PACRIM'S SUMMARY FOR BEER IN SOUTH AFRICA

HEADLINES

▪ COVID-19 results in shift to more affordable products as consumers see spending power constrained

▪ Beer category sees total volume growth of 2% in 2019 to reach 3.3 billion litres

▪ Flavoured beer products attract millennial consumers in 2020

▪ Flavoured/mixed lager sees most dynamic performance in 2020 with total volume growth of 36% to reach 99 million litres

▪ Beer sees 8% unit price increase in 2020

▪ The South African Breweries Ltd remains dominant in 2019 with 73% volume share, although Heineken South Africa (Pty) Ltd makes gains

▪ Beer set to see -8% total volume CAGR over forecast period to stand at 2.2 billion litres in 2024

PROSPECTS

Flavoured and craft beers underpin category’s performance in 2020

In 2019 flavoured beer revitalised millennials’ interest in the category, and led to stability in declining beer volumes. While beer volumes were declining by 4% to 5% annually on the global stage, this was not as severe in South Africa, as craft beer and lager buoyed the trend towards more upmarket and premium products. Millennials were also shifting away from heavy, bitter beer varieties towards lighter, and sometimes fruity flavoured products. This supported the growth of flavoured/mixed lager, which saw the category’s most dynamic performance in 2020.

Craft beer, meanwhile, cemented its significance with an expansion of new products, as most craft brewers had an ale, weizen, and even a stout in their portfolio, along with their flagship lager products. These categories are very niche, but were nonetheless growing well, along with lagers. Their performance was due to the increasing variety of such products. This particularly appealed, as for a long time beer drinkers were only able to drink mainstream beer. Craft beer addressed this and made beer more sophisticated. This revived consumer interest, helping to win consumers from wine. Prior to the craft beer boom, mainstream players only made lager because this was easier to sell to a wider audience.

Female millennials represent increasingly important consumer segment

In 2020 millennial female consumers were becoming increasingly important as society continued to drive the emancipation of women. There was evidence of a move towards more unisex beers targeting both men and women, with women typically more adventurous than their male counterparts, and willing to try something new.

Millennials’ changing preferences supported the dynamic growth of flavored/mixed lager in 2020. New product launches were positioned as unisex offerings. For example, the recently introduced Flying Fish Chill has less sugar and carbohydrates, making it appealing to anyone watching their weight, as well as those interested in general health issues. Hansa Golden Crisp, introduced towards the end of the review period, was well received due to its light, easy-drinking nature and less bitter taste.

Healthier options perform well

The South African Breweries Ltd, which offers everything from Budweiser to Castle, was in 2020feeling the brunt of a long-running decline in beer demand globally suffered by its brand owner Anheuser-Busch InBev NV. However, the company intensified marketing campaigns, which boosted sales volumes. Its “no excuses” and “smash the label” campaigns yielded success as consumers responded well. Of particular note in 2020, however, was the performance of Castle Lite, which gained volume share due to consumers’ increasing interest in healthier beer options. The health trend also benefited Heineken, which gained share in South Africa’s beer category in 2019 following the rollout of Heineken 0.0. This is an alcohol-free lager brewed with a “unique recipe for a distinct balanced taste”. Furthermore, it has only 69 calories per 330ml bottle, with 16g of carbs, compared with 138 calories and 10.5g of carbs in regular Heineken.

Meanwhile, the double-digit growth in sales of South African Breweries’ Corona resulted in the brand rising in the beer category’s rankings over 2018-2020. Imported beers such as Corona were growing faster than the overall beer industry at the end of the review period.

COVID 19 impact

On-trade volume sales of beer are expected to fall by 36% in 2020 in light of the impact of COVID-19. This compares to an expected 1% rise forecast for 2021 during research conducted in May 2019, ie before the spread of COVID-19. Off-trade volume sales of beer, meanwhile, are expected to fall by 28% in 2020 due to COVID-19’s impact. This compares to an expected 2% rise forecast for 2021.

There has been a move away from premium products to more affordable, economical alternatives as consumers face spending constraints as a result of COVID-19. In beer, standard lager is set to be more robust than premium products, for example. Furthermore, with non-alcoholic beverages moved into supermarkets’ beverage aisles towards the end of the review period, non-alcoholic products have seen strong growth during lockdown.

Affected products within beer

Premium lagers set to see a negative influence as a result of COVID-19 in both off- and on-trade channels, due to channel shifts arising from the home seclusion trend. Non-alcoholic beer is an emerging category, benefitting from the health trend, but unlikely to see stockpiling. Signal Hill Products, which offers a non-alcoholic beer within its Devil’s Peak range, has seen increased interest from consumers who would not necessarily have opted for a non-alcoholic beer prior to COVID-19 lockdown. Its Hero and Hero Twist of Citrus offerings have proven particularly popular. Weissbier/weizen/wheat beer is also unlikely to see stockpiling, and on-trade consumption is unlikely to shift to off-trade purchases for home consumption.

Recovery and opportunities

Curfew, restrictions affecting both on- and off-trade channels will continue to negatively impact demand for alcoholic drinks in the short term. The effect of lockdown on consumers’ incomes is also likely to have a severe negative impact on all categories, especially premium beers, whilst cheaper variants will fare better. Interest in craft non-alcoholic beer has also soared during South Africa’s lockdown. Alcohol-free craft products have gained traction due to the limited reaction from the country’s major alcohol producers in response to growing demand According to industry sources, South African consumers are enjoying the non-alcoholic beer products on offer, indicating growth potential for the future.

New low-alcohol or non-alcoholic beers are likely to continue to attract consumers. As a result, new launches are expected. The effects of the health trend will be exacerbated by increased awareness of health issues arising from the COVID-19 pandemic, and the relationship between the health of the immune system and obesity on the severity of the disease. Health-conscious consumers are more aware than ever of the effects of frequent and excessive alcohol consumption. Furthermore, such products appeal to those who participate in sporting activities, and also pregnant women. Low-alcohol or non-alcoholic beer could therefore satisfy a number of demands that were not previously considered by beer industry players. Meanwhile, new flavour variants are likely to attract millennials.

CATEGORY BACKGROUND

Brands such as Castle Free and Devil’s Peak from Hero to Zero are growing well albeit from a low base. The forecast period will see greater demand for affordable non-alcoholic beer products, as their price point during the review period was still too high to drive greater volume consumption.

Most premium brands such as Hennessey and Cîroc, however, are susceptible to other trends such as premiumisation and influencer marketing. Additionally, there is large-scale syndicated purchasing of these brands, which shows that price remains a concern.

• Premium - More than ZAR 25.00 per litre

• Mid-Priced - ZAR 18-24.99 per litre

• Economy -Less than ZAR 18.00 per litre