Standard bearer

Anyone who thinks they know what the future holds in the drinks industry is a mug. If someone wagers you a decent sum of money predicting what the state of the market will be, please do me a favour and take up the idiot's offer. The cash will follow pretty swiftly.

Why so cynical? Let's look at the evidence. No-one, upon no-one would have predicted that in the summer of 2006 the good people of Great Britain would develop a big penchant for drinking cider over ice.

Trying to predict the patterns of the lager market is equally futile. Five years ago Stella Artois was king; the perfect brand. It had premium values, massive sales and fantastic advertising. Not only that but most trade experts were advising that premium lager was the way forward and that standard lager was about as fashionable as bell-bottomed trousers.

Fast forward half a decade and the situation couldn't be more different. Stella is undoubtedly suffering. It is still doing healthy volumes but not as much as before. It now sits at number four on AC Nielsen's on-trade charts. It is certainly not falling through the floor, but times are tough.

And where one smart alec once said standard lager was a thing of the past, it is now the only sector in the beer category which is standing up to the tough trading environment in pubs and threats from other drinks categories. Carling and Foster's absolutely dominate market share in lager. Carlsberg has, through clever marketing, established itself as the official beer of football, leading to big performances in sports bars and high volume lager pubs.

How has this turnaround taken place?

1. Extra cold​

There is always "the next big thing" in beer, be that nitrokeg or the widget. Extra cold has been called the next big thing for some time. But it has been much more than that. The innovation rescued standard lager sales when they had been suffering for some time and has led it back into some small form of growth.

According to AC Nielsen figures, since 2002 extra cold technology has (on its own) grown overall sales of standard lager from 39 per cent to 43 per cent of total on-trade beer sales.

"Extra cold has done a hell of a lot for mainstream lager," says Darran Britton, marketing director of Carlsberg UK. "It has made the brands appear more relevant and modern. Plus it has given the brands a stamp of quality - drinkers look at extra cold products and know they are going to get a quality pint."

Steve Kitching, managing director of on-trade sales at InBev, agrees that extra cold is presenting a quality message.

"Retailers need to remember that it is the presentation of extra cold brands that communicates refreshment to pub-goers, and that's what triggers the demand rather than the fact that the beer is served at two, three or five degrees," he says.

The extent to which extra cold is taking over is highlighted by AC Nielsen statistics, which show in 2003 extra cold brands were in 23 per cent distribution in the on-trade. That figure has hit over 50 per cent this year.

Graham Page, consultant at the data analysts, believes the innovation looks like it is here to stay. "Most brewers are looking to go extra cold with everything across the board - even ales," he says.

And yet, is there a storm brewing on the horizon? As much as brewers are making hay with extra cold, pub companies are getting frustrated. The more successful the innovation becomes the more extra cold brands a licensee will want on his or her bar. Which is fine, until you realise how much under-bar space is taken up by the cooling systems.

"Why not share technology, with all dispense of different brands being put through one universal cooling system?" the pub companies asked the brewers. "Get knotted," they replied - and why wouldn't they, after stumbling upon a potential goldmine.

But it looks like the retailers' patience has run out. Mitchells & Butlers is believed to have installed its own cooling system and is now charging brewers a rental fee to use it. Don't be too surprised to see other retailers following suit.

Steve Kitching has concerns about the future of extra cold and how licensees will adapt to these problems.

"Bar equipment is most definitely one of the biggest industry issues. As the dispense temperature of lager drops, it places new demands on existing beer dispense equipment," he says.

"There are two ways of tackling the issue: the first is to take all the bar equipment out and start a fresh with a brand new solution that meets market specifications and the way it is moving. The second option is an incremental solution whereby you build on new bits of 'kit' as new brands arrive.

"It's up to the retailer to decide which is the most effective way of achieving this change. A number of managed chains are re-specifying their dispense solutions. However, bearing in mind the size of the on-trade "universe", with more than 114,000 outlets, it is going to take many years to change all the equipment."

2. Big brands performing well​

While beer lovers like to see differentiation in a market, nothing drives a category along like having successful big brands - be that crisps, coffee or lager.

One of the big reasons cask ale continues to see year-on-year decline, despite the effort and investment put in by regional/and family brewers, is that there is no longer a power brand. Former big national brands like Bass and Boddington's have been left to wither on the vine somewhat.

"The reason for standard lager's success is you have three power brands that are performing well and that helps maintain the whole category," argues Darran Britton. "We invest £20m a year in Carlsberg."

John Holberry, on-trade sales director at Coors Brewers, responsible for the "daddy" of the standard lager market, Carling, believes differentiation is something the consumer craves - except when it comes to big, mass-selling products.

"The only place differentiation isn't so important is in the really big mainstream areas in a category - and this is the case across the board, in things like confectionery and washing powder. People like big, familiar brands."

The performance of Carling, Foster's and to a lesser extent Carlsberg (although anecdotal evidence from pub companies suggests Carlsberg has had a cracking summer thanks largely to its World Cup campaign) are top-notch and continuing to improve. And surely that is the reason why standard lager is the only sector in the beer category not suffering in the on-trade.

And what of premium?

Premium lager is on a sticky wicket at the moment. Reports of its impending doom are wildly over-exaggerated but it not enjoying the best of times. According to AC Nielsen, in the year up to March 2006 draught premium lager had lost three per cent market share - and arguably that is down to the performance of the big players in the market, particularly Stella Artois.

The argument about the performance of big brands being crucial to the performance of a category is something John Holberry at Coors believes is significant. "The sectors in beer are purely driven by brands. If the big brands are doing badly then the category doesn't do well," he says.

"Look at the effect the performance of Stella is having on the premium lager market. And that is about Stella not doing some of the things it has done well in the past."

Richard Bradbury, on-trade sales director at Heineken, also believes that while Stella is still the number one in the category, it is the factor behind the category's poor performance.

"It still has strong sales and brand equity. But if you took out that brand's performance then the category would no longer be in decline. It would be more static."

John believes that premium brands that are doing something different, like Heineken and San Miguel, are the ones enjoying current success. "The big draught premium lagers that have not brought anything to the party are th