Executive Summary

Key Note estimates that the UK market for premium lager, dark beer and cider was worth £10.84bn in 1999. Of this, premium lager and dark beer accounted for an estimated £10.52bn of sales, or 97.1% of the market, since premium products are less established within the cider market. The beer and cider markets both witnessed growth in 1999, as expenditure on alcohol rose, although the wine and spirits sectors are currently showing the fastest growth within the drinks market as a whole.

Premium drinks are defined by their strong alcohol by volume (ABV) count, as well as by their comparatively high prices. The premium sectors of the markets for both lager and dark beer have steadily increased their share of sales during the last decade, although a handful of established brands account for the majority of sales. Premium ciders have a smaller share of the overall market, as it is the weaker brands which are the current market leaders. The markets for beer and cider also differ in terms of distribution channels. The majority of beer sales (around 70%) are made via licensed premises, which have lost ground to the take-home trade (i.e. off-licences and grocers) in recent years, although the former channel is likely to remain dominant for some years to come. In contrast, around 68% of cider sales currently take place in the off-trade, and this division of the market is unlikely to change to any significant degree.

The brewing industry is now extremely concentrated, with the Belgian company Interbrew having become the new leader in the market, following its purchase of the brewing divisions of two of the industry's former giants, Bass and Whitbread. The previous leader, Scottish & Newcastle, looked to consolidate its position at the start of 2000 by purchasing the beer interests of the French company Groupe Danône, only to see Interbrew move in soon after. Already owning the UK's leading premium lager brand, Stella Artois, Interbrew may now introduce more foreign-based premium brands to the UK market. 90% of the cider industry is held by two companies, HP Bulmer and Matthew Clark.

In volume terms, beer consumption has been flat for a number of years now. The UK currently has a per capita consumption rate of 103.6 litres per year, the fifth-highest in the world, behind countries such as Germany and Denmark. Younger drinkers are tending towards lager, which explains the gradual shift away from more traditional drinks such as bitter and stout, although bottled premium ales represent a small but important market niche. Cider consumption fell in the years following 1995, due mainly to the competition from new drinks such as alcopops, although the market's volume is now starting to recover.

Key Note estimates that, by 2004, the UK market for premium lager, dark beer and cider will be worth £12.56bn — an increase of 15.9% on the figure for 1999. Lager and dark beer will remain the dominant sectors, with growth driven by the established brands, such as Stella Artois and Kronenbourg.

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