Beer Monopoly




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mern von Alexander in Frauenau:








Posted NOVEMBER 2019

The Brexit fiasco

Beer in Ireland │ Call it the luck of the Irish? While Ireland’s craft brewers have been struggling to build a local base by taking on the almighty duopoly of Guinness and Heineken, their bulging portfolios and deep pockets, consumers have moved on to drinking wines and spirits instead. And worse is to come. Once the UK leaves the EU, the whole industry will need to face up to its devastating consequences.

When news broke in May this year that Dublin was to get its first booze-free pub, the Virgin Mary on Capel Street, which would only sell beer, wine and cocktails with zero alcohol to the “Sober Curious”, all my preconceived notions about the Irish came crashing down. Blame them on Heinrich Böll’s Irish Journal (1957). In this book, the Nobel Prize winning author lovingly records a way of life before modernity swept through the country. Like millions of other arm-chair travellers, I had assumed that the Irish live by the maxim “Drink when you are happy, drink when you are sad”. So what about the stereotypes of the jolly Irishman singing and swaying on a bar stool, or the solitary drinker in his telephone-box sized snug, shutting out the world as he drowns his troubles? Have they since been obliterated by the march of time?

And true enough, data show that alcohol consumption on a per capita basis has dropped significantly since its peak in 2001, when it stood at over 14 litres per capita. At 11 litres now it is broadly in-line with countries such as France, Germany and the UK, according to Bernstein Research. Public health officials still think that this is an excessive amount and would like to see it drop further.

The Irish Republic’s tough Public Health Alcohol Bill, which took years to wind its way through parliament, was finally signed into law in 2018, and includes provisions for minimum unit pricing; cancer warning on labels; the segregation and reduced visibility of alcohol products in the off-premise, and a ban on TV advertising before 9 pm. There is a timeline for when different sections will commence over the next few years. The first to come into effect this autumn is the prohibition of advertising in certain places, including within 200 metres of schools and playgrounds, as well as the ban on alcohol advertising in cinemas and on children’s clothing.

The second significant dynamic affecting the Republic’s alcohol consumption is the change in what people are drinking. Beer has been the big loser. Since the turn of the century, per capita consumption of beer has declined: from over 100 litres to reportedly 80 litres in 2018. Part of the decline is probably due to the influx of the “New Irish”, mostly Central Europeans, who migrated to the Republic following their countries’ access to the EU. Not only have they hiked the Republic’s population by 600,000 people to 4.8 million since 2004, they would have also knocked down average consumption figures.

More worrying to brewers is another data set. In 2001, beer had 55 percent of the alcohol market, but this has dropped to 45 percent in 2018. There have been long-term gains for both wine and spirits. Plenty of women seem to enjoy a glass of wine these days. This may help explain why wine has doubled its share of throat (28 percent of total alcohol), followed by spirits (20 percent) and cider (8 percent). Of course, the anti-alcohol lobby thinks that women should not be drinking at all because of alcohol’s detrimental effects on their health. Libertarians will retort that this is the first time in Irish history that women can hold proper jobs and have their own incomes. Who is to tell them what they can do with it and mustn’t?

Guinness’ omnipresence

Any report on Ireland’s alcohol market will need to start with the country’s most famous and most recognizable beer brand, which is, without a doubt, the iconic Guinness. Arthur Guinness (1725–1807) started brewing in 1756 and his brewery at St James’s Gate has gone on to dominate the industry and become a world force. Nowadays, it ranks fourth among global beer brands by value, behind Budweiser, Heineken and Corona.

In 1932, Guinness’ headquarters moved from Dublin to Park Royal in London. At that point, the Guinness family still held a 51 percent ownership in the company. In 1997, Guinness merged with Britain’s Grand Metropolitan to form the world’s largest drinks company, Diageo.

Under Diageo’s reign, Guinness has embarked on a consolidation course and concentrated all brewing in Dublin. Diageo first closed the Park Royal brewery in 2005, followed by the shuttering of the Kilkenny brewery (brands Kilkenny and Smithwick’s) and the Dundalk brewery (Harp lager) in Ireland in 2013. In 2008 Diageo had also proposed to cut production at St James’s Gate and move to a new greenfield site in Leixlip, west of Dublin. However, the USD 870 million programme was shelved in 2009 after Ireland was hit by the global financial crisis and property prices tanked.

Two other breweries have had a national impact and went head to head with Guinness. These were Williams, Beamish & Crawford, established in 1792, and Murphy’s, founded in 1856, both of county Cork, in the south of Ireland. Through circuitous routes of ownerships, those two breweries eventually ended up with Heineken, which decided to shut the Williams, Beamish & Crawford brewery in 2008.

Walk into any pub in the Irish Republic these days and you will feel overwhelmed by the number of different beers on tap. Among the big brands, there will be a Guinness, Heineken, Carlsberg, Coors, Budweiser, plus a host of imports like Moretti, Asahi, Peroni, Corona, and ciders – you name it. If you are lucky, there will be a few taps dedicated to craft beer brands, either local or imported.

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Oh America

Hard seltzers │The hard seltzer craze has gripped the US. So much so, that White Claw’s shortage in the autumn caused a panic. How could an alcoholic drink, that intentionally tastes like fizzy water with hints of flavour, explode into the drinking public’s consciousness and fuel a meteoric sales growth? The answer is: because hard seltzers are refreshing, have fewer calories than beer and appeal to all genders. But will they have staying power?

Like all market observers, I have been fascinated by the media coverage of hard seltzers over the summer and well into the autumn. At the end of July, Americans woke up to the screaming headline news that over the past 12 months ended 14 July, sales of hard seltzers were up 177 percent. Yet, come September and the spike had risen to 200 percent, as dollar sales had crashed through the USD 1 billion threshold, leading pundits to forecast that hard seltzers could become a USD 2.5 billion category by 2021. Those of us who have been around a bit longer, probably couldn’t help thinking: Haven’t we seen this before?

Remember alcopops? About a quarter of a century ago, those violently coloured neon drinks took the world by storm – despite attracting heaps of moral outcry. To my knowledge it was Australia’s Two Dogs, invented by the Adelaide publican and entrepreneur, the late Duncan MacGillivray, in 1993, which kicked it all off. For a few summers Two Dogs ruled the pack. Soon after it had reached an annual global turnover of AUD 150 million (then USD 112 million), Mr McGillivray decided it was time for an exit. Fearing that the good times may not last much longer, he sold the brand to France’s drinks group, Pernod Ricard in 1996, which sold it to Japan’s brewer Kirin in 2006.

Hard on the heels of Two Dogs came Sub Zero (1994), officially dubbed an alcoholic soda, which Dermot O’Donnell created for the Foster’s Group. Although Two Dogs was made from fermented lemon juice, whereas Sub Zero was made by fermenting sugar, the beauty of these products was that they attracted no excise. Bingo. They benefitted from a legal loophole. They were not defined in the Pure Foods Act.

Accordingly, they were VERY trendy and also VERY profitable, not least because wine companies had withdrawn from the cooler category to avoid adverse publicity about encouraging underage binge-drinking. Sub Zero stayed in the market until the early 2000s when the brand was passed on to the Australian supermarket chain Woolworths, having seen its profitability eroded due to changes to the Excise Act in 2000.

Alcopops’ rise and fall

While Sub Zero looked sleek and cool, Two Dogs’ label was bright and garish. But not as garish as the colours and flavours of its imitators, which soon after appeared in markets halfway around the world. Hooper’s Hooch, introduced by brewer Bass in the UK in 1995, was a copy of Two Dogs. Other brash and brazen drinks followed. Inevitably, as the 1990s wore on, consumers grew tired of those “blow-your-head-off” alcopops, and went straight for the second-generation alcopops, such as Smirnoff Ice and Bacardi Breezer, which demonstrated sophistication. Thanks to the link to their mighty parent brand, they later became the heavyweights of the alcopops sector.

As shelves began to groan under the weight of these drinks, a Babylonian confusion arose as to what to call them. Variously they have been labelled as flavoured malt beverages (FMBs), malternatives, progressive adult beverages (PABs), long drinks, or ready-to-drink cocktails (RTDs). The beer and drinks industry might have preferred to classify them as “flavoured beverages”, a post on the BBC’s website recalls, but in every British and German newspaper they were simply nicknamed “alcopops”.

In Australia, I was told, straight and queer folk still use a very rude slang expression (which cannot be printed here), coined by their grandfathers, when talking about cheap and cheerful sweet alcohol. What was socially accepted lingo for the ubiquitous wine coolers half a century ago, may be deemed crass language nowadays. Still, it underlines that flavoured alcoholic beverages have been met with demand for decades. They have just gone through various permutations as dictated by shifting fashions and punishing taxation.

Alcopops hit in the UK because they tasted like a soft drink and got you drunk. At the time, the carbonated soft drink (CSD) category in the UK had stagnated and the rise of diet CSDs was taking place. Few people would switch from beer to Hooch. Instead, Hooch cunningly targeted a consumer bracket that does not yet like beer: youngsters and teenagers. Branding these drinks in a style that also appealed to young people was key to their success. In the end, alcopops were done in by two predictable blows. Several tax hikes made alcopops too expensive for teenagers. And faddish new drinks chipped away at their aspirational status.

The life and death of alcopops is classic product life cycle stuff. In the UK, they burst onto the scene and became an instant success. Once teenagers could lay their hands on Rekorderlig and Kopparberg’s flavoured ciders, they disappeared again. A similar thing happened in Australia. Alcopops of yore are gone, as RTD mixed spirits like Vodka Cruiser, Smirnoff Ice, Jack Daniels & Cola, have stepped into their place. Liquorland, a nationwide alcohol retailer, alone lists over 130 SKUs for RTDs. Although the category has gone backwards for eight years after the introduction of the Alcopops Tax in 2008, it has since grown at 3 percent annually to represent an AUD 2.5 billion industry (2018), according to the Australian Financial Review. That is sizeable when compared to the AUD 6.5 billion (USD 5 billion) Australian retail beer market.

Skipping on tax and regulations

Because of tax and regulatory quirks, beverage companies have long sought ways to make flavoured cocktail-like beverages by brewing instead of distilling. Over in the US, sweet and beer-strength “malternatives” first appeared in the beer aisles in the 1980s, when changes in the tax code slapped spirit-based or wine-based coolers with a higher excise rate, thereby creating an opportunity for malt-based drinks which would qualify as “beer” for tax purposes. Despite their poor reputation, these drinks sold quite well.

The first clear, flavoured malt beverages originated from The Lion Brewery in Wilkes-Barre, Pennsylvania. It was the first to make a base which was mostly a combination of corn syrups with some malted barley, which was fermented as much as possible. Activated carbon was used to remove all colour and nearly all flavour. The Lion products included Sting-Ray’s rum-flavoured beverage and a gin and tonic flavoured product, as well as several malt-based coolers under the Calvin Cooler line.

The first to cause a splash, however, was Coors’ Zima Clearmalt in 1993. The same year brewer Miller, from Milwaukee, launched Miller Clear, a beer which uncannily looked like water with a bit of foam. Cashing in on the “clear craze” of the 1990s, Zima peaked at 1.5 million hl in 1994, before plummeting to just 470,000 hl in 1996. Stroh Brewing Company made its own copycat version of Zima, which it named “Clash”, but it did not gain much traction, so Stroh quietly stopped making it. Zima hung around until 2008, when it was discontinued. MillerCoors re-released Zima in 2017 and 2018 as a seasonal. It did not return this year as the number two brewer in the US is placing its bets on Henry’s Hard Sparkling water instead.

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