declining trend at the moment, whereas craft beer is growing year on year​.”

Mismatch drew raised eyebrows in June when it was named Australian’s favourite beer at the Australian Independent Brewers Association Awards with a lager—not the first variety that comes to mind among the hoppy and widely esoteric brews available. This might also indicate that more mainstream tastes are gravitating towards craft beer as mass beer sales decline.

I’m not sure what has happened in society, but I think craft beer in the beginning can be intimidating for many people, but more are becoming educated—education leads to more experimentation​,” he said.

It’s always evolving, and it’s somewhat changing now. The level of quality is going up so people are expecting more, they are expecting a more consistent product, rather than products being all over the place​.”

Quality is king

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The demand for quality beer among Australia’s discerning market is central to why the mass breweries have maintained their hegemony for so long, according to their representative, Heffernan.

Quality is very important. Many smaller breweries are to be applauded for their dynamic approaches, but often the quality between brews is noticeably variable​,” he said.

Their production runs are small and price is a huge problem—not everyone wants to pay A$12-15 for a beer at the pub. So until the smaller producers can achieve the volume to meet demand, can get quality under control and can rein in price, they will struggle to be taken seriously more broadly​.”

At the mainstream end of the market, brewers see a bright future for niche beers that target the mass market.

CUB has high hopes for Carlton Zero, and intends to build a category around its first non-alcoholic beer, with possibly some craft varieties to follow, through a low-fermentability brewing brewing process developed by the brewing company’s parent, ABI InBev.

We have been able to leverage and lean in on their technical expertise to brew our beer—which is a beer and tastes like a beer, but has no alcohol in it​,” said Barnes.

You have to start at the heart of what beer is, which is a lager, and we really wanted it to appeal to beer lovers. Our intent is to grow the category around this; there will be opportunities in the future to premiumise and also to reach out to new beer and craft segments​.”

The beer industry overall is expecting to see more of the same brand development for some time as brewers further respond to changes in taste. The major brewers will continue to launch new products that are capturing significant market share—though this could be coming at the expense of their traditional offerings, says Heffernan.

It has been noted by experts that Lion’s tremendously successful Iron Jack has been eating into the share of its other brands, including XXXX Gold, which has been declining for years, and Hahn Super Dry and XXXX Summer Bright lager—sales the latter two having performed badly in the months since the launch of the new label.

But still, as consumer tastes evolve and if the major breweries continue reacting to these changes by launching successful products, this cannibalism will be marked less than the success of new brands will be celebrated by each respective group.

Each of CUB, Lion and Coopers have launched major new brews in just the last year and all have been performing their socks off​,” said Heffernan. “While the smaller breweries are seeing new breweries coming online at the rate of almost one a week, their market share has remained largely unchanged​.

So something in that space is likely to give eventually. Basically, the are competing among themselves for 3.5% of the market… so it’s an interesting dynamic​,” he added.

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