Can big lager brands join the cult of craft?

For big lager brands, the rise of craft ale presents a challenge. Tony Enoch, partner at Nude Brand Creation looks at what the sector can do to address the threat posed by craft

Tony Enoch Nude Brand Creation

As the craft ale revolution gathers momentum, lager has been losing out, according to a report examining the beer industry by market intelligence agency Mintel. While sales of lager still heavily outweigh those of craft ale, what can the sector do to address the threat posed by craft? 

Small independent breweries have been springing up around the country at a growth rate of 10 per cent per year, according to the Campaign for Real Ale and independent breweries’ ales have proved popular in pubs, creating a lifeline for the struggling pub industry. Pubs have been turning to craft ale in a bid to encourage more people in through the doors to enjoy ales from around the UK and even abroad.

In fact, some of these independent breweries have spotted a gap in the market for creating more complex lagers with an interesting narrative. For example, runaway success story BrewDog is making its own lager called This is Lager, which is described as an homage to the 19th century German and Czech Pilsners and as lager reclaimed, perfected and renewed.

It is really positive to see the craft sector adding value and substance to the lager industry. It promises to give consumers more choice and to create more competition, which will only serve to make the lager sector more vibrant. But for big lager brands, the rise of craft ale presents a challenge. And if small UK breweries continue to dream up artisan lagers this will eat into their profits further.

A quick response

The dilemma facing big lager brands is that craft is small, independent and can launch innovative new products quickly. This is everything big brands are not. The difficulties for bigger brands is that when they do come up with an innovative product, they cannot react as quickly, due to the long and established processes products have to go through before they are released. The big brands spend a lot of time researching and need to seek several levels of management approval, whereas a smaller independent will just do it. For the larger beer brands to innovate quickly, they would need to have a big mind set change. They are trying to and they would love to, but change of course takes time.

The big brands cannot simply imitate craft as consumers are savvy and will reject obvious ploys to cash in. Products need to be authentic, have a truth about them and be better than the competition. It is of course possible for big brands to acquire craft companies without alienating their audience, but the transition needs to be managed carefully. The craft company should be allowed to carry on business as normal and retain the elements that make it craft. And we wouldn’t recommend shouting about the acquisition either.

Another challenge faced by the big brands is that some craft ales obtain a cult following. And you can’t create a cult in a boardroom. You can’t dictate to the consumer what products are cult. So the big companies have a really difficult job to compete with craft. However, there are great examples of successful craft brands in other sectors that have made that transition; for example Ben & Jerry’s, Innocent and Nantucket Nectars.

Innovation is key

Working across the alcoholic drinks industry, from spirits to beer, Nude understands the challenges, as well as the need to surprise and engage with their audience in new ways. Quite simply larger brewing companies need to take a few more risks, not be afraid to make mistakes – allow their marketers the chance to make mistakes and learn from them. For example, in Japan it is not uncommon for launches to go ahead without research, and ‘see what happens’. This approach best mirrors the start ups attitude of passion and gut instinct that can really resonate with today’s consumer. However, if a brand is tied and unable to act more ‘spontaneously’, then it needs to look at improving the brand story and drive forward innovation to help attract consumers and head off competition from small independent brewers.

There are examples of innovation by big brands out there which point to a way forward in addressing the challenge from the craft sector. A good example is Pernod Ricard’s Our Berlin, a vodka made from locally sourced ingredients at a Berlin micro distillery, where it is hand bottled and labelled. The vital factor here is that it is built around a genuine neighbourhood structure that is both engaging and inclusive. The concept has been rolled out to other cities, including Detroit and Seattle, with more cities to follow. Each city adds its own local character to the vodka.

Fosters Rocks also reappraised its position in the lager sector with its release of classic rum and spiced rum flavours last year. It responds to the demand for flavoured lagers and illustrates innovation in the sector, although in this case, following a trend rather than creating one.

Finally if you look to the bread industry, the supermarkets have been quick to embrace the trend for artisan bread. As new artisan bakeries open, selling a loaf of bread for £4, so the supermarkets have created their own artisan style bread, using desirable ingredients such as spelt, millet or quinoa. To attract more consumers, could the lager industry look at inventive ways to use new ingredients or present themselves in more eye-catching formats? Embracing innovation will be key for the lager sector to regain its sparkle but narrative continues to be essential to reach the heart of savvy consumers attuned to the new and engaging story of craft.

18 April 2016