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What is influencing alcohol trends in Europe?

14/12/2018

The European alcohol market is one of the largest in the world. There have been dynamic shifts in consumer behaviour as consumers are drinking less volumes of alcohol. From 2000 through to 2015 the UK, Spain, Italy, Ireland, Switzerland, Denmark, Belgium and France saw a decrease in per capita alcohol consumption. However, over those 15 years the consumption of alcohol remained the same in Sweden and the Czech Republic, whilst consumption increased in Poland and Romania. Despite this decline overall, the shift in consumer behaviour has also witnessed consumers spending more on alcohol. In this article we look at the consumer trends that are influencing this market and how brands are adapting to meet consumers' changing requirements across Europe.

 

Health Trend

In recent years, this trend has had the most significant impact on the alcohol industry. No only has the pursuit of a healthy lifestyle resulted in a decline of alcohol sold but it has been crucial in  influencing the trend to focus on the use of natural botanical ingredients added to spirits, a growth in demand for natural wines, and an increased use of fruit flavours in ciders and ready to drink products.

 

Low and Non-Alcohol Variants

There has been a huge shift to reduce consumption of alcohol, particularly among young adults. As a result, many brands are creating low- or alcohol-free alternatives. Over a quarter of 16 – 24 year olds in the UK abstain from drinking alcohol, and this trend in young adults continues to grow. This in turn saw the value of non-alcoholic wine and beer increase by 66% and 37% respectively, (in the UK last year. Kantar Worldpanel estimated that non-alcoholic beer sales increased by 60% in the UK compared to last year. Demand for low and alcohol free beer is also being seen in Spain and Sweden.

 

Since 2009, low alcohol wine makes up 3% of the alcohol market worth more than £70 million. Canadian research found that the volume of low alcohol beer consumption in Western Europe is growing by 1% annually with a recorded growth of 7% for alcohol free beer. Euromonitor International also estimated that the value of non-alcoholic beer in 2017 was worth €4.1 billion, highlighting the potential for alcohol free alternatives.

 

The Czech Republic also saw a decrease in alcohol consumption despite being one of the world’s leaders in beer consumption. However, consumption of and preference for non-alcoholic beers is increasing. This preference is favoured by the younger generation, indicating that they are driving changes in the alcohol industry. Major brands such as Carlsberg and Heineken have developed low or non-alcoholic alternatives. EFMP Czech partner PPM Factum helped Heineken launch their 0.0% beer into the Czech market. While our Dutch Partner PSfm worked with AB InBev to promote Jupiler 0.0% draught and bottled beer in the Netherlands where the focus was to create new opportunities to serve the beer after sports and/or during lunch or in the late afternoon. The legal drinking age limit changed in the Netherlands from 16 to 18 years old in 2014 and it remains topical conversation amongst youngsters and within the alcohol industry.

 

In Poland, our partner, Option One, was responsible for building Heineken’s "Zone Zero" in stores nationwide. The rationale for “Zone Zero” was the observation that in 2017 sales of alcohol-free beer in Poland increased by 22.9 percent - faster than sales in any other beer segments. As a result, Heineken decided to focus in 2018 on the development and promotion of alcohol-free products. In addition to the "Zywiec Non-Alcoholic" beer already present in stores, the company introduced the Heineken 0.0% as well as the Warka Radler 0.0% beers in two flavours: apple-mint and grapefruit-orange. In order to increase awareness of non-alcoholic beers in Poland, Grupa Zywiec developed the "Zone Zero" concept - a merchandising campaign of installing displays and POS materials and information which helps consumers to navigate among store shelves and to purchase alcohol-free beer. A set of stands, displays and shelf-talkers dedicated for “Zone Zero” was designed to use in both modern and traditional retail stores. The "Zone Zero" project was developed entirely in Poland, and turned out to be an international success, winning the Commercial Courage Award - the most prestigious commercial award in the Heineken world.

 

 

In Denmark, the sale of non-alcoholic beer has increased three-fold over three years. Bryggeriforeningen (Danish brewery association) attributed this to consumers living healthier lifestyles. Additionally, non-alcoholic beer has maintained its strong performance in 2017 for the fifth year running, which highlights the consistent preference for non-alcoholic alternatives. The decrease in overall beer consumption but an increase in the demand for non-alcoholic beer is observed in Germany as well, with growth in volume sales of low and non-alcoholic beer growing at 5 and 3% respectively in 2015.

 

Furthermore, there was a decrease in alcohol consumption in Ireland, and major brands such as Guinness have introduced non-alcoholic versions of their drinks. However, Euromonitor International found that the strong sale of non-alcoholic beer witnessed across Europe may not be seen in Ireland, as they are sold for the same price as alcoholic drinks. Additionally, in the Irish market the sales of non-alcoholic beer which was worth almost €20 million has decreased steadily every year to just over €16 million in 2017, highlighting that the sale of non-alcoholic beer in Ireland has not been able to grow at the same pace as in other parts of Europe.

 

Between 2006 and 2014, Italy witnessed a 23% decline in per capita consumption of alcohol, due in part to decreases in wine consumption. The decline in consumption was observed across all ages, but the largest decline was seen for 15 – 24 year olds (43% decline) followed by a 23% decline for ≥65 age group. This decrease in alcohol consumption attributed to the health trend has also been observed in Switzerland, which recorded its lowest levels of alcohol consumption for more than 70 year, in 2016.

 

So far, there has been a decline in per capita alcohol consumption observed in the UK, Switzerland, Sweden, Spain, Denmark and Germany. Although not necessarily due to the health trend, there have also been declines in consumption in Belgium, the Czech Republic, Ireland and Italy. Additionally, the number of those abstaining is increasing. For example, in Italy 38.4% of the population abstain from alcohol. Whereas, in Romania and Poland the alcohol industry is growing and there have not been reported declines in consumption.

 

Increasingly brands are developing new low - or alcohol - free alternatives to target a growing number of individuals who drink less alcohol or abstain from it altogether. This also highlights that the health and wellness megatrend has emerged throughout most of the 13 European countries analysed.

 

Premiumisation of Alcohol

Despite the observed decrease in consumption of alcohol per capita across Europe, there is a growing trend to concentrate on the quality of alcohol rather than the quantity consumed, highlighting the trend across Europe known as premiumisation. This has resulted in brands switching their focus from volumes to value, particularly in mature markets such as the UK and France. As a result, UK sales of alcohol increased by a total of £172 million in December 2017 compared to 2016, with significant increase in gin, whisky and sparkling wine (sales increased by 26%, 10% and 7%, respectively). Research carried out by Kantar Worldpanel determined that the rise in alcohol sales was due to the premiumisation of the UK’s off-trade drinks market. Further research by McKevitt demonstrated that sales of drinks had increased by 5.2% year-on-year.

 

CGA calculated that 43% of consumers select high quality drinks and this increases to 54% among 18 to 34 year olds. This highlights that the alcohol industry is being driven by young adults. The Czech Republic are also witnessing increases in quality rather than quantity as the overall volume consumption of alcohol has decreased but the consumption of high quality alcohol has increased. For example, high quality beer (11 and 12 degree beers) sales overtook those of lower quality beers, supporting the premiumisation trend. Craft beer is also becoming more popular due to the premiumisation trend and consumers are demanding more innovation, as witnessed in Denmark, in Romania where craft beers have shown growth and recently entered the off-trade channel, in Spain which is the fourth biggest producer of craft beer, and in Switzerland.

 

The premiumisation trend is prevalent across the 13 countries reviewed. This growing trend is seen to positively impact the spirits sector with an increased demand for premium spirits in Belgium, the Czech Republic, Denmark, France, Germany, Poland, Spain, Switzerland and the UK. In Switzerland and Germany, English gin has maintained growth in volume and value for both the off- and on-trade sales. The premiumisation of spirits in the UK is, in part, due to the popularity of the cocktail culture. It has been estimated that over 70% of adults in Poland are opting for quality rather than quantity, as demonstrated by a 6% increase in premium vodka sales despite an overall decrease in the vodka market.

 

The demand for higher quality wines is also taking place in Denmark, with a particular preference for sparkling wines in France, Poland and Spain.

 

However, not all brands have benefitted from the premiumisation trend. For example, Carlsberg indicated that there was a decrease in the UK market due to the rise of premium brands and that overall sales in Western Europe had decreased by 8% for the quarter. Despite this, their sales of non-alcoholic beverages in Western Europe increased in volume by 23% year-on-year. The negative impact on Carlsberg regarding sales of alcoholic beverages has also occurred on the sale of other mainstream lagers of 5.5% for higher value, premium beverages. The negative impact premiumisation has had on beer sales is being observed in supermarkets across the UK. This is because volume sales remain stagnant resulting in retailers stocking less in favour of more premium drinks, which drives further declines in sales, creating a cycle. Additionally, the price of beer has increased by just 0.5% CAGR whilst volume growth has declined by 1.1% CAGR in the past 10 years. Craft beer, on the other hand, has seen volumes increase by 14.5% in the year to June.

 

Furthermore, while volume sales of beer are struggling with premiumisation, sales of premium spirits (e.g. gin) are growing at a fast pace. Premium spirits now account for just over half of the total spirits volume. This also supports the CGA report which saw volumes of premium spirits increasing by almost 12% in the year to June 2017.

 

Brands must stay on top of the premiumisation trend if they are to continue in one of the largest markets. Brands will also see a huge shift from total volume sales to total value sales as the premiumisation trend will see consumers willing to spend more of their disposable income on higher quality drinks.

 

Cross Category Innovation

Innovation is not only shaping technology but it is also shaping the way brands produce products. As a result, we are witnessing unusual pairings between types of alcohol. For example, Glenfiddich has started producing some of its whiskey in IPA casks. Accolade wines has also expanded their Echo Falls fruit infusion wine range to bring a berry vodka to the alcohol market. Other examples of this crossover between types of alcohol include:

  • Seattle Cider Company developing cider rosé;
  • Jack Daniel’s whisky cider;
  • Rekorderlig cider cocktails.

Our Czech partner PPM Factum worked with St Nicolaus Slovakia brandy and did an in-store promotion to pair brandy and coffee.

 

Brands are challenging the market norms to retain consumer engagement and to help them reach a wider audience by producing products that appeal to more people. The premiumisation and aspirational consumption trend will need to be balanced with diversification in category, geographical reach and brand positioning.

 

Conclusion

In conclusion, across Europe we are witnessing a change in the alcohol market as consumers are drinking less alcohol. This decline is likely to continue to persist within the coming years particularly with the growing trend in a healthy lifestyle and mindful drinking rapidly developing. Yet despite this growing trend, individuals are willing to spend more money on alcohol due to the premiumisation of alcohol products.

 

Through using experienced field marketing agencies who are able to effectively promote and engage consumers,  in a way that aligns brands with their consumption patterns, will not only help  to inspire innovation, but will be the core differentiating factor that distinguishes successful brands from the rest.

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