PACRIM's Summary for Beer in Costa Rica
HEADLINES
Beer records 3% total volume growth in 2010, reaching 180 million litres
Additional levels of specialization and imported value for money proposals continue to set the pace
Ale continues to post dynamic growth, increasing by 10% in total volume terms
On average, unit prices increase by 2% in current terms in 2019, keeping pace with inflation
Florida Bebidas continues to dominate beer in 2019, holding an 89% total volume share
Beer is expected to post a total volume CAGR of 3% over the forecast period, rising to 213 million litres in 2023
PROSPECTS
Local Craft Beer Manufacturers Experience New Challenges
Despite the good performance of dark beer (in particular ale) in Costa Rica over the last five years, the demand for craft beer began to show signs of maturity in 2019; affected by a clear slowdown in both off-and on-trade growth. This began in the second half of 2019, when a general tax reform began to be discussed by the local authorities (which was finally approved by the end of the year), which had different side-effects. These included strikes by public employees (which lasted nearly three months) and massive protests, which affected the tourist industry and had an impact on local consumer confidence across all segments of the population. In this context, many on-trade establishments found it hard to maintain their operations. This significantly affected demand for smaller craft beer producers, which were forced to abandon the market or find new manufacturing models; for instance, third party manufacturing allows them to decrease their operational and fixed manufacturing costs, whilst they can focus on marketing and brand positioning activities.
Premium and Economy Imported Lager Continue To Gain Momentum
Whilst local buyers’ interest in more specialized craft beer began to wane during 2018, both economy and premium imported lager kept setting the pace for beer consumption. Brands such as Heineken, Corona Extra and Stella Artois, along with a broad assortment of economy imported lagers available in modern grocery retailers (especially Walmart outlets, where these products are used as traffic generators) kept boosting off-trade beer consumption amongst locals. Economy imported lagers tend to base their value proposals on availability and affordability (often in 12 to 24 can multipacks) across chained modern grocery retailers, which are often the direct importers of such proposals. Meanwhile, added-value brands such as Heineken and Stella Artois keep capitalising on aspirational marketing concepts, targeting millennials with global marketing campaigns and promotional point-of-sale strategies. The 2019 sales dynamics continued to benefit the performance of more affordable but still added-value proposals, which reflects local buyers’ general caution when visiting on-trade outlets, whilst opting to trade up to more premium lager brands in off-trade retailers.
New Value Proposals Are Anticipated To Impact Demand for Beer
As smaller local craft brewers leave the market over the coming five years, it is expected that the remaining players will continue to consolidate and gain sales momentum. The largest local craft brewers (such as 35 Fábrica de Cervezas) are anticipated to continue making efforts to increase their economies of scale, opting to maintain collaborations with smaller players for third party manufacturing, whilst entering domestic premium lager to compete with global flagship brands such Heineken. This scenario will allow consolidated craft beer manufacturers to increase their economies of scale over the next five years, aiming to expand their presence in modern grocery retailers across the country. They will also look for development opportunities abroad, where they are expected to use the brand image of Costa Rica to leverage sales, whilst diluting their manufacturing costs even further. New value proposals will also include experience-based formats, opening up opportunities for on-trade establishments towards 2023, with brew pubs helping to reinforce the top-of-mind positioning of emerging and recognized manufacturers and beer brands amongst millennial buyers and international tourists across the country.
COMPETITIVE LANDSCAPE
Forida Bebidas Remains the Dominant Player
Benefiting from its dominance across all alcoholic drinks categories (besides having a leading role in soft drinks and packaged food), local player Florida Bebidas kept setting the pace in beer during 2019, capitalising on economies of scale in manufacturing and distribution. It has broad availability and affordable unit prices for all its value proposals, which have a presence across modern and traditional grocery retailers and on-trade establishments throughout the country. In the specific case of beer, it is worth mentioning that this domestic player is capable of addressing all segments of the population though different proposals. These range from its economy brand Bohemia (offered in off-trade channels in 350ml metal cans), to mid-priced proposals such as the category leader Imperial (which comes in different presentations, including low and non-alcohol versions, as well as a broad assortment of packaging formats), and its imported and domestic premium proposals (which include Bavaria Gold, Heineken and Corona Extra). These are complemented by its offer of ales, which include its own craft beer plant (Domingo 7), as well as imports of Samuel Adams.
The Balance of Share Is Fragmented
The balance of total volume share in beer remained very fragmented in 2019, with all the remaining players accounting for minimal shares. These players include a wide assortment of importers and local craft brewers, which continue to make efforts to improve their competitive position based on economies of scale. They also include a mixture of added-value and affordable proposals capable of reaching a wider consumer base, whilst allowing them to gain distribution and logistics savings on a broader scale.
Innovation and Affordable Added value Proposals Are Set To Gain Momentum
The competition within most beer categories is anticipated to remain based on aggressive pricing strategies and the constant launch of new flavour innovations and lower alcohol products. These will be capable of capitalizing on additional sales opportunities and new consumption occasions, whilst reinforcing top-of-mind brand awareness amongst a broader base of high- and middle-income local consumers over the forecast period. In this scenario,innovations based on local products and natural ingredients claims are anticipated to gain momentum amongst local craft brewers’ proposals, which will gain traction based on their own brew pubs; helping to create further revenue opportunities whilst also boosting demand across modern grocery retailers. Lower calorie options, as well as organic and gluten-free alternatives, are also set to capitalize on the expectations of higher-income consumers, with these niche proposals expanding demand for beer amongst a wider base of potential consumers in Costa Rica.
CATEGORY BACKGROUND
Examples of typical brands in mid-priced lager are the local brands Imperial and Pilsen, with a price range of CRC1,800-2,000 per litre, although they can also be found at CRC1,150-1,200 when opting for returnable 1 litre glass bottle presentation. Economy lager, on the other hand is only found in 330-355ml metal beverage cans. This price band includes a fragmented base of imported alternatives that have limited brand awareness amongst buyers (who base their demand on pricing and availability), which tend to compete against the local Florida Bebidas brand Bohemia; they all have limited distribution through off-trade outlets. Finally, good examples of premium brands are imported products such as Corona Extra and Stella Artois, which start at around CRC3,000 per litre and tend to be promoted as inspirational brands.
Premium - CRC 2750+ per litre
Mid Priced - CRC 1750 - 2750 per litre
Economy - CRC 1500 - 1750 per litre