According to a new research report by UK-based Technavio, the global beer market will grow by only a 2% CAGR (compound annual growth rate) between 2017-2021. That slowing growth presents a number of dilemmas for traditional brewers, who will be under pressure to come up with new product offerings to offset maturing market growth worldwide.

As the report points out, the one segment of the global beer market that appears to be the most sluggish in terms of future growth is the “Standard Lager” segment, which still accounts for more than half (56%) of all beers sold worldwide. However, beer drinkers continue to transition to the “Premium Lager” segment, which now accounts for 28% of all beers sold worldwide. The third most important category of beer is the “Specialty Beer” segment, which accounts for more than 9% of all beers sold worldwide.

Technavio has published a new report on the global beer market from 2017-2021. (Graphic: Business Wire)

So what’s accounting for the slowdown in the global beer market? One key factor, says Technavio, has been the maturation of the North American and Western European markets. Consumers are tired of drinking the same beers all the time and are embracing craft, artisanal and other premium beers that are made with superior ingredients and brewing techniques. That’s led to a sharp rise in the “Premium Lager” segment over the past decade. 

At the same time, says Technavio, beer is losing out to spirits such as tequila, whiskey, and cognac. In other words, the same drinker who might have relaxed with a beer after work is now seeking out other alternatives. As a result, the relatively sluggish growth of the global beer market is being significantly outpaced by the growth in the global spirits market.

At some point, too, you have to consider how the broader dynamic of global economic growth is impacting drinking habits. As less-developed nations begin the journey of economic development, beer is the dominant drink of choice due to its relative affordability. But as incomes rise and as a middle-class develops, there is a natural move to embrace higher-priced spirits and premium products.

So what can global brewers do to woo back beer drinkers? One solution is greater innovation in the types of products that are available. You can see that innovation at work in the “Specialty Beer” segment, where the race is on to find unique flavor profiles that drinkers might be found elsewhere. 

The key to making a popular specialty beer, says Technavio, is experimenting with unusual fermented foods. “The addition of fruits, herbs, spices, miscellaneous flavorings such as licorice, smoke, and hot pepper, and odd fermentable products such as maple syrup, honey, and molasses turn an ordinary beer into a specialty beer,” says Technavio.

For beer drinkers, one trend that’s taking off in the “Standard Lager” segment is the brewing of beers with fruity taste profiles. According to Manjunath Reddy, a lead alcoholic beverages research analyst from Technavio, “The global standard lager market is witnessing an increasing prominence of flavored lagers, and the vendors operating in this space are coming up with new flavored products to remain competitive.” Reddy points to apple as one flavor that has become popular with traditional brewers, “In June 2014, for instance, Molson Coors Canada launched Mad Jack later in apple flavor in the Canadian market.”

So, even as the global beer market prepares for single-digit growth rates in the years ahead (2017-2021), there’s still the potential for Specialty Beer and Premium Lager brewers to win additional market share. That’s where the true innovation seems to be happening in the beer market, and that could help to win back beer drinkers who have begun to drink whiskey, tequila or cognac instead.

SOURCE: Business Wire