How an evolving consumer is driving change in the low and no alcohol beer category

Is there really such a thing as ‘FMCG’ anymore? We believe that those FMCG brands that are going to see success in the long run are those that can see beyond their sector. As the boundaries between health, tech, and FMCG become increasingly blurry, and as FMCG reduces its dependency on retailers by developing in B2C, we’re tapping into our expertise across sectors to explore how brands can innovate and change the game more rapidly, with better joined up thinking. It’s time to ask yourself if being single minded is making you narrow minded…Can FMCG really win on its own? Click here to read the other blogs in this series.

The UK has always been a nation of enthusiastic beer drinkers, knocking back eight billion pints of the amber nectar every year.  But the industry is facing significant challenges, driven by some stark changes in consumer behaviour which are forcing brewers to look beyond their core product and consumer to stay relevant and commercially liquid.

As with many parallel FMCG categories; snacks, confectionery and soft drinks, health is the key macro driver of these evolving behaviours and when the numbers are examined the scale of the challenge and indeed the opportunity becomes apparent.

A recent Society of Independent Brewers (SIBA) report indicated that a third of 18-24 year olds have reduced their alcohol consumption while 23% vs 17% of all adults are teetotal, a 6% rise year on year.  Now of course  the industry has been wise to this for a while, investing heavily in the low and no alcohol (LNA) space to cater to this burgeoning consumer type, resulting in a 30% increase in LNA beers in the last three years and driving sub category expected 2020 revenues beyond £63m.

And it’s not just the lucrative younger demographic changing their ways, but established beer drinkers too, with 66% of them claiming to follow a healthy lifestyle with clear implications for their alcohol consumption and the potential demand for high quality, LNA alternatives to fill that void.

A few short years ago, TVE partnered with Heineken to innovate in the LNA space beyond traditional lager and their flagship Heineken 0.0% variant, in order to increase engagement and appeal of the LNA subcategory.  This was a great example of an international brewer looking beyond simply stripping the alcohol out of their household brands, cognisant of the fact that consumer expectations would swiftly move on and seek out other RTB’s around craft, ingredients and complexity of flavour from LNA products

Effectively, established drinkers traditionally approach LNA with a negative mindset and with the alcohol RTB of beer crucially absent the product will always be benchmarked against the full ABV variant which regardless of quality will be deemed inferior or lacking.

This however is not an issue amongst the younger cohort or teetotal consumers.  LNA beer is a positive choice; a grown up, sophisticated drink which leverages the social equity of beer with none of the compromises to a healthy lifestyle.  And it’s this shift from a negative to a positive perception of the LNA category that will define its potential.

Another legacy barrier was around paying a premium price point for LNA beer, but the SIBA report suggests that this too is changing. While just 19% of Gen X consumers agreed that they were happy to pay for a good quality LNA variant, this rises to 36% amongst Gen Z & Millennial consumers.

So with  a growing consumer type willing to trade up for a superior product experience, the impetus lies with brewers to meet that challenge by innovating with flavour profile, exotic ingredients and stand out packaging to drive increased equity into the LNA category.  And by positioning LNA as a positive, lifestyle choice and a healthier alternative to full ABV, brewers can drive engagement and relevance with the growing number of younger consumers who are simply opting out of the alcohol sector.

That said, with the on-trade market effectively on hold, it will be interesting to see how an enforced period of behavioural change will impact the category in the long term.  Will consumers emerge from isolation with renewed vigour for full ABV or will the daily Joe Wicks workout win out?

Ultimately, the real mark of success and potential of the category will be if LNA manages to shake of the shackles of its alcohol legacy and evolve into a valuable, health led subcategory in its own right. In the longer term, will the category come to be defined by the consumer led positivity around the nature of the product and its tangible practical and emotional benefits and not simply by what it’s seemingly lacking?

Categories: Premium FMCG

BY ENGINEER Alex Beattie

alex.beattie@thevalueengineers.com