butterfly's 2016 global beer trends series: developed markets

2016GLOBAL BEVERAGETRENDS SERIES

Quarter 1

DEVeloped MarketsBeer & Cider

INTRODUCTIONAs a leading international brand and innovation company

with expertise across FMCG, this year Butterfly London reportson global beverage trends.

2015 was a year of immense activity within the sector and in 2016 we expect to see the pace continue and the

category evolve even more to address new consumer needs, occasions and consumer types.

This first edition focuses on the developed markets. The USA continues to be the dominant force for change in the category.

However, the UK and other Western European countries are also driving trends, just as much as reacting to them.

For each area we consider what are the key drivers of change in 2016, how the market is responding and what this means

for companies moving forwards.

To receive your full report free of charge, please email [email protected]

WE ARE BUTTERFLY LONDON

We are a brand and innovation company; What makes us different is our skill in finding emotional insights that we use in brand positioning, innovation and brand communication. Our expertise is in the beverages sector in both developed and emerging markets. We keep our feet on the street, attending drinks

festivals around the world and gather every Friday afternoon at our Butterfly Beer Club to sample new brews and discuss the category. That’s how much we love our drinks.

Brand positioning . Brand creation . Product Innovation

Ideation workshops . Naming . Concept and comms optimisation

Pack , Retail & comms concept design

Max Norman

ConsultantRyan Dethy

DesignerBrian Hackett

Associate DirectorMegan Powell

Associate ConsultantHannah Loake

Associate Consultant

SOME OF OUR WORK IN THE

DRINKS SECTOR

White spirit flavour innovation - USA

Special edition beverage naming - Global

Soft drink innovation - Egypt, Saudi Arabia, Mexico

Beer brand creation - Russia

Beer sub-brand innovation - Poland

On-trade and product innovation for Champagne and Cognac - Global

Soft drink repositioning - UK

Tea Water brand creation - Thailand

Coffee brand naming and logo design - South East Asia

Water brand portfolio strategy - Europe

2016 GLOBAL TRENDS & DRIVERS

Saturation is complete in the beer market. Brands should prioritise standing out on-shelf and on-trade.

The Malt and hop supply shortage will continue to effect what beer brewers can make and will lead to new trends.

Cans will continue to replace bottles as the format of choice due to the practical & monetary benefits and trendy image.

‘'Malternatives'‘ will boom as companies target –sweet tooth– millennials, women, new occasions and compete with spirits and soft drinks.

No-Low alcohol and gluten-free beverages will grow to meet demand from the health aware and free-from consumers.

Acquisitions of independent smaller beer companies by corporates will put pressure on craft breweries and influence consumer choice.

Stand-out, simple and contemporary design that clearly links to the product will curry favour from consumers.

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USA: KEY DRIVERS OF CHANGE

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A rise in demand for hops and malt: The industry is facing an ingredient shortage with supply not keeping up. This pressure will cause

craft brewers to experiment through necessity, leading to new, niche trends.

Flavoured ‘Malternatives‘ are increasing in popularity: Major brewers will regain share from other alcohol categories and attract

millennials and women with new, sweeter and exciting flavours with fruit and spirit-driven propositions.

Saturation point has been reached: There–'s no more space on shelves, something that should take the pressure off large beer companies

and allow them to build on their existing portfolios. Design is key to standing out.

The acquisitions debate: Are smaller independents selling their soul and values if they accede to tempting offers? Will consumers follow

the brand to its new home or will they defect to smaller brands who have stayed true to their roots?

STATS • QUOTES • FACTS

The USA consumes

per year of beer, or about 20 gallons per person per year. That–s 160 pints per person, or an equivalent of over 1 full bathtub for everyone in the USA.

205.8 million barrelsBetween 35-54 years old,

a woman–'s interest in trying or drinking sweet flavoured beer remains strong. Men–'s, by contrast, plummets.

IPAScurrently account for around

of the USA craft beer market, or seven million barrels of beer.27%

of craft drinkers said they would purchase more craft if there were –'more variety–'.33%

GIVE ME THAT USA NEWS

San Diego based Stone Brewing company is taking the audacious step of opening a brewery in Germany, bringing independent Californian-style brewing to Europe to take on what they see as the under-developed German and European beer market. It opens in April 2016.

The latest trend in the US is for hyper local beers, with brewers foraging the locale for unique ingredients and adding them to the fermentation process. A prime example being a Colorado Chokecherry double IPA!

GIVE ME THAT USA NEWS

No Label Brewing Co.’s Forbidden Lavender Ale is brewed with honey malt and lavender flowers. According to the brewer, the idea is to combine traditional brewing methods with not-so-traditional flavours. It’s unfiltered and unpasteurised and lends itself to being smooth, crisp and flowery.

S’Quiela is a Premium Malt Beverage created by four women who wanted to make a drink that women would want. It is made from fresh grapefruit, a touch of agave and the highest quality of malt. Described as the perfect blend of sweet and tart, the beverage features 5.9% ABV.

Watch the S–Quiela story here

https://www.youtube.com/watch?v=CMI3HbLldUE

WHAT YOU NEED TO KNOW ABOUT NITRO BEER

Driven by the millennial generation, consumers’ tastes are moving away from affordable domestic lagers to premium craft varieties. Many breweries are tapping into this ‘nitro’ trend to create stand-out appeal.

The Left Hand brewing company has been a pioneer of nitro beer in the US. They have been one of the first to manage to crack the difficult task of producing bottled nitro beer, the majority of which generally comes on tap. Sharp-eyed drinkers will notice that most, though not all, beers served on nitro tend to be more malt heavy than hop forward. Thus, more porters and stouts over India pale ales are typically found on nitro. Innovation in 2016 should therefore use nitrogen with different beer styles.

In cans, Guinness and Sam Adams are also leading the way with their Nitro IPA and Nitro White Ale.

Lighter carbonation

Smooth effect

Thicker, luxurious mouth feel

Thick, creamy head

Less aroma

AT LAST, CIDER IS GETTING INTERESTING

Seattle Cider Co.’s Three Pepper Hard Cider is brewed in small batches with Washington-grown apples and jalapeño peppers for a sweet kick.

Pennsylvania based cider maker Jack’s has added classic American craft brewing hops through the fermentation process of its dry cider to add citrus and herbal aromas and flavours.

USA CONTENT COVERED IN OUR

FULL REPORT The Rise Of The Nespresso-Style Beer Machine

How The USA Is Getting Fruity With Beer

IPA Is Still King Of The World And Here–s What'–s Next

The Amazing Future Of Home Beer Delivery

How The Ingredient Shortage Will Impact Beer

A Look At The Weird And Wonderful

–Saturation Complete– – Why It–'s Good News For Beer Companies


CLICK HERE TO RETURN TO MAP

UK: KEY DRIVERS OF CHANGE

Craft is going truly mainstream: There–s an opportunity to market craft-style beers to women and younger

consumers should as they are becoming interested in the taste profiles of beer.

Craft is spreading from cities to regions: This is being driven by rising standards of taste and also by new,

cheaper distribution services.

Increasing health awareness: Eating healthily is no longer boring; it is fashionable. Demand for gluten-free and

low-no alcohol beverages with new propositions will increase.

Time to get milllennial: Companies should continue to create drinks with new and interesting flavours, designs

and immersive experiences.

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'––More women are also now starting to show an interest in beer too. Women prefer more hoppy beer –with less volume and more flavour.–'

New alcohol consumption guidelines advise both men and women to drink no more than 14 units per week - That'–s about 8 x 330ml cans of 5% beer.

'–The gluten-free sector is small, but rapidly growing.'–

–'We expect to see pubs and bars of all sizes and styles offering a more diverse range of drinks. We will see less dependency on hops with more breweries

brewing fruit.–'Rob Jenkins, Managing Director

at Portobello Brewing Co. Chris Imlach, Eebria

Andy Hepworth, managing director at Hepworth & Co. Brewers

GIVE ME THAT UK NEWS

TOAST BEER: Hackney Brewery has been hijacked by the charity Feedback to address the UK food waste issue by creating Toast Ale, a new beer crafted from unsold slices of bread - 24 million slides of bread are thrown away in the UK each day. All profits are going to the food waste charity which aims to halve food wastage by 2030.

EMOTION BEER: To celebrate the new year, IBM teamed up with UK independent microbrewery High Peak Brew Co. to produce a beer based entirely on human emotions. IBM used sophisticated data science to identify the most meaningful emotions from the English language: joy and optimism. They then analysed 2,800 different beer recipes and their ingredients, tasting notes and reviews to find beers that matched these emotions; all the beer recipes were combined to find the three most recurring ingredients to create a data-driven new year celebration beer.


UK FLOODING: Heineken’s Tadcaster brewery – think John Smith’s ale - pledged £50,000 to support the local community in response to the recent floods that have hit thousands of home owners and business in the UK. Meanwhile, the founders of the Bachory Beer Festival donated a large percentage of their ticket sales to victims and flood support network after seeing the impact of the deluge.

ONLINE CRAFT DELIVERY: We expect to see online craft beer delivery services thrive in 2016. Honest Brew matches beers to your flavour preferences and sends you 12 new beers each month. Customers can cancel their subscriptions any time they want.


NEW CURRY BEER: If you go to a curryhouse in the UK you’ll know the beer menu is pretty limited. But now there’s a little more diversity thanks to East End Foods’ ‘Himalayan Monkey’, a new Indian beer brand for the country. At last.

BEER IN STARBUCKS: Starbucks’ latest UK store in London looks more like a wine bar than a coffee shop. That’s because it is. And they also serve beer. The Covent Garden outlet encourages customers to take their time and has waiters who take orders and payments via iPads, taking the rush out of the experience.

R.E.S.P.E.C.T GLUTEN-FREEWe predict 2016 to be the year that gluten-free beer really makes a name for itself in the UK on the back of a wider free-from food boom.

However, just because it’s gluten-free doesn’t mean it will sell. Makers of gluten-free beer should prioritise creating and marketing a genuine, full-tasting beer that tastes just as good, if not better, than regular craft beer. Estrella’s Daura is an example. Beer first, gluten-free second.

Creating an engaging brand that stands for something is also critical, and so is having a contemporary design. Celia lager is one example here.

–'2015 will be the year that gluten-free

grog made the mainstream.–' –

The Telegraph

'–We will certainly be encouraging the gluten-free market as

we are set to launch a whole range of ales, lagers and a porter of

naturally gluten free beers brewed traditionally with barley.

This is a small, but rapidly growing, sector.–'

Andy Hepworth managing director at Hepworth & Co. Brewers

R.E.S.P.E.C.T GLUTEN-FREE

What is coeliac disease?

It is an autoimmune condition where the white blood cells attack the small intestines in response to the presence of gluten, a protein found in wheat, rye and barley. This causes irritation and inflammation of the lining of the small intestine. The result makes digesting food difficult and causes a variety of symptoms from diarrhoea, weight loss, nausea, fatigue and pain.

How many people does it effect?

It’s estimated that 1 in 100 people in the UK suffer from the disease. That’s around 6.4 million people. That’s 85 Old Trafford stadiums at full capacity. However, more and more people who don’t actually suffer from the disease are opting for a gluten-free diet as a lifestyle and health choice, taking the number well above a tenth of the population.

WHAT IS EVENT BEER AND HOW CAN YOU DO IT?

Where limited-run beers are being created, the first port of call for some craft brewers looking to promote them is releasing them on one day to be drunk in a small range of places.

Launches like this gain organic traction at a grass roots beer-enthusiast level and get good coverage over social media too, particularly Instagram.

To launch their special edition Double IPA (DIPA) the Manchester-based Cloudwater Brew Co. came up with #DoubleIPAday. They spread the word of their bespoke launch parties around the UK via Twitter and Instagram and encouraged consumers to share images of them with their own DIPA.

BrewDog celebrated the launch of their ‘fast-living, terminally-hoppy’ India Pale Ale ‘Born To Die’ at The Roundhouse Taproom in Hong Kong in November 2015, with the aim of passing on flavour as quickly as possible to get people to see and taste the difference time makes to IPA.

UK CONTENT COVERED IN OUR

FULL REPORT What Happens When On-Trade Meets Ten Pin Bowling

The Age Of Mass-Market, Low-Alcohol Beer Is Coming

Is Brown British Bitter Dying?

What Is Event Beer And How can you Do It?

The Rise Of The Online Beer Economy

Why So Many Flavoured Beers Fail And How To Get It Right

Cans Are Booming, But Why?

Brewdog Versus Diageo

The Reaction Of Independent Breweries To Acquisitions

Why Craft Is Spreading From Cities To The Regions



W. EUROPE

W.EUROPE: KEY DRIVERS OF CHANGE

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Health-conscious, flexible living: Consumers are opting for non-alcoholic and low ABV beer, or by

drinking beer in smaller quantities.

Increased disposable income: Younger consumers are not brand loyal and will gravitate to unique designs,

flavours and formats whilst still incorporating elements of tradition.

Europe more open to new ingredients and processes: Traditional German –Purity law– brewing methods

are becoming less important to brewers and drinkers due to influence of American and UK craft scene.

New occasions, new tastes: Spirt beers have huge growth potential. Fruit is a huge opportunity. Corporates

are well placed to capitalise on this segment.


Beer is the 3rd most popular drink in Europe after water and tea.Beer Market - Europe Industry Analysis, Size, Share, Growth, Trends and Forecast 2015 - 2021

'–The artisanal brewing going on in Italy is –incredible at present.'–

Butterfly Lo n d o n ,2016

'–The increasing diversity in the European Beer Market

is a key characteristic, it–s never been so colorful.'–

Demetrio Carceller, President of The Brewers of Europe, 2015

'In Spain, non-alcohol beer now represents around 10% of the overall beer consumed. Brewers have invested in the production and quality of these brews.–'

Demetrio Carceller, President of The Brewers of Europe, 2015

GIVE ME THAT WESTERN EUROPE NEWS

Beer in beautiful bottles is going to be massive in 2016. We have already witnessed established brands trying to update their packaging, stripping back to bold minimalism in a bid to increase market penetration with younger cohorts. However, there is huge potential to further this packaging development for beers to truly stand out of from the crowded shelf. Swedish brewer Omnipollo are paving the way. Their bottles don’t even have labels and are distinguished purely by graphic images.

In 2016 we will see a rise in barrel-aged beer, but with a simple twist. A strong trend emerging is high ABV beer infused with liquor. This ageing technique often raises the beer’s ABV percentage, just by spending time in a former liquor barrel.

GIVE ME THAT WESTERN EUROPE NEWS

We predict a steady rise in the number of European-based brewers producing beer in small cans. Small cans are already popping up all over the shop for all sorts of reasons:

1. Cans stand out more on shelf2. Familiar and comfortable format for millennials3. Easier to drink on-the-go4. The volume is not overwhelming for consumers not having sampled the beer before5. More sustainable than glass bottles

Birradamare Italian is artisanal, premium and oozes style. Could we see more brewers adopt a ‘Nespresso’ approach to beer?

THE AMERICAN BEER REVOLUTION HITS GERMANY

The flagship German beer flavours that shaped the taste of beer as we know it today are set to be challenged in 2016, in no other country than Germany herself.

The well–known Reinheitsgebot, 1516 German purity law that restricts the brewers’ ingredients to just water, barley and hops is set to be tested. American brewing compa-ny, Stone Brewing will open the doors of its first Berlin based brewing facility. The craft beer company strongly challenges the status quo with their full flavoured, chocolate and coffee blends, Indian pale ales, through to lemon drop, citrusy beers.

This recent brewery takeover and others like it represent a clear cultural steer towards more diverse beer flavour profiles in 2016 and beyond.

Source: http://www.eater.com/drinks/2016/2/3/10904398/america-germany-craft-beer-traditions

UNUSUAL FLAVOURS FROM POLAND Warsaw Beer Festival is showcasing the weird and wonderful imagination

of Polish flavours and packaging–

How about some Bernardyskie Ciemne beer, enriched with oak-smoked wheat and

barley? It even re-ferments in the bottle.

Browar Brodacz’s American Pale Ale by Browar Brodacz is brewed with addition of

schizandra Chinese and lemon grass.

You’ll find green tea sencha and sandalwood in the Holy Mountain IPA

by Raduga Brewery.

This New Zealand aromatic pink pale ale by Browar Trójmiejski Lubrow is coloured

by beetroot.

WESTERN EUROPE CONTENT COVERED IN

OUR FULL REPORT How European brewers are winning with millennials

Why European consumers are choosing cans

Fruity beer innovations can capture millennials– –sweet

tooth– attention

Low-no alcohol: when less means more

How creating experiences can help communicate quality

Scandinavian beer is set to pack a unique ABV punch

How beer is conquering Europe's wine territories

The creative world of Polish packaging

Beyond Peroni: The rise of artisanal Italian beer



BEVERAGE TRENDS FROM EMERGING MARKETS

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butterfly's 2016 global beer trends series: developed markets

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