31/08/2022

Growth drivers for the global beer industry in 2022 and beyond

IWSR analyses the drivers and outlook of the global beer category

In 2021, the global beer market recovered nearly half of the volume losses it endured during the height of the pandemic in 2020. Looking ahead, IWSR expects the global beer market to return to pre-Covid levels over the next 2 years, and to rise almost 3% higher than pre-pandemic levels by 2026.

During the pandemic, wine, RTDs and spirits were less exposed than beer to the collapse of the on-trade and so gained share. In many markets, still wine proved the perfect partner to ‘at-home’ consumption during lockdowns, while RTDs and spirits were able to capitalise on the emerging cocktail trend that is becoming more visible across the world. However, IWSR numbers show that beer demand is now recovering, and while many brewers are expanding into other categories, they are continuing to invest in their core beer brands, too.

The traditional beer strongholds of North America, Australasia and Western Europe are inevitably showing signs of maturity, but demand in other parts of the world is relatively vibrant: IWSR is particularly optimistic about Central and Southern America, where beer consumption has already surpassed 2019 levels. Competition among brewers and favourable demographics have contributed to the performance here; beer sales are set for a 15% rise above their pre-Covid level by 2026, with Brazil, Colombia and Mexico leading the charge. This region will contribute nearly three in every 10 litres of global beer growth between 2021 and 2026.

Prospects for beer in Africa remain upbeat too, with a young legal drinking age (LDA) population, a low per capita rate of beer consumption, and a climate suited to beer consumption all helping to push up demand. And with the scale of their outlay on new breweries and infrastructure, the big brewers have demonstrated that they are there for the long haul. By 2026, IWSR expects the African beer market to be a fifth bigger than it was pre-Covid in 2019.

In Asia, overall prospects for beer are being constrained by a sluggish Chinese market and a declining Japanese market – but outside the region’s two biggest markets, IWSR anticipates volume growth of 22% over the next five years. Gains are forecasted in markets including the Philippines, Cambodia, Laos, Indonesia and India. Heineken, for example, has recognised the potential in India, taking a controlling interest in India’s beer giant United Breweries in 2021, as well as introducing the Amstel brand. In India, spirits consumption exceeds that of beer, highlighting opportunities that exist for selling beer; this potential will be amplified as India’s middle class grows and more consumers enjoy domestic refrigeration.

In the more mature beer markets around the globe, category growth will be less focused on volume and more on value. While there are downward pressures on beer consumption in these markets, consumers have shown a willingness to upgrade to higher-end products – in line with the ‘less but better’ trend. As consumers sat at home in these countries during the lockdowns of 2020 and 2021, they also sought out more premium beer-drinking experiences as a substitute for eating out, and this trend looks to be continuing. This has helped to boost margins and make up for some volume contraction.

In Western markets, the moderation and “better for me” trends present a considerable opportunity for no-alcohol beer and, increasingly, the globally recognisable beer brands are offering non-alcoholic alternatives. Last year, AB InBev introduced Stella Artois 0.0 into the US, and Corona Sunbrew 0.0% – the first non-alcoholic beer with vitamin D – in Canada. Heineken 0.0% has now reportedly been rolled out to more than 100 markets.

This investment and indeed patience – Guinness Zero reputedly took four years to develop – has meant that these new no-alcohol variants deliver a taste experience that makes them ideally suited to cater to a society that’s increasingly focused on moderation, especially in more developed markets around the world. This is borne out in the numbers, with global volumes of no-alcohol beer jumping by 14% last year. There remains plenty of momentum and, by 2026, no-alcohol beer volumes are expected to increase by a further 50%.

The threat to beer from other categories does exist, however, and many of the major brewers are becoming less tied to their brewing operations: Molson Coors is now a ‘Beverage Company’ and not just a ‘Brewing Company’, and AB InBev continues to invest in its ‘Beyond Beer’ business, which contributed more than $425 million of revenue in Q2 2022 according to its earnings report. In the release, the company added: “Our above core beer and spirits-based ready-to-drink portfolios outperformed the industry, led by Michelob ULTRA which grew by double-digits and Cutwater and NÜTRL vodka seltzer which grew strong double-digits.” Meanwhile, Heineken signalled its intentions with its plans to buy South Africa’s Distell Group, announced in late 2021.

Such moves should however not be seen as a gloomy bellwether for the beer industry, but as strategic business planning aimed at leveraging supply chain advantages. IWSR believes that, at 74%, beer’s volume share of the beverage alcohol market will have edged down only marginally by 2026. And, as brewers invest in global markets and product innovation, the opportunities for beer will continue to present themselves.