What makes people pay more for some beers than others? Fancy fonts? Posh glassware? High ABVs? Low ABVs? Multi-million pound advertising campaigns? If we're talking premium beers, the first thing must surely to be to establish what 'premium' means.
Time was that it meant high strength. But in a cultural climate where high alcohol content is perceived as a bad thing, less is more. With the much documented, but seemingly unstoppable success of the four per cent stable of brand spin-offs such as Beck's Vier, premium can now mean low-strength too.
World beers are also enjoying success. With draught volume up nine per cent, and value up by a staggering 18 per cent (for the year ending July 10, CGA Strategy), the category can legitimately claim to be premium.
And so it is that we are in the middle of a beer revolution. What 'premium' is coming to refer to is changing to incorporate not just lager brands such as Kronenbourg 1664, Stella Artois, Heineken, Beck's and Carlsberg, or fine ales, but world beers, low-strength beers, crafted lagers and cask ales too.
What to stock?
Put simply, consumers' perceptions of beers that are worth paying more for is widening. Though that's great news for pubs, it begs the question as to what range licensees should now be stocking? It should be remembered that this broadening of tastes has come at a cost. According to CGA, which defines premium beer as any lager with an ABV of 4.1 per cent or above excluding world beers, the premium lager category is in crisis. Draught premium has dropped nine per cent in volume and six per cent in value. Though claiming a much smaller share of the overall market, packaged premium lager has suffered notable losses too, with 14 per cent wiped off volume and 10 per cent off value. So what beers are customers migrating to and why?
David Scott is customer marketing director for Carlsberg UK, which has both world beers such as Tuborg and San Miguel, alongside standard premium brands. He says consumers have simply got bored with traditional premium, as Scott calls it. There are too many brands, with little to differentiate between them. "Premium lager has become 'overtapped' on the bar," says Scott.
"Sales have declined over the last three years but licensees have kept the same number of taps open for traditional premium beers. Consumers no longer see premium brands as something worth paying more for and have looked to other alternative brands, and this is world lager."
Scott also argues that licensees have not kept up with demand with what beers they stock. "Licensees should be offering consumers more choice but they are getting set in their ways. Of course you need your core range, but not every tap needs to be the same," he says.
Scott is so convinced of world lager's continued appeal and its ability to lure drinkers away from premium lager, he predicts world lager to overtake premium by as early as 2013. That's pretty big news.
But if traditional premium brands are falling out of favour because of saturation, licensees need to heed the same lesson when it comes to world beers if they want to achieve the increased margins that make brands such as market leader, Peroni Nastro Azzurro, so attractive.
World beers certainly don't come with a guarantee of enduring appeal. With so many brands new to the UK market this year - such as Spanish beer Alhambra and Namibian brand Windhoek, or launching here on draught for the first time like Spanish beer Estrella Damm or American wheat beer Blue Moon - brands need more than just distinctive glassware and an exotic and sophisticated brand image to make their presence on your bar or back-bar justified.
Quality over quantity
Someone who knows all about that is Darren Tendler, sales director at Miller Brands. Miller Brands specialises in developing premium world brands including Peroni and Pilsner Urquell. It has stuck to the mantra of quality over quantity and has been exceptionally selective with which premises are allowed to stock its draught products, preferring sites that match with its brands' quality credentials. Crucially, it has stuck to its guns over its premium pricing, even in the off-trade. How very refreshing. Peroni has grown volume by 20 per cent and value by 21 per cent in the past year.
Tendler says: "The consumer knows it is an imported premium lager, they know that the brand is something desirable and as a consequence are prepared to pay that. "We do not compromise around pricing. We can't control retail pricing by any stretch but we can say that retailers are happy to buy into the brand proposition and don't feel it is necessary to deep discount. They focus their effort on some of the more mainstream beers. "So world beers, not just Peroni, is an area where there is a real increased margin opportunity for pubs."
With both consumers and retailers on board, and a major new advertising push under way Miller Brands' chance of keeping the brand premium appears high. Though, as highlighted by the CGA data, while some more mainstream lagers are losing value, others - such as Heineken - prove that with the right backing and repositioning brewers can convince consumers of their quality credentials once more.
In 2002 Heineken was selling strongly at over 528 million pints a year, but had an image problem. Yet in what was a massive gamble, Heineken did the brave thing, invested for the long term and repositioned the brand from one that was seen as weak and tasteless to a premium continental lager. The 'new' Heineken was to be imported from Amsterdam, ABV was adjusted to five per cent and sold at a premium price.
Bruce Reinders, brands director of Heineken and premium lager at Heineken UK, says: "I think a lot of the historical negative imagery around the brand sits mainly in the trade, and not actually in consumers' minds. "If you're 45 to 50-plus, you remember Heineken as being not such a good quality beer, but that certainly doesn't exist among people who are 35 or younger. "There is a whole new generation of drinkers coming through that don't really have the baggage of the brand that older drinkers have. We are encouraged, but it will take some time."
However, Heineken's repositioning took place at a time when premium was the growing category. That other brewers would take such gargantuan steps to reposition declining brands in a declining category seems unlikely. Instead, expect those that have world brands in their portfolio to increase their focus, and those that don't to acquire some.
The local angle
But world beer can't be allowed to hog the limelight, so where are the other areas of growth likely to be? Consumer hunger for all things local and authentic is still rumbling. The revived fortunes of cask ales is testament to that.
But lager is set to benefit too?
Susan Mayman is managing director of Freedom Brewery, which brews what it describes as 'hand crafted lagers', including Freedom Four, Freedom Pilsner and Freedom Organic Lager. So far in 2010 it has increased its number of on-trade stockists from 25 to 120, has reported 112 per cent sales growth on last year for July and aims to double its brewing capacity by 2011. "Our lagers' attributes are similar to cask ales in that they based on product alone and not multi-million pound marketing budgets with campaign straplines stating facts which, in any decent lager, should be a minimum standard," says Mayman.
"We all know the beer market is extremely competitive and while we obviously can't compete financially with the mass producers, we are certainly holding our own. "By the end of July we had already brewed more lager this year than in the whole of last year and it shows no sign of letting up."
Then of course there are the new breed of brewer that are challenging the face of the UK brewing industry. Scottish brewer BrewDog with its deliberately outrageous PR stunts, and Welsh brewer Otley with its simple and slick brandin