25/01/2023

Key trends for beer in 2023

IWSR analyses the key drivers for the global beer market

IWSR anticipates that the beer category will remain largely buoyant in 2023, with forecast volume growth of between +1% and 2%. Despite the uncertainty created by ongoing macroeconomic and geopolitical challenges, there remain many opportunities for beer globally. While the cost-of-living squeeze is taking hold in many markets, IWSR expects that beer – seen as ‘an affordable luxury’ – will remain largely resilient as consumers defer bigger-ticket purchases.

Ongoing on-premise recovery

Although beer sales in the on-premise are still expected to reach pre-Covid levels by 2025, the fragile economic environment is likely to delay the recuperation of alcohol sales generally in the on-premise channel. This will have implications for the brewing community and, notably, the smaller craft players, which are more reliant on these outlets. Inevitably, pressure on disposable incomes this year may discourage footfall in pubs, bars and restaurants, but some share should shift back to the off-premise, with sub-channels such as ecommerce expected to gain share.

Improving results in the top three markets

The biggest worldwide market for beer, China, underperformed last year due to the return to strict lockdown conditions. But with China re-opening its borders in January 2023 after three years of travel restrictions and quarantine requirements, the on-premise is expected to enjoy a bounce-back, boosting the channel and the beer category as a whole. Some brewers have already reported seeing a notable rebound in markets in the Asia-Pacific region last year as Covid-related restrictions were eased, particularly in Vietnam, Malaysia, Cambodia and Indonesia.

In the US, preliminary 2022 findings show that while total beer continues to recover from pandemic losses, imports (led by Mexican beer) showed positive volume gains (4%) for the year. Although beer sales are predicted to continue to contract in the number two market for beer, losses may not be as marked as previously thought. The rate of decline in beer is easing up slightly, and RTD growth has slowed due to a highly saturated hard seltzer segment. The rise of the seltzer hit beer sales hard in the States but in other markets around the world the threat to beer from seltzers now looks to be less pronounced than it was a year or so ago.

There is continued optimism for beer volumes in 2023 for Brazil, Mexico, and Latin America generally. This part of the world has been the focus of considerable investment by brewers in recent times – and this spend is yielding strong results. IWSR expects beer volumes in Brazil and Mexico – the third and fourth largest beer markets respectively – to continue to grow over the coming years.

Growing importance of ecommerce in beer

Across the 16 most influential ecommerce markets, beer will generate the fastest online growth over the next few years: together with cider and RTDs, it will account for nearly a quarter of ecommerce value sales by 2026 as the major brewers increasingly recognise the opportunities that this channel has to offer and view it as the direction of travel longer term.

AB InBev and Heineken, for example, are not only investing in selling to consumers online, but also in building their digital B2B platforms to service their trade clientele, especially in emerging markets where the traditional trade remains very important. Two examples are AB InBev’s Bees app and Heineken’s Heishop. In Q3 of 2022, Heineken reported that in the first nine months of 2022, it more than doubled its ecommerce sales.

Premiumisation continues to grow despite shrinking disposable incomes

The online environment is well suited to promoting premium brands, and the expansion of online beer sales should help to facilitate the ongoing premiumisation of the beer category. Despite the inflationary pressures of 2022, the process of premiumisation appears to be enduring and is likely to again this year. This was very evident not only in China and Asia-Pacific last year but in markets across the globe, as brewers focused on selling their higher-end brands and consumers spent more on their at-home experiences to compensate for less frequent horeca visits. This trend is expected to continue into 2023 as consumers increasingly perceive beer as an ‘affordable luxury’, thus propping up value within the category.

No-alcohol segment to make further gains

Premiumisation will mean that value will outperform volume performance, which will have a positive impact on brewer margins. No-alcohol beers are normally not liable to any duty but often still command an attractive retail price for operators. Widening availability, increased marketing support, innovation, better-tasting product and rising consumer engagement are driving opportunities for the segment. Technological advances will mean that, in 2023, we will likely see more draught no-alcohol beers feature in the on-trade, giving them even more of a presence. More NPD is expected from brewers, with alcohol-free brands such as Lucky Saint raising over £10 million in Series A funding – the largest by an alcohol-free brand in Europe – in January 2023.

What does the future hold?

Although 2023 will be another year of uncertainty for brewers, the positive factors are expected to outweigh the negative ones, and the next 12 months are forecast to deliver growth. A slackening of inflationary pressures and an end to the war in Ukraine would trigger a considerably more upbeat set of results.