global performance and prospects for beer

Global Performance and Prospects for Beer

July 2011

© Euromonitor International

2

Alcoholic Drinks: Beer Overview

Introduction

Global Picture

Category Analysis

Regional Analysis

Channel Analysis

Competitive Environment

Prospects

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held responsible for omissions or errors

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Scope

Introduction

ALCOHOLIC DRINKS 239 bn litres

Wine 27 bn litres

Beer 187 bn litres

Lager Dark beer Stout Low/non-alcohol

beer

Spirits 20 bn litres

RTDs/ high-strength

premixes 3.9 bn litres

Cider/perry 1.8 bn litres





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• The core objective of this report is to examine the current state of the global beer industry, including the post-

recession fallout, recovering and beleaguered markets, and scenarios for growth moving forward.

• In addition to providing a global overview of market performance, the report also analyses:

• performance by product category;

• performance by geographic region;

• the state of the competitive landscape;

• performance by retail distribution channel;

• global prospects and opportunities.

• The data and analysis are specific to beer and the categories of lager, dark beer, stout and low/non-alcoholic beer.

• The global beer market is examined in terms of performance over the period 2010-2015, with a closer look at 2010

specifically, with graphics and analysis identifying key areas of risk and opportunity.

• The report does not claim to be comprehensive, focusing on key industry developments, but rather seeks to offer

high-level insight into key changes in the market at a time of manifest macroeconomic volatility.

Objectives

Introduction




5


Global beer sales

increase

Global beer volume growth picked up again in 2010, after flat sales in 2009. Although

there was a significant improvement on 2009, growth has not yet returned to pre-

recessionary levels, with its peak in 2006.

China gains in

importance

China’s share within global beer volumes increased over the review period, with it

now representing almost a quarter of total volumes sold. Its importance obviously

gives it a significant influence on global beer sales.

Lager dominates Lager is the most important beer type globally, accounting for over 90% of global

beer sales in both volume and value terms. However, low-/non-alcohol beer was the

best performing category globally in 2010.

Domestic beer holds

largest share

Beer operates in a "local global" market, with the majority of beer being consumed

where it is produced. Imports and exports account for only a small proportion of

global beer production, and domestic lager accounts for over 90% of global sales.

Western Europe and Asia-

Pacific the key regions

Asia-Pacific is the major region for beer in volume terms, accounting for more than

30% of total volume sales. However, in value terms, Western Europe leads, with

about a quarter of global spending on beer.

On-trade the more

dynamic channel

In 2010, the on-trade outperformed the off-trade. However, this does not mean that

consumers have started going out again. Excluding China and Russia from the global

figures, the on-trade actually declined, while the off-trade grew.

Beer market is very

concentrated

Beer is very concentrated, with the top 10 brewers representing about 61% of total

beer volumes in 2010, compared to wine where the top 10 wineries only hold a 13%

share. Although brewers are global, most brands are very local.

Emerging markets will

lead the way

Beer sales are expected to increase in all regions except Western Europe over the

forecast period, with emerging markets expected to be the most dynamic, particularly

China, Brazil and India.

Key findings

Introduction




6


Introduction

Global Picture

Category Analysis

Regional Analysis

Channel Analysis


Prospects




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145

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185

190

2005 2006 2007 2008 2009 2010

% t

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lum

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litre

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Beer Total Volume Performance 2005-2010

Beer

Beer value growth

Beer volume growth

• Global beer volume growth picked up again in 2010, after flat sales in 2009, with volumes growing by over 1%. It

appears that recovery is on its way.

• Although 2010’s performance represented a significant improvement on 2009, growth has not returned to pre-

recessionary levels yet.

• Volumes stood at 187 billion litres in 2010, making beer the largest category in the alcoholic drinks industry

representing 78% of volume sales, compared to wine and spirits which represented 11% and 8%, respectively.

• The stagnation in 2009 and still relatively low growth in 2010 was mainly caused by Eastern Europe, North America

and the saturated Western European region, which all saw declines in both years.

Beer sales pick up in 2010 after the slowdown in 2009

Global Picture




8


• China’s share in the global beer market has gradually increased over the past six years, from 19% in 2005 to 24% in

2010.

• As a result of China accounting for almost a quarter of the global beer market in 2010, it has a substantial impact on

the performance of the category globally.

• Western Europe has gradually been losing share within the global market, with its share declining from 18% in 2005

to 15% share in 2010, as beer becomes more and more saturated within the traditional beer consuming markets of

Western Europe.

• Global beer volume growth stood at 1% in 2010; however, excluding China global sales declined, highlighting the

importance of this one market.

-4

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2004/2005 2005/2006 2006/2007 2007/2008 2008/2009 2009/2010

% t

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Global and China Beer Growth 2005-2010

World

China

World excl. China

China impacts global beer volumes

Global Picture




9


Introduction

Global Picture

Category Analysis

Regional Analysis

Channel Analysis


Prospects




10

Alcoholic Drinks: Beer Overview Category Analysis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2006 2007 2008 2009 2010

Bill

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Global Beer Performance by Category

Stout

Low/non-alcohol beer

Lager

Dark beer

• Lager is by far the most important beer

type, accounting for 93% of global beer

sales by volume and 91% by value in 2010.

• Although sales remain small compared to

lager, low-/non-alcohol beer was the best

performing category in beer in terms of both

volume and value growth in 2010, with

volume sales increasing by 6%, compared

to 1% for lager. The category benefits from

the current drive to consume less alcohol,

and stricter drink-driving regulations in

many countries.

• Stout is the smallest category in beer

representing less than 1% of beer volumes

in 2010. Falling consumption of stout in the

key markets of Ireland and the UK has

contributed to overall volume stagnation on

a global level.

• Although dark beer suffers from an old-

fashioned image in many traditional beer

drinking markets, it has seen growth

overall, driven by the popularity of wheat

beer among younger consumers looking for

sweeter and milder tastes, and also craft

beers, many of which are dark beers.

These are becoming increasingly popular in

developed markets, such as the US and the

UK.

Lager dominates the beer category




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• Domestic lager – defined as being brewed in the country in which it is sold – has a significant dominance over

imported lager, accounting for 96% of global lager volumes in 2010. Generally, domestic brands are the best known,

most widely available brands, and tend to be more affordable than imported beer.

• Only in Western Europe and North America does imported lager have a 10% or bigger share. For all other regions its

share is below 5%.

• In most instances where the share of imported lager is higher than average this is not caused by an inability to meet

consumer demand through domestic lager but more about consumer preferences for certain imported brands. Large

markets for imported beer, such as the US, exist thanks to consumer preferences rather than necessity. Instead of

making up for any shortfalls in local production, beer is generally imported to give an upscale cachet lacking from

most domestic brews.

Domestic lager most popular globally

Category Analysis

0% 20% 40% 60% 80% 100%

World

Asia-Pacific

Australasia

Eastern Europe

Latin America

Middle East and Africa

North America

Western Europe

Domestic vs Imported Lager by Region Total Volume in 2010

Domestic lager Imported lager

• Until 2009, domestic lager

was losing share to

imported lager as

consumers were trading

up towards more premium

lagers; however, since the

recession started

consumers have been

trading back to domestic

lager which resulted in

domestic lager gaining

share in 2009 and 2010,

and showing positive

volume growth in 2010,

compared to a 4% volume

decline for imported lager.




12


0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

World

Asia-Pacific

Australasia

Eastern Europe

Latin America


North America

Western Europe

Lager by Price Platform by Region 2010

Premium lager Standard lager Economy lager

• Standard lager is by far the most

popular price platform within lager

representing almost 50% of global

volume sales in 2010.

• The majority share standard lager

holds is replicated when looking at all

other regions, with the exception of

Asia-Pacific, where economy lager

leading the way with a 70% volume

share, largely due to the large beer

consuming markets of China and

Japan.

• Unlike the UK, the US, Germany and

other major importers, where

domestic beer dominates and beer is

imported by choice and tends to be

premium, in countries such as

Bosnia-Herzegovina, Belarus and

Georgia, which have a higher share

of imported versus domestic lager,

the brands that are imported feature

standard and economy products

more prominently in the mix.

Standard lager dominates in all regions except Asia-Pacific

Category Analysis

Note: Premium, standard and economy lager are categorised primarily on price, but also with consideration to

packaging and positioning. Classification is made on a country by country basis. This means that some brands with a

higher abv and therefore a higher price, eg Tennant's Extra in the UK, are classified according to positioning, which in

this case is in the economy segment.




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2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

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Lager Performance by Price Platform 2005-2010

Premium Lager Standard Lager Economy Lager

• While economy lager’s growth witnessed a marginal slowdown in 2010 compared to 2009, it consistently

outperformed both the standard and premium segments.

• Premium lager witnessed a relative resurgence in 2010, while standard lager continued facing significant hurdles.

The trading down of 2009 was thus replaced by a degree of polarisation in 2010.

• Polarisation was particularly evident in the US, where economy and premium lager saw growth in 2010, while

standard lager saw a 5% decline in total volume. Germany saw a similar trend to the US, with polarisation being

apparent in 2010.

Polarisation apparent in lager

Category Analysis




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• While recessionary pressures in mature markets appear to have largely bottomed out, the still subdued consumer

confidence levels, plummeting disposable incomes, the nature of the “jobless recovery” and persistent market

volatility have established thriftiness and bargain-hunting as defining characteristics of the “new consumer” in mature

markets.

• Economising can obviously take many forms beyond merely buying smaller quantities, ranging from purchases of

lower-end private label products to heavily discounted premium variants, and while the former is straightforward, the

latter goes hand-in-hand with the concept of value for money.

• Packaging reformulation is one of the ways that cost savings can be achieved. Larger and smaller sizes can either

reduce the average unit price or render affordable a product previously considered too expensive.

• At the same time, launches of products positioned at lower price points by leading manufacturers can mitigate

migration away from their flagship brands in times of austerity.

Polarisation: Economising in the age of austerity

Category Analysis

Brand name: Desperados

NBO : Heineken Entreprises

SAS

Market: France

Category: Lager

Launched: 2010

Comment: A large 1.2-litre

bottle to share: more

affordable and offering more

content than the standard

3x33cl pack

Brand name: Buck Range

NBO: Supervalu Inc

Market: US

Category: Lager

Launched: 2010

Comment: Taking on

brewing heavyweights, a

cheaper private label

alternative to the likes of

Bud Light and Coors Light




15


• Iran is the largest market globally for non-alcoholic beer.

With Islamic law forbidding the consumption,

manufacturing and trade of alcohol in any form, and anti-

smuggling programmes run by the Iranian government

further limiting parallel trade alternatives, non-alcoholic

beer witnessed very strong growth in Iran between 2005

and 2010, posting a volume CAGR of 40%.

• The recent state-backed initiative to shift consumption

away from carbonates played an integral role in

maintaining this momentum, with the burgeoning non-

alcoholic beer segment registering 46% total volume

growth in 2010, a feat unrivalled by other markets around

the world, making Iran the fastest growing beer market

globally.

• Japan also saw rapid growth in sales of non-alcoholic

beer in 2010, of 22%, to reach 79 million litres, due mainly

to purchases by drivers. With stricter penalties for drink-

driving having been imposed with the revised traffic law in

2002, there has been a stronger incentive not to drink

standard beer.

• However, low-alcohol beer still contains a very small

amount of alcohol, and consumers have not been totally

convinced that it would be legal to drive after drinking

them. The introduction of 0.00% alcohol beer in 2008

provided a greater sense of security, resulting in dramatic

growth. Following the launch of Kirin Free in April 2009, all

the major domestic breweries launched non-alcoholic

beers, boosting sales of non-alcoholic beer in Japan.

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Top 10 Markets for Non-alcoholic Beer 2010

2010 Total Volume 2009/2010 Growth

Non-alcoholic beer popular in the Middle East

Category Analysis




16


• Spain has emerged as the leader in the global rankings

for low-alcohol beer, with per capita consumption of 7

litres in 2010. Stricter drink-driving legislation, increasing

health awareness and a mature beer category in need of

innovation were the main growth drivers of the category

over the review period. However, as the economy

worsened and consumers drank less out of the home,

low-alcohol beer saw its volumes decline.

• In Russia, the second largest market, sales of low-

alcohol beer grew by 1% in 2010, making it the best

performing category. This increase in low-alcohol beer

was driven by two main factors – a ban on drinking

alcohol before driving and no increase in excise taxes,

as there was in lager.

• In the US, MillerCoors’ MGD 64 and Anheuser-Busch

InBev’s Select 55 have started an arms race to offer the

lowest calorie and carbohydrate products available.

These two products are marketed towards health- and

appearance-conscious consumers as “lighter” light

beers, with only 64 and 55 calories, respectively.

Premium imports have also taken notice of this trend,

with Red Stripe releasing a “light” version of its beer, and

both Heineken Premium Light and Corona Light

supported by advertising in 2010. A side effect of lower

calories and carbohydrates is a lower alcohol content in

the beer. As such, low-alcohol beer has surged in the

US, with total volume growth of 16% in 2010 – the

fastest among the top 10 markets by volume.

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Top 10 Markets for Low-alcohol Beer 2010

2010 2009/2010 growth

Stricter drink-driving law aids low-alcohol beer

Category Analysis




17


• While “health credentials” and “alcoholic drinks consumption” are rarely used in the same sentence, healthier or less

harmful alcoholic drinks propositions are increasingly finding favour.

• Such offerings seldom claim to promote health per se, but rather purport to moderate the negative effects of alcohol

consumption. They primarily targeting female consumers.

• Among health claims, low calorie and low carbohydrate content are the primary trends driving such propositions,

while attempts to promote functional attributes are still largely a niche, and products with such attributes account for

negligible volumes.

• Governments and independent health advocacy bodies around the world are putting increasing pressure on

manufacturers to provide lighter alternatives to their flagship brands, and at the same time demonstrate their

corporate responsibility credentials. Additionally, increasingly stringent drink-driving legislation is forcing the hands of

both manufacturers and consumers.

The health issue: Low calorie and low carbohydrate content

Category Analysis

Brand name: Stella

Artois Légère

NBO: Lion Nathan Ltd

Market: New Zealand

Category: Lager

Launched: 2010

Comment: Premium

low-carbohydrate beer

containing only half the

carbohydrates of the

standard variant

Brand name: Sol Cero

NBO: Colebrook SL

Market: Spain

Category: Non-alcoholic

beer

Launched: 2010

Comment: A non-

alcoholic extension of the

Mexican Sol brand,

providing social

responsibility credentials

to the company and a

practical alternative for

drivers

Brand name:

HeyDay

NBO: Khoshgovar

Mashhad Co

Market: Iran

Category: Non-

alcoholic beer

Launched: 2010

Comment: Addition

of mango and

raspberry flavours

to the line




18


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1,400

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Top 10 Markets Dark Beer in 2010

2010 2009-2010 Growth

• Dark beer is a relatively small category within beer, and

represented only 4% of beer volumes in 2010. Although

dark beer suffers from an old-fashioned image, sales

are being driven by the popularity of wheat beer among

younger consumers looking for sweeter and milder

tastes, and also craft beers, many of which are dark

beers.

• In Germany, which is the largest dark beer market

globally, sales of wheat beer were especially strong in

the region of origin, Bavaria, in 2010, but continued to

grow in other German regions as well, as more

Germans enjoyed the milder taste and slightly higher

alcohol content compared to Pilsener. Wheat beer has

been especially successful among younger people,

which has made it a focus of innovation and new

product development across Germany.

• The US is the most dynamic dark beer market in the

top 10 by volume, posting double digit growth in 2010,

driven by amber ale and wheat beer. Wheat beers are

preferred to standard American lager by many non-beer

drinkers, due to their lower levels of bitterness and a

hint of sweetness. The category had been thought to be

at the tail end of the meteoric rise seen since 2002, but

experienced a surge in the latter part of the review

period due largely to the entrance of Bud Light Golden

Wheat on the market.

Sweeter and milder tastes benefit dark beers

Category Analysis




19


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Top 10 Markets Stout 2010

2010 2009-2010 growth

• Nigeria overtook the UK and Ireland as

the top market for stout sales by volume

as far back as 2006 and 2004,

respectively, and by 2010, sales in the

country had reached 355 million litres.

• Marketing campaigns that successfully

used the platforms of football and music

to reach out to the massive consumer

pool of the Nigerian market were the

driving force behind the category's strong

gains over the review period.

• As in the UK and Ireland, Guinness

dominates the category in Nigeria,

accounting for 55% of sales in 2010.

• Italy is the most dynamic Western

European country among the top 10 in

2010, with stout enjoying 2% volume

growth. Italians are becoming more

interested in new types of beer, such as

dark beers and stout. This trend is being

fed by supermarkets, hypermarkets and

pubs, which are enhancing their portfolios

and increasing the space dedicated to

“special” beers. An increase in the

number of companies focused on special

beer imports, for example Eurosaga, has

contributed further to this.

Stout a Nigerian Staple

Category Analysis




20


Introduction

Global Picture

Category Analysis

Regional Analysis

Channel Analysis


Prospects




21


• Asia-Pacific and Western Europe are the

key regions for beer by both volume and

value.

• While Asia-Pacific is the major region in

volume terms (accounting for 34% of

global sales), value sales in the region

account for only 25% of global sales,

indicating the relatively low unit price of

beer in the region (economy lager makes

up the bulk of volumes, at 70% in 2010).

• Conversely, Western Europe accounts

for 15% of global volumes but 26% of

values, indicating the extent of

premiumisation in the region over the

review period. (Standard and premium

lager constituted 74% of volumes in

2010, and the region has a relatively high

share of other types of beer besides

lager compared to other regions.)

• Despite the large size of the Asia-Pacific

market, it offers potential for future

growth. As well as being the most

dynamic region in volume terms (average

annual growth of 7% between 2005 and

2010), per capita, consumption of beer,

at 17 litres, is well below the global

average (27 litres in 2010).

Asia-Pacific and Western Europe dominate

Regional Analysis

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2010

Bill

ion

litre

s

Beer Total Volume by Region 2005 and 2010

Western Europe

North America

Middle East andAfrica

Latin America

Eastern Europe

Australasia

Asia-Pacific




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Regional Performance Beer 2005-2010

2005-2010 2009/2010

• Generally, the emerging markets are more dynamic

than developed markets, with all emerging regions bar

Eastern Europe growing in 2010.

• MEA, Latin America and Asia-Pacific outperformed the

global market in both volume and value terms in 2010,

while Western Europe and North America

underperformed in terms of both volume and value

growth.

• Eastern Europe suffered in 2010, as a result of the

economic slowdown, with Russia, in particular, showing

strong high single digit declines in 2010. The main

reason for the decline in Russia was the

implementation of a 200% excise tax increase in 2010,

which significantly increased unit prices, hampering

beer sales in the country.

• Western Europe and North America saw sales decline

in 2010.

• In North America, the recession was mainly to blame,

with sales starting to decline in 2009 but expected to

grow again in 2011.

• Western Europe, on the other hand, has seen beer

sales stagnate for several years, with the recession

accelerating the slowdown. There will be continued

decline in saturated major markets such as Germany

and the UK. Not only are sales being eroded by ageing

populations, the economic slowdown means that beer

continues to suffer from falling patronage in the on-

trade, as well as drinkers shifting to cider, wine and soft

drinks.

Emerging markets are most dynamic, as mature stall

Regional Analysis




23


• The 10 largest markets determine global beer

fortunes, and in 2010 accounted for 67% of global

sales by volume and 63% by value.

• The volume share of the leading 10 markets has

remained relatively static over the past five years;

however, Poland entered the top 10 rankings whilst

Spain moved out.

• China alone accounts for 24% of volume, making it a

bigger market than any single region except Asia-

Pacific. However, China has the lowest per capita

consumption of the 10 largest beer markets, of 34

litres, indicating a lesser degree of saturation and

potential for future volume growth. The Chinese

market saw strong growth between 2005 and 2010, as

rising disposable incomes and price competition made

beer more affordable. Additionally, health concerns

have boosted the migration from traditional spirits to

drinks with a lower alcohol content, and contributed

significantly to robust growth in total volume sales of

beer.

• In contrast, volume sales declined in the mature

markets of Germany and the UK between 2005 and

2010. In Germany, ageing populations have translated

into a decline in the core drinking demographic (20-39

year-olds) while in the UK, beer is becoming less

popular, partly on the back of increased food offerings

in pubs, which has led some consumers to prefer wine

and some to move to cider/perry.

Top 10 markets determine global beer market

Regional Analysis

24%

13%

7% 5% 5%

4% 3% 2%

2% 2%

33%

Top 10 Markets by Volume 2010

China

USA

Brazil

Russia

Germany

Japan

Mexico

United Kingdom

South Africa

Poland

Others

15%

10%

8%

6%

6% 5%

4% 3% 3%

3%

37%

Top 10 Markets by Value 2010

USA

Japan

China

Germany

Brazil

United Kingdom

Russia

Spain

Mexico

Canada

Others




24


Introduction

Global Picture

Category Analysis

Regional Analysis

Channel Analysis


Prospects




25


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Bill

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Global On-vs Off-trade Performance Beer 2005-2010

Off-trade volumes

On-trade volumes

Off-trade growth - Global

On-trade growth - Global

Off-trade growth - excl. China and Russia

On-trade growth - excl. China and Russia

• Both on-trade and off-trade alcoholic

drinks volume sales saw a bounce back

in 2010 after a slowdown in growth in

2009.

• The off-trade marginally outperformed

the on-trade over the review period, with

both channels taking a hit in 2009, when

the recession was at its peak.

• It is notable that in 2010, on-trade sales

grew faster than off-trade sales with this

trend expected to continue over the

forecast period.

• However, this does not mean that

consumers have started going out

again. If China and Russia were

excluded from the global figures, the off-

trade would see growth while the on-

trade would decline. This highlights the

importance of these two emerging

markets.

• The importance of Russia and China is

driven by the on-trade’s relative

advantage in absorbing the 200% tax

hike for beer in Russia and the rising

middle-class increasingly going out in

China. Nevertheless, these two markets

are the exception rather than the rule,

as the on-trade continues to suffer.

On-trade outperforms off-trade in 2010

Channel Analysis




26


On-vs Off-trade performance by country in 2010

Channel Analysis

Note: The map denotes better performing channel (off-trade or on-trade) in 2010

Off-trade

On-trade

Key:




27


-5 0 5 10

Internet retailing

Discounters

Supermarkets/hypermarkets

Independent smallgrocers

Convenience stores

Small groceryretailers

Food/drink/tobaccospecialists

Forecourt retailers

Other groceryretailers

Beer – Distribution Breakdown 2005-2010

% Off-trade volume CAGR 2005-2010

• Supermarkets/hypermarkets

and independent small

grocers remain the most

important off-trade channels

for beer, with 33% and 29%

shares of off-trade sales,

respectively, in 2010.

• Within store-based retailing,

discounters saw the highest

growth between 2005 and

2010.

• Discounters benefited from

consumers looking for value

for money, with their

economy proposition appeals

to cash-strapped consumers.

• Internet retailing was by far

the most dynamic channel

overall, having enjoyed near

double-digit annual average

growth over the review

period, benefiting, like

discounters, from consumers’

quest for value. Consumers

are looking for bargains and

bulk purchases, to which this

channel lends itself well.

Internet retailing the most dynamic channel

Channel Analysis

0

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Global Beer Distribution by Channel

Non-store retailing

Other grocery retailers

Food/drink/tobacco specialists

Small grocery retailers

Discounters

Supermarkets/hypermarkets




28


Introduction

Global Picture

Category Analysis

Regional Analysis

Channel Analysis


Prospects




29


0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Bill

ion

litre

s

Top 10 Brewers 2009-2010

2009

2010

• AB-InBev is by far the largest

brewer globally, with a 19%

volume share in 2010: almost

double that of the second

biggest brewer, SABMiller,

which held a 10% share.

• Beer is very concentrated, with

the top 10 brewers representing

about 61% of total beer

volumes in 2010, compared to

wine, where the top 10 wineries

only hold a 13% share.

• Also, the wine rankings have

remained unchanged since

2005, unlike beer, where

consolidation has been going

on for several years, with the

acquisition of Anheuser Bush in

2008 by InBev, and Heineken

buying FEMSA in 2010.

• Heineken’s acquisition of

Femsa has made it the fastest

growing company in the

rankings with its volumes

increasing by 30% in 2010,

closing the gap to number two

brewer SABMiller.

One clear leader in a concentrated beer market





30


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

Bill

ion

litre

s

Top 10 Beer Brands Globally – Total Volume

2009

2010

• Chinese beer brand Snow is the

leading beer brand globally holding a

5% total volume share in 2010. Its lead

is down to China’s importance in the

global beer market, holding a 24%

volume share of global beer sales.

• Snow, owned by China Resources

(CRE), is a very local brand, with its

sales concentrated in its home market.

This is not unusual as, unlike spirits

brands, which are more international

with major brands having an

international presence, beer brands

are relatively local, although brewers

are global.

• Budweiser and Heineken are

exceptions, with both brands having

significant international presence. This

is especially the case for Heineken,

with 40% of its sales volumes being

generated outside its home market of

the Netherlands, making it a truly

global brand.

• The next slide indicates how different

the coverage of CRE and Heineken is.

Chinese brand leads the pack





31


Heineken vs China Resources' global presence in 2010





32


• Globally, Heineken is the second largest imported

lager brand after Mexico's Corona Extra. 40% of

Heineken's international volumes (excluding the

Netherlands) are imported lager. This is high

compared to Budweiser, another well-known

global brand, which has 12% of its international

volumes within the imported category.

• In many markets where it does not own a

subsidiary, Heineken's brands are brewed under

licence. In most markets, this is done by

companies in which it owns a minority stake, eg

CCU in Argentina and Chile.

• The main countries of export for Dutch beer,

including Heineken, are outside Europe, with the

US being the largest consumer of Dutch beer.

Exports from the Netherlands grew between

2004-2008, but declined in 2009, as countries

such as the US drank less imported beer due to

the recession, which was reflected in Heineken's

sales declining by 12% in the US in 2009 and

2010.

• In early 2011, Heineken acquired the brewing

operations of the Sona Group (five breweries) in

Nigeria, further strengthening its grip on this large

and rapidly growing beer market. This is indicative

of the direction of brewers' corporate strategies,

now that most of the major acquisition targets

have been purchased.

Heineken, Brewing Facts and Figures

Own breweries Licensed brewing

Western Europe –

37 (recently closed two

breweries in the UK,

and one in each of

Finland, France and

Spain).

Before InBev's acquisition of

Anheuser-Busch, Heineken used to

brew Budweiser in Italy.

Eastern Europe –

31 (recently closed two

breweries in each of the

Czech Republic and

Russia).

Heineken is a major third-party

brewer of Diageo's Guinness in

Russia. Before InBev's acquisition

of Anheuser-Busch, Heineken used

to brew Budweiser in Russia.


– 25



many African markets (eg Rwanda

and the Democratic Republic of

Congo).

Latin America –

5 (this will rise to 19

with the acquisition of

FEMSA).

Minority stake in CCU in Argentina

and Chile.

Heineken produces Budweiser in

Colombia and Panama.

Asia-Pacific



Indonesia.

How does Heineken do it?





33


• Until 2008, cider/perry was an undervalued niche category in the Netherlands, with limited volume growth. In 2008,

the country's dominant beer producer, Heineken, launched a new cider called Jillz, targeted primarily at women as

an alternative to wine and beer. The brand is expected to help volume sales and per capita consumption double

between 2008 and 2015, albeit from a small base. Heineken has achieved this by leveraging its distribution and

financial strength. The Jillz brand has seen very strong growth, and in 2010 accounted for around 50% of category

volumes.

• In 2010, Anheuser-Busch InBev launched Stella Cidre in a dynamic UK cider market, where cider sales are far more

dynamic than beer sales making it a logical step for the brewer.

• If any other brewer were to move into cider/perry, it could attempt something similar in the US and Canada, where

cider has a niche premium image, as well as in other Western European markets, such as Belgium, France and

Germany.

• One means to enter cider/perry would be through the acquisition of the world's third largest cider company, C&C,

which is a small independent player and publicly listed. C&C is already well established in the key cider/perry growth

markets of the UK and Ireland. Any volume gain would be relatively small in the short term and would require

considerable effort to develop brands, but in increasingly mature beer markets any growth is likely to be welcomed.

Potential for global brewers in cider/perry


0.0

0.2

0.4

0.6

0.8

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Pe

r ca

pita

co

nsu

mp

tio

n

(litre

s)

To

tal m

ark

et siz

e

('0

00

litre

s)

Cider/Perry Performance in the Netherlands 2005-2015

Total volume sales '000 litres Per capita consumption




34


• The global beer market remains highly localised, with brewers constantly looking for new ventures and opportunities

to sustain growth in what is a relatively stagnant market overall. From China to Germany, brewers are facing

challenging market conditions, which vary by market and range from factors such as ageing and declining

populations to changing consumers preferences for other alcoholic drinks categories, such as wine, spirits, cider and

RTDs, to ongoing global economic uncertainty.

• Despite the different challenges currently faced in different markets, local and international brewers are all facing an

increasingly saturated market. As such, they will need to look to diversify, be it in the short, medium or long term.

• In Germany, the beer market is saturated, with consumers increasingly preferring lighter and “healthier” beers over

traditional varieties, thus many brewers have already expanded into the more lucrative malt-based RTDs category.

Malt-based variants boast a perceived healthier positioning and lower alcohol content, while consumers associating

such products with beer can provide a new direction for brewers.

• Similarly, in Russia, with increased pressure on the national beer market, due to a 200% excise tax increase, leading

to an almost 10% decline in 2010, brewers are looking to be less dependent on beer and find new growth areas. For

example, Baltika Breweries is launching products in new categories and focusing more on exports.

• Even in relatively high growth markets, such as China, brewers are looking further afield, with strategies to diversify

further their gradually maturing urban consumer base. Female-targeted products represent one option, as does

further expansion into underserved provincial and rural areas.

• .

Product diversification

• Within beer: moving into different categories; low/non- alcohol beer, premium lager, flavoured beer

• Within alcoholic drinks: cider, malt-based RTDs

• Outside alcoholic drinks: carbonates, bottled water, etc

Channel diversification

• On-trade focused: specific channels within on-trade, such as full-service restaurants

• Off-trade focused: non-store retailing vs store-based retailing – modern retailing vs traditional

Geographical diversification

• Urban vs rural

• Exports to more dynamic markets, with emerging markets in Africa and the Middle East, Latin America and Asia-Pacific offering the best growth opportunities

Opportunities for brewers: diversification is essential





35


Introduction

Global Picture

Category Analysis

Regional Analysis

Channel Analysis


Prospects




36


0

0.5

1

1.5

2

2.5

3

3.5

4

170,000

180,000

190,000

200,000

210,000

220,000

230,000

2010 2011 2012 2013 2014 2015

% g

row

th

Bill

ion

litre

s

Global Beer Market Forecast Performance

Beer Total Volume Total volume growth

• Global beer volumes are expected to continue to grow over the forecast period.

• The forecast total volume CAGR is 3% for 2010-2015, which is a slight improvement on the CAGR for the review

period, which stood at 3%, as the category sees sales picking up after the 2009 and 2010 slowdown caused by the

economic downturn.

• All regions are expected to see sales begin to increase again by the end of the forecast period, at the latest, after the

slowdown in the latter part of the review period.

• Western Europe is expected to take the longest to recover but will eventually see some growth again.

Beer volumes to increase over the forecast period

Prospects




37


• As was the case during the review period,

non-alcoholic beer is set to be the most

dynamic beer category over the forecast

period, driven by the Middle East and

Africa, and in particular by Iran.

• Low-alcohol beer is seeing a marked

improvement on the review period, with

China being one of the most dynamic

countries as more flavoured and lower ABV

beers are on the market, targeting female

consumers. With economically independent

women becoming a much bigger group in

China, female consumers will become a

target market with greater potential. Hence,

manufacturers are likely to cater to female

consumers’ preferences with the launch of

more low-alcohol/non-alcoholic beers or

fruit-flavoured beers in the future.

• Lager’s forecast performance is similar to

its historic growth, mainly driven by Asia-

Pacific, which is forecast to grow by a 6%

CAGR in total volume terms between 2010

and 2015.

• The Middle East and Africa region will drive

stout’s and dark beer’s forecast growth,

with both categories showing an improved

or similar performance compared to the

review period.

Non-alcoholic beer continues to be most dynamic

Prospects

-2 0 2 4 6 8 10 12 14 16

Dark beer

Lager

Low-alcohol beer

Non-alcoholic beer

Stout

% total volume CAGR

Beer by Category Forecast Performance 2010-2015

Note: The filled bar is referring to 2010-2015 CAGR (forecast), the unfilled

bars refer to 2005-2010 CAGR (historic)




38

Alcoholic Drinks: Beer Overview Prospects

Emerging markets set to remain most dynamic

Beer Forecasts by Country 2010-2015




39


• Already the largest beer market in the world, China

will account for over half of global volume growth

between 2010 and 2015, and given that its per

capita consumption is still under half that of many

Western markets, this trend is set to continue.

• Therefore, having a strong presence in this market

is important; however, there are growth

opportunities in beer outside China.

• After China, Brazil will be the second most

dynamic beer market in terms of absolute volume

growth between 2010 and 2015, followed by India

and Vietnam.

• Emerging markets will be the main engine for beer

growth over the forecast period, with regions such

as Latin America and the Middle East and Africa

playing an important role. China will underpin the

dynamism of Asia-Pacific.

• Iran will be the most dynamic in percentage growth

terms despite the complete ban on alcoholic

drinks, with media coverage of the harmful effects

of cola carbonates offering growth potential for

non-alcoholic beer.

• The potential seen by brewers in these regions is

clearly evident when reviewing global brewers'

strategies.

• Opportunities also exist outside beer, with some

brewers looking to enter new categories.

0

5

10

15

20

25

30

35

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Brazil India Vietnam Iran Nigeria

% C

AG

R 2

01

0-2

01

5

mill

ion

litre

s

Beer Opportunity Markets Outside China 2010-2015

2010-2015 Absolute Growth 2010-2015 CAGR

Growth Opportunities outside of China

Prospects




40


• In 2010, beer benefited from increasing disposable

incomes among lower income brackets and a steady

employment rate, combined with the FIFA World Cup held

in South Africa, which boosted sales in June and July, a

period of the year when demand is typically lower

compared to the summer season.

• Increases in the purchasing power of most Brazilians, and

growing demand for higher quality products was evident

over the review period. As a result, alcoholic drinks

manufacturers invested in expanding their portfolios with

premium products, such as Cervejarias Kaiser do Brasil,

which introduced Amstel Pulse (Netherlands), Birra Moretti

(Italy), Edelweiss (Austria), Murphy’s Irish Stout and

Murphy’s Irish Red (Ireland) in early 2010, and Cervejaria

Petrópolis, which partnered with a German brewery to

produce and distribute Weltenburger beer.

• It is expected that consumers will continue to migrate to

more sophisticated products in the forecast period, as

disposable incomes continue to rise. The share of

households with a monthly disposable income over

US$750 is predicted to grow from 47% in 2010 to over

57% in 2015.

• Dark beer and premium lager will experience the fastest

growth, of 96% and 70%, respectively, in total volume

terms between 2010 and 2015. Greater investment in

these categories and growing demand for such products

among affluent consumers and the middle class are

expected to spur sales in the near future.

0 5 10 15 20

Dark beer

Premium lager

Beer

Standard lager

Low-/non-alcohol Beer

Economy lager

Brazil: Forecast Growth by Category 2010-2015

2010-15 CAGR %

Brazil beer sales driven by premiumisation

Prospects

Key point: Brazil offers great opportunities for brewers

as consumers are opting for more premium products

as disposable incomes are rising and urbanisation

continues. The northeast region of Brazil is a focus of

investment, as the area has benefited most from the

economic stability experienced in Brazil since

1998. It showed the fastest growth in GDP among

the regions of Brazil. The very young population of

Brazil, with the bulk being under 40 years, is also

favourable to brewers.




41


Advancing middle classes key for growth in Brazil

Prospects




42


• India is forecast to be the second fastest growing country for beer in absolute terms globally between 2010 and

2015. It is expected to add an extra 1.3 billion litres to its current market size of 1.7 billion litres by 2015. However,

although it is dynamic, beer consumption is still very low compared to Western markets. India’s per capita

consumption in 2015 is expected to be 2.4 litres, compared to the global average of 30 litres.

• Sales of beer are highest in South India, with over 30% of India’s beer volume sales. The hot climate makes beer a

favoured choice of South Indians. Andhra Pradesh and Tamil Nadu are the main contributors to South India’s beer

consumption. Strong lager, with around 8% abv, constitutes more than 70% of sales, while mild lager is more popular

in on-trade outlets in urban areas.

• International brands are expected to expand their shares considerably over the forecast period, as Indian consumers

become more discerning about their brand preferences. International products, including ales and

weissbier/weizen/wheat beer, are also expected to become more popular, particularly in the major cities, where

brands such as Hoegaarden, Little Devils and Geist proved popular in high-end on-trade outlets in 2010.

• Future growth is expected to be driven by small cities and towns in states such as Orissa and Madhya Pradesh,

which were under-penetrated by the major brewers over the review period. With increased availability in

supermarkets/hypermarkets, this will expand the occasions and locations for Indians to consume and purchase beer.

0

5

10

15

20

0

200

400

600

800

1,000

1,200

South India West India North India E and NEIndia

% t

ota

l vo

lum

e g

row

th

mill

ion

litre

s

India Beer Forecast by Region 2010-2015

2015 total volume 2010-2015 total volume CAGR

Opportunities in India for international brands and categories

Prospects

Key point: India has huge potential due to its

relatively low per capita consumption of beer

and its strong expected forecast growth, as

brewers are expected to increase their

penetration. However, it is worth noting that

India has issues with infrastructure and with

gross under-capacity for all forms of transport,

which hinders distribution. It also has a

complicated taxation system, which varies from

state to state. This, and the difficulty in setting

up production facilities nationally, caused by

byzantine regulations, could be big factors in

hindering development within beer.




43


• The shift from traditional rice wine varieties to beer in the context of evolving westernisation trends was the main

driver of beer growth over the review period, which spearheaded alcoholic drinks growth.

• Volume sales of beer in Vietnam are expected to continue to grow between 2010 and 2015, at a 9% CAGR, on the

back of the long-term growth of the local economy, as well as changing consumer lifestyles, which are increasingly

influenced by Western culture.

Vietnam: Beer sales benefit from westernisation trend

Prospects

• With the increasing

number of more

educated consumers,

expatriates and

overseas students,

consumers will look for

products that suit their

taste, lifestyle and

status.

• At the same time,

consumers will also

seek drinks that have a

health and wellness

positioning or are low in

alcohol content for

social drinkers.

• Consequently, low-

alcohol beer is likely to

be introduced to the

market in the future to

meet this consumer

demand.




44


• The integration of Vietnam into the WTO is opening more opportunities for investment and imports from foreign

companies, especially as its government is committed to reducing taxes levied on imported beer to 65% after joining

the WTO, and further reducing the rate to 35% in the next five years.

• Also, the country’s relatively young population, with a median age of just 28 in 2010, compared to Japan, where it is

45, offers good opportunities.

Prospects

Vietnam’s changing regulatory environment offers

Key point:

• Reinforcing “health and wellness” perceptions for beer will cement already buoyant growth rates, whilst also adding

value and raising profit margins.

• Imported beer will benefit in the medium and long term from the integration of Vietnam into the WTO and the

subsequent tax reductions.




45


• With Islamic law forbidding the consumption, manufacturing and trade of alcohol in any form, and anti-smuggling

programmes run by the Iranian government further limiting parallel trade alternatives, non-alcoholic beer witnessed

strong growth in Iran over the review period, which is expected to continue over the forecast period.

• Forecast volume growth is expected to be at a 33% CAGR between 2010 and 2015, which makes Iran the fastest

growing country for beer. This will be driven entirely by non-alcoholic beer, and in actual terms it will add an extra one

billion litres to the global market.

• Non-alcoholic beer is expected to see an impressive performance in Iran, more than doubling its total volume sales

between 2010 and 2015. More young adults in Iran will switch to non-alcoholic beer, following widespread media

coverage suggesting that it as a better alternative to cola and other carbonates, and this will play a significant role in

most major players’ promotional activities. A number of international beverage companies, as well as some Iranian

soft drinks companies, have expressed interest in producing non-alcoholic beer, on the assumption that it could

become an alternative to standard carbonated soft drinks.

• The increasing number of supermarkets in Iran, together with growing westernisation and urbanisation trends, will be

the key reasons driving volume sales of foreign non-alcoholic beer over the forecast period. The shares of

multinationals, such as Carlsberg A/S, Bavaria NV and Heineken NV, are expected to grow slowly but steadily during

the 2010-2015 period, enhanced by their wider availability in major supermarkets and hotels all over the country.

• New entrants – both international beverage companies and some private Iranian soft drinks companies previously

operating only in soft drinks – are expected to be seen in non-alcoholic beer in Iran during the forecast period, on the

assumption that it could become an alternative to standard carbonated soft drinks. These players will aim to

persuade young Iranians to drink non-alcoholic beer instead of traditional carbonates, which is in line with the Iranian

government’s policy.

Iran the most dynamic beer market in terms of growth

Prospects

Key point: As the fastest growing beer market in percentage terms, Iran offers opportunities for non-alcoholic beer

manufacturers in the future, aided by increasing number of supermarkets and the growing westernisation and

urbanisation trends in the country, making it an increasingly attractive market for international producers.




46


• Beer sales in Nigeria are set to grow by a 7% CAGR

between 2010 and 2015, adding an additional 907 million

litres to the global beer market.

• Growth will be particularly strong in dark beer and stout,

which are expected to grow by 19% and 11% CAGRs,

respectively, in total volume terms over the forecast

period.

• Although still relatively small compared to lager and stout,

dark beer is making inroads into the Nigerian beer market

because the high alcohol content and dark colour appeal

to many Nigerian consumers. In addition, dark beer

brands have attracted many consumers who typically

drink stout since they are of similar quality but are

cheaper.

• Polarisation is key for a country where 55% of households

live in poverty, while a niche socioeconomic elite is

adopting Western lifestyles and drinking habits. Focusing

on the lower and higher ends of the market with a diverse

product portfolio will guarantee the strongest returns

within alcoholic drinks.

• Any brewer that wants to be in the market has to have

local production, as there is a ban on imports of all

alcoholic drinks. This means that foreign brewers have

acquired breweries in Nigeria. For example, SABMiller

acquired Pabod Breweries Ltd and Voltic Nigeria Limited

in 2009, and has recently announced that it will invest

over US$100 million in building a new greenfield brewery

in Onitsha, in southeastern Nigeria.

Key point: Nigeria is on its way to becoming the largest

and fastest growing economy in Africa. Its population is

young and their disposable income will boom over the

forecast period, creating opportunities for beer.

However, this will also create challenges for brewers

and force them to segment their offer to more diverse

target groups. The one-dimensional, macho beer

drinker image is expected to evolve and adapt to cater

for women, older consumers or even expatriates, which

will provide further opportunities for beer in Nigeria

0

2

4

6

8

10

12

14

16

18

20

Beer Darkbeer

Lager Low-/non-

alcoholbeer

Stout

20

10

-20

15

CA

GR

%

Nigeria Beer by Category Forecast Performance

Nigeria – dark beer and stout most dynamic

Prospects




47


• Emerging market potential is key,

but it is necessary to offset this with

strong operations in developed

markets with high profit margins.

• As brewers become increasingly

international, they are susceptible to

economic fluctuations in specific

markets.

• Having a balanced geographic

presence will enable companies to

mitigate declines.

• Similarly, brand portfolios should be

diverse enough to meet

macroeconomic conditions and

satisfy changing consumer

preferences.

China increasingly key

• Although still possessing

considerable potential for further

growth, China has already arrived

as a major market. Brewers must

target the next high growth areas,

such as Brazil, India, Iran, Nigeria

and Vietnam.

• India, with its low per capita

consumption, is an obvious target,

but there are other prospective

markets in Asia-Pacific, such as

Vietnam, and strong growth is

forecast in many African markets.

• Initial costs can be high, while

distribution and legislative factors

can be prohibitive, but the rewards

will be great in the long term.

Strong positions in emerging

markets

• Already the largest beer market in

the world, China will account for

over half of the global volume

growth between 2010 and 2015, and

given that its per capita consumption

is still under half that of many

Western markets, this trend is set to

continue.

• Having a strong presence in this

market is a necessity for the major

global brewers.

• Partnerships with local players have

for the most part dictated

operations, and whether

international players can instigate

buyouts will to a large extent be

dependent on government

legislation.

Geographic and portfolio

balance

Summary: Key future trends for brewers and beer

Prospects




48


• Beer

An alcoholic drink usually brewed from malt, sugar, hops and water, and fermented with yeast. Some beers are

made by fermenting a cereal, especially barley, and are not flavoured by hops. Alcohol content for beer varies –

anything up to and even over 14% abv (alcohol by volume), although 3.5-5% is most common. Beer is often loosely

classified by the nature in which it is made: Top fermented (eg ales, bitters, wheat beers, stouts, porters etc) and

bottom fermented (eg all lagers). Pre-mixed beers, such as beer/lemonade, beer/whisky or beer/tequila mixes, are

excluded from the data. These are included in RTDs/high-strength premixes. Beer is the aggregation of lager, dark

beer, stout and LABs/NABs.

• Dark Beer

Included here are ales, bitter, wheat and sorghum beers. Ale is brewed using a warm fermentation (ie the beer is

fermented at a relatively warm temperature), while lager is fermented at lower temperatures, using a cool

fermentation. Bitters are ales. They are categorised by having a harder, bitter flavour (hence the name). Bitters tend

to be darker in colour, are usually less fizzy than lagers, and are generally drunk at warmer temperatures (just below

room temperature is typical). Major brands in Germany include Erdinger, Paulaner, Bindingerlager and Maisel. In the

US, Bass Ale and Molson Red Jack Ale. In the UK, John Smith’s, Boddingtons, Stones and Newcastle Brown Ale.

Also included are beers that have characteristics of other beers (for marketing purposes), such as Caffreys and

Calders sold in the UK, and Half and Half (from Suntory) sold in Japan. At country level, dark beer is broken down

into the main types within each country market.

• Low-Alcohol Beer

Low-alcohol beer is defined as beer with between 0.05% abv and 3% alcohol by volume (abv).

• Non-Alcoholic Beer

Non-alcohol beer has less than 0.05% abv.

• Stout

Stouts (and porters) are generally very dark, almost black, and often have a roasted coffee or burnt toast taste to

them. This is because the malt used in the brewing process is kilned or roasted until it is, literally, burnt. Kostritzer is

an example in Germany. In the UK, Guinness, Murphy’s, Beamish and Mackesons are examples.

Definitions I

Report Definitions




49


• Lager

Lager is categorised primarily on price, but with consideration to packaging and positioning. This is the sum of the

following: imported premium/standard/economy lager and domestic premium/standard/economy lager.

• Premium Lager

Premium lager is categorised primarily on price, but with consideration to packaging and positioning. Premium lager

is classified on a country by country basis, therefore there is no set rule whereby all countries covered must deem

that any lager which is, for example, priced over 20% of the standard benchmark brand is necessarily premium. For

example, Tennant's Extra, in the UK, has a higher than average abv and therefore a higher price, but has a

positioning that places it in the economy segment. The classification of brands by premium/standard/economy can

be viewed through the brand shares link. Imported premium lager refers to lager that is brewed in a country other

than the one in which it is marketed.

• Standard Lager

Standard lager is categorised primarily on price, but with consideration to packaging and positioning. Brands within

standard lager are usually those which have the highest shares in the market. Standard lager is classified on a

country by country basis, therefore there is no set rule whereby all countries covered must adhere to the same price

classification. The classification of brands by premium/standard/economy can be viewed through the brand shares

link.

• Economy Lager

Economy products are at the bottom end of the price range. These will usually include private label (unless premium

private label brands have made inroads in the market) and unbranded products. Economy lager is categorised

primarily on price, but with consideration to packaging and positioning. Economy lager is classified on a country by

country basis, therefore there is no set rule whereby all countries covered must adhere to the same price

classification. For example, Tennant's Extra, in the UK, is classified as an economy lager because of its positioning in

the market, regardless of its higher than average abv and therefore higher price. The classification of brands by

premium/standard/economy can be viewed through the brand shares link.

Definitions II

Report Definitions




50


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global performance and prospects for beer

Documents

global beer market

global beer industry

global beer volumes

bn litres beer

lownonalcoholic beer

global beer volume growth

global performance

important beer type