Beer volume decline to hit big brewers say analysts

beer 1024 x 512

Volumetric consumption of beer in Australia is set to decline over the next four years, hitting mainstream beer, but the value of sales will increase, according to analysts at Fitch Solutions,

Fitch, which recently released its Q4 report on the Australian food and drink market, found “rising health awareness and higher taxes” was going to have a significant impact on the beer market.

Brandon Msimanga, a food and drink analyst at global market insights company, said that governmental interventions and changing consumer habits were fuelling the trend.

“Excise taxes on alcoholic drinks and the government’s public awareness programmes about the negative impacts of excessive alcoholic drinks consumption [contributed to the decline],”Msimanga said.

“While beer will continue to dominate alcoholic drinks consumption in volume terms over the medium term, we forecast a 0.4% contraction in beer consumption over 2019-2023.

“Wine consumption will grow at an annual average of 0.9% during 2019-2023 while spirits will post the strongest growth in consumption at 2.4% over the same period.”

The report said beer consumption will decline from an estimated 74.9 litres per capita in 2018 to 69.1 litres in 2023.

In contrast, Fitch forecast an increase in alcohol spending. Its predictions for 2020 indicate that overall spending in the category will rise to $22.7 billion, from $21.8 billion, reaching $25.7 billion in 2023.

The report said that mainstream commercial beer would be “most affected” by the decline, as consumers shift to smaller quantities of higher quality, local beers.

The craft beer segment “continues to experience double digit growth”, albeit from a low base.

It said the opening of new breweries, noting the launch of Black Hops II earlier this year, was a sign of the growing popularity of small scale and craft brewers.

“This is due to Australians’ willingness to spend more on premium alcoholic drinks while consuming the same or lower volumes of alcoholic drinks,” Msimanga explained.

“[This indicates] that consumers are trading up to more expensive, premium offerings. While beer consumption will fall year-on-year, we expect a small rise in wine consumption and a larger rise in volume consumption of spirits.”

As a result of this trend, Msimanga said that drink producers and retailers “stand to benefit” from investing in more ‘premium’ alcoholic drinks products like craft beer, spirits and wine.

Some of the major brewers have taken this lesson on board with the acquisitions of Green Beacon and Balterby CUB in addition to 4 Pines and Pirate Life, and Lion’s acquisition of New Belgium Brewing which opens up new craft beer avenues globally for Japanese owner Kirin.

Fitch’s analysts said that the young adult population (20-39 years old) will be a “key demographic” in the trend towards ‘premiumisation’.

“The young adult demographic is more open to trying out new and innovative alcoholic drink product lines while presenting long term spending growth opportunities,” Msimanga explained.

Fitch said that Australian consumers have high levels of disposable income and so they can spend relatively freely on premium and discretionary items.

“Consumers are increasingly favouring quality over quantity,” it said.

Which is just as well, as they also found that beer excise in Australia is more than twice the Organisation for Economic Co-operation and Development average.

Australia has now, along with Scandinavian countries and Japan, one of the highest beer excise rates globally. Australian tax rates on beer are also automatically increased twice every year, Fitch highlighted.

“Furthermore, the Australian Government’s Department of Health has developed its National Alcohol Strategy 2019-2028 which is targeting a 10% reduction in harmful alcohol consumption. There is also a shift from the consumer side due to rising health awareness,” Msimanga explained.

Back to News