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US cider boom offers beer bust ‘escape route’ - analyst suggests

By Ben Bouckley , 09-Oct-2012
Last updated on 10-Oct-2012 at 11:32 GMT

Riding the new US cider boom is one of the few escape routes for large mainstream brewers faced with ‘hemorrhaging’ beer volume sales, a leading alcoholic drinks analyst insists.

Spiros Malandrakis, senior alcoholic drinks analyst at Euromonitor International, told BeverageDaily.com that, since cider was readopted by young UK urbanites in 2005, the seeds of its future, ostensibly upmarket, success were sown.

Euromonitor data shows that cider posted 6% global volume growth in 2011, while research released in September by research firm Technomic shows that domestic light beer sales (accounting for over half US beer volumes) fell 2.6%, while regular domestic beer sales (20%) fell 3.2%.

US cider war starts

This week we learnt that Carlsberg will launch its Somersby brand in the US via Crown Imports. Meanwhile, other industry big guns, AB InBev, Miller Coors, C&C Group and Heineken, have all either pulled off M&A moves and launches, or plan to do so.

“The situation with most beer companies is quite difficult in all mature markets, and cider is one of the very few escape routes they have left. It’s either that, trying to imitate what the craft segment is doing with beer or flavored variants, or going into RTDs,” Malandrakis said.

“This could potentially be the easiest, because cider has proven to be massive – it’s much more than just a niche in the UK, where it accounts for a massive part of drinking,” he added.

While sales of cider totaled just 59m liters in the US last year, in the UK a massive 912m liters were sold (volumes here are still growing at 6% per year); other major markets include South Africa, France, Spain and Ireland.

But Malandrakis warned that it was only a matter of time before the socio-economic storm brewing in Europe finally caught up with the category, and at least led to a slowdown in markets such as the UK, bringing the US to the fore as a battleground for the big brewers.

“It is immediately relevant to female populations – that’s the breakdown across the world – and it starts from a premium position in the States, so producers don’t need to endure the decades-long process they had to go through in the UK,” he said.

Another advantage, even for premium cider, was affordability, the analyst said: “It’s not like vodka that might cost a couple of hundred quid [200 or $320], only one, two, three more than a standard beer, it’s as affordable as the craft segment has proven to be through the years of the recession.

Malandrakis told this publication that he didn’t think there was a specific cider taste profile that would work in the US, given that it was a young category still at the “experimentation stage”.

Rags to riches story Stateside?

During a vacation that he spent in California, last year, the analyst added, staff in large Wal-Mart stores had not even heard of cider when asked about it, which showed a lack of public awareness.

Nonetheless, whereas cider began in the UK as a humble blue-collar drink that subsequently fell out of fashion, before its return to favor last decade, Malandrakis predicted smoother fortunes in the US.

“One sure thing is that tradition and heritage play a major role in the way it is promoted. It’s less of a rags to riches story (as per in the UK) but its starting in the premium end in the States,” Malandrakis said.

“Cider is tapping into the same demographic, the same marketing campaigns, to an extent the same companies as craft beer.”

Despite a focus on US traditions at this stage, the analyst suggested that a fascination with all things British in some quarters meant that UK brands could perhaps use their genealogy as a USP Stateside in future.

US producers had already tapped health and wellness concerns since cider does not contain any wheat, he added, while, broadly speaking, cider could either play on (1) flavors or (2) provenance.

“That’s how I see the trend evolving in the UK. In 2005 the big step forward was serving cider on ice, which boosted Magners, and paved the way for flavors in 2006/7,” Malandrakis said.

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