Losing bottle?

Last year a drinks buyer for one of the big managed pub groups told me that the future of beer lay in draught and that premium packaged lager (PPL) was going the way of the dodo.

Now while it can be foolish to make bold predictions such as this about the future, it is undoubtedly true of the current market. According to AC Nielsen statistics for the period up to May 2006, the category is in four per cent decline. Aside from Corona Extra, the top five brands in the category are showing signs of decline.

The sharpest drop is in the managed sector, which is declining ahead of the market at six per cent.

Given the tough trading times reported by several managed pub companies whose business is centred on the high street, such as Laurel, Regent Inns and Luminar, this fact is hardly surprising. After all, the bulk of PPL sales are centred on high street bars and clubs.

So what is the future for PPLs? Are familiar draught brands like Stella Artois and Foster's going up a blind alley by pursuing the PPL market?

After all, aren't customers now looking for differentiation through imported, world beers? How can traditional PPLs hit back?

Over ice

The biggest challenge to PPLs over the last year has come from the most unlikely of sources. Cider is the new crown prince of the drinks world (in other words not yet the king, but making all the headlines and stealing the hearts of the young ladies while it's at it). And more surprisingly it is packaged cider rather than draught. Magners is the star of this particular show but sales volumes for rival brands like Strongbow Sirrus and Gaymers mean that cider is pressuring PPLs for space in back-bar fridges.

The Magners serve of a pint bottle poured into a branded pint glass over ice has given the consumer something new. It has added theatre and given control of dispense back to them, as they control the pace of topping up the drink. The old bottled favourites Budweiser, Beck's and Holsten Pils are struggling to find growth, although it is important to point out that Budweiser still has 33 per cent share of the PPL market.

One thought that is surely in the minds of the marketing teams of these brands is why not push this over-ice concept into the PPL market? For one thing it would help guarantee a "cold" serve; something lager drinkers now demand and don't always get from product served from unreliable back-bar fridges.

John Holberry, on-trade sales director at Coors Brewers, understands the logic but does not think it will work. "I am not sure about serving lager over ice - simply because of the way the liquid mixes with water. That is why we have spent so long developing the Coors Sub Zero technology [which dispenses pints of Coors Fine Light and -2OC, leading to the formation of lager crystals] because serving with lager crystals works better."

Elephant on test

But as it happens a move towards serving lager over ice may well be taking place. Darran Britton, marketing director at Carlsberg UK, has confirmed to The Publican that the brewer has been testing the recently relaunched Carlsberg Elephant served in a glass over ice in more than 50 pubs and bars.

And Budweiser has recently entered the standard lager market with its new Budweiser Silver concept, which is unique to the UK. However, aside from being a lighter, lower ABV lager, perhaps the most significant innovation is its packaging: a pint bottle with "gripper" handle. Surely it won't be long before the marketing and sales team at Anheuser-Busch in the UK begin to recommend that licensees serve the product over ice?

Despite the negativity surrounding the PPL category, the big brewers are still committed to it. Steve Kitching, managing director of on-trade sales at InBev, says there is big and sustainable value in the market. "The PPL market remains an important part of the trading mix for retailers, generating on-trade sales of £916m annually - an 11 per cent share of total on-trade lager value business.

"We are certainly not backing down on our support of the PPL sector. Since its launch last year, Brahma has established a repeat purchase rate of 77 per cent which is extremely high for a new brand and has proved particularly popular with professionals aged 21 to 34."

Both Scottish & Newcastle and Carlsberg have innovated in the market in recent months with the launch of two new citrus lagers: Foster's Twist and Carlsberg Edge, respectively.

Perhaps the future for PPLs lies in brand owners hitting the right target market; being aware that consumer tastes have changed and adapting accordingly. Steve Kitching strongly believes retailers need to take this message on board.

"The quality dispense initiatives undertaken by some draught brands have clearly had an impact on PPL business. Some consumers would have chosen to drink bottled brands because they were worried about draught quality but that has changed. Others wanted to show what brand they were drinking but increased use of branded glassware means they can now do this with draught," he argues.

"However, a large number of consumers still want to drink bottled beer and there are drinking occasions where packaged brands are important, for example in clubs they have a much larger role to play than in community pubs, where draught is the more popular choice."

A PPL success story - Corona Extra

The picture for PPLs isn't all gloomy. In among declining volumes is one big success story. Here Paul Wells, managing director of Charles Wells, which imports and distributes the product, tells The Publican how he and his company have made such a success of Corona Extra.

"We took on the rights to Corona in 1996 from Whitbread. I worked in the US in the 1980s and was struck by Corona then - it was really beginning to take off. It is a great world brand.

"We were looking for something that would complement Red Stripe in our efforts to build up a portfolio of international world beers. We did have a number of failures in that regard, such as Bitburger. So we have paid our dues in many respects.

"Timing with these brands is critical. When Corona first came into the English market it was after a period of huge sales of Sol, which was the number one Mexican lager in the market at the time. But for some reason overnight Sol seemed to collapse.

"The problem with being instantly popular is that you then stand in line waiting for the next big thing to take over.

"To be honest Corona didn't work at first - people were suspicious of another Mexican brand so soon after Sol. All we did was embark on activity-based marketing - mainly because we had no money to spend on it at the time. And through this we created a direct relationship with the licensee and a bond with the brand.

"It is an iconic brand - the bottle is contemporary as well as retro. It is truly international and authentic and that is what people are now looking for. You have to have brand authenticity [in this market]. All over the rest of the world, in Japan and the US for example, freshness of beer is hugely important. But this doesn't seem to be the same in the UK - they want authenticity.

"Corona is now the number three PPL in the UK market, with the top two being in decline. It is very well established in the on-trade but perhaps less so in take-home.

"The new innovations with lime flavour already in the beer are interesting. But I am not sure that is the solution.

"Essentially there are many PPLs in this market which are easy drinking and are drunk cold from the fridge. But they are not achieving the same results as Corona is right now. For me it is all about the power of the brand."

Corona statistics​

• The world's fourth largest beer brand since 2001 (Impact Databank)
• The world's best-selling Mexican beer for the past 15 years (Grupo Modelo)
• The number seven premium lager in the UK - twice the value at retail of Peroni and Miller Gen