The International Beer Strategies conference in Porto last week was a fantastic opportunity to meet many friends and clients of the firm.
I left the event with a number of key takeaways that highlight the complex challenges faced by the sector, which resonate with the work that AlixPartners is undertaking across the value chain to help companies perpetuate their growth.
Here are five of the critical market dynamics at play that were high on the agenda amongst delegates:
1. Optimise2: Navigating challenging macro and geopolitical factors is the new norm. Brewers (and other beverage companies), emboldened from successfully navigating challenging conditions, are now optimising their supply chains, production capabilities, and portfolios. Security of supply, a persistently challenging macro picture, and evolving consumer trends are amongst the key drivers for this. Case in point – I spoke to a number of brewers who are actively considering or have announced multi-million-dollar manufacturing investments to drive productivity and ESG gains, as well as provide new manufacturing capabilities. Others are looking to invest to grow their international reach and align their portfolios better to consumer trends.
2. Premium and value for money: The event organisers talked about premium brands outperforming during difficult economic times as consumers seek to drink better quality but less often – a trend that our recent Critical Consumer study highlighted at the start of the year. Striking the balance between premium and perceived value for money is key to win share of throat, particularly in such a crowded market, where a variety of different beers, from craft to world lagers, position themselves as 'premium'.
3. Not going out... On-premise remains 4% down on volumes since the pre-COVID years, although most agreed this remains the key channel in which to build brand equity. The evolution of the bar was covered excellently by Juan Gonzalez from DAMM, who pointed out that new segments are substituting traditional beer, catalysing increasing fragmentation, particularly within premium (the 'old' premium lager category is now premium lager, world lager, craft, and a no alcohol variant). What does this mean? Brewers are missing revenue if their premium portfolio is narrow because most consumers will have more than one "go-to" premium beer.
4. Not staying in... While on-premise is down, the growth of live events such as music festivals provides a growing opportunity to build brands to target audiences for an increasing array of beverages, including Flavoured Alcoholic Beverages (FABs) and Low and No (LoNo) varieties.
5. I'm a celebrity... get me on a can: The role of social media influencers, athletes, and celebrities in the drinks industry to promote either their own brands or third-party brands is not new, but it is growing. And with good reason, based on the survey data shared, which showed the importance of such promotion partnerships to engage with younger generations in particular. This isn't a one-way construct though, for either side, with aligned interest, meticulous planning, marketing acumen, and the right partners required to set up such collaborations for success.
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