Craft Beer falls under the category where the manufacturer runs a comparatively small size beer manufacturing unit. Globally, the beer industry is on a growth trajectory, driven by change in lifestyle, increase in disposable income, increasing awareness in social-media platform etc. The increasing demand of the beer industry is majorly driven by developing countries like China, Brazil and India.
One of prime catalysts of this increasing demand is the addition of different flavors along with new ingredients, which has becoming popular amid millennials and the young generation. Thus, the countries having higher young population, are witnessing growth across the sector.
The composition of Beer includes ingredients like malted cereal grains, hops, yeast, water. The composition undergoes through the process of fermentation for a specified period.
There has been some greenfield acquisition across the sector primarily across the US market and other major markets. A set of analysts believe that the global beer market is getting saturated due to lack of variation in the taste of the drink. Due to the incorporation of new flavors, the prime section of the consumers is increasing their interest for the craft beer. The craft beer segment is growing at a decent pace, despite the total consumption of alcohol declining in the recent past.
What do the statistics reveal?
A couple of years back, the global beer market was valued at ~$5,93,024 million and is estimated to reach $6,85,354 million in 2025, depicting a CAGR growth of 1.8% from 2019 to 2025. One of the primary aspects of beer industry is the increase in the packaging costs. The can components are made from aluminum sheets, while higher aluminum prices drive the margin lower by increasing the manufacturing costs. Thus, the manufacturer bears the heat during the rising price of aluminum.
One of the key factors behind the growth of craft beer is the emergence of online segment. Due to the social media, consumers are preferring craft beer compared to normal beer as the introduction of online delivery has noticeably enhanced the consumption. Within the craft media segment, ~77% of the consumers are male and the average age of the consumer stands at 38. About 40% of the craft beer consumers falls under the age group of 30 to 39 years, ~20% falls in between 18 to 29 years while 25% constitute the 40 to 49 years category. As per study, the Australian consumers take advice from friends and family to get advice on beers to buy. As per the data, during the last year, ~30% of the craft beer consumer came from online purchase as compared to 22% during CY18.
The word ‘independent’ is used to denote the craft beer segment and most of the population treat it as an individual group. The rest of the respondents treat this as an independent name which supports individual or small-scale businesses. As per few industry experts, ~89% of the total consumers support the independent craft beer concept. Across the Australia, the current trend suggests that can beer has overtaken the bottles in the recent past.
The consumption of beer is directly related to the population of the nation. In the recent past, it has been observed that there has been an increase in the female consumers. However, few analysts believe that in coming years, the consumption is likely to increase due to the naturally sweet and non-alcoholic nature of the product. Based on the types, beer can be categorized into three segments i.e. popularly priced, premium and super premium. As per the recent trend, the growing premium category is summoned as the ‘mass premium’ category, as most of the population is consuming this category.
The US Beer Market
The scenario of the US market is continuing to struggle which is evident from the lower shipment across the US market. This is primarily driven by growing health awareness across the consumers. Thus, the consumers are preferring craft beer, which is presumed to be categorized as the premium category. The soft beer market has been gaining traction during the recent past on account of added flavors. Moreover, customized drinks like ginger beer, mead and even gin are on a revived growth trajectory, along with craft beer segment. The manufacturers are experimenting to bring certain innovative products like frozen alcohol slushies, tequilas, wine pops and hard seltzers in coming years.
The Australian Beer Market- A Look at TWE
In Australia, Treasury Wine Estate Limited (ASX: TWE) delivers beer to the retail customers besides being a wine manufacturer. The management has stated that across the alcoholic beverage segment, premiumization is playing a pivotal role for driving growth of the industry. TWE reported 13.3% growth in EBITS at $218.7 million in FY19. EBITS from Asia came in at $293.5 million with an EBITS margin of 39.2%.
The company is investing in logistics, as they believe, this will deliver extra growth in the coming years, due to the emergence of digital media. The Australia and NZ posted a growth of 15% in EBITS at ~$156 million with an EBITS margin reported at 26%. The growth was catalysed by growth in the lower luxury portfolios and masstige, enhancing the overall performance in the on-premise channels while focussing on maintaining the cost efficiency. The Europe segment reported an EBTS of $51.4 million, depicting a growth of 3.8% on y-o-y basis. During FY19, the EBITS margin stood at 14.9% aided by focus across specific regions.
We believe, in coming years, the Australian market is likely to be dominated with craft beer due to the premiumization of the product and as well as driven by the innovation across the product. The online-delivery factor is expected to drive added volume to the manufacturers and the suppliers. The Australian region along with Asia is likely to deliver growth in the future.
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