British beer sales rose for the first time since 1997 last year as drinkers celebrated during the Queen's Golden Jubilee and the football World Cup. But the increase is likely to be a temporary one, with tough times ahead for the UK's brewers.
A new report from drinks market analysts Canadean shows that the increase in sales last year was driven primarily by lager, with most other categories continuing to decline.
Mainstream lager volumes grew slightly thanks to the major brands performing strongly during the year, but most of the growth came from premium lagers, a category which could continue to improve in the coming years as the flavoured alcoholic beverage (FAB) phenomenon appears to be running out of steam, Canadean suggests.
Although sales of traditional British ale or bitter have been declining for some years, the major brands have been able to increase volumes by the cannibalisation of their smaller counterparts. But with the continued demise of these smaller brands, the success of this approach could be coming to an end, the report suggests.
One of the reasons for the steady decline in the UK beer sector has been the increasing simplicity of cross-Channel shopping, with the lower prices in France enticing increasing numbers of UK consumers to buy their beer there.
Although accurately assessing the volumes of beer bought in France for consumption (or illegal resale) in the UK has never been straightforward, Canadean suggests that the glory days for cross-Channel shopping may in fact be over. Volumes dropped by an estimated 20 per cent last year as a result of higher ferry fares, tighter customs controls and a move towards tobacco smuggling, Canadean suggests.
But with UK consumers still among the biggest consumers of beer in western Europe, the import market remains important, although it continues to fluctuate wildly: the huge 34 per cent increase in 2002 followed a 12 per cent dip in the previous year. EU countries were the main source of the growth with a 38 per cent increase. The two largest suppliers, Ireland and Germany, account for over 60 per cent of the total.
Rising to a record high in 2002, the performance of exports is very encouraging but not without a little cause for concern, according to Canadean. Although exports increased by some 5 per cent to the huge market represented by non EU countries, only four countries worldwide take significant volumes of beer produced in the UK, and exports still depend heavily on the US, easily the biggest overseas market.
The UK industry has been shaken up over the last few years, with both Whitbread and Bass brewing units being sold to Interbrew and Scottish & Newcastle pushing increasingly onto the Continent.
But Canadean believes that the dust has now settled, and with the market dominated by just four major players (S&N, Interbrew, Carlsberg-Tetley and Coors, which owns Carling), mergers and acquisitions are likely to involve smaller, regional players such as Greene King or Wolverhampton & Dudley Breweries. With around 27 regional brewers and 400 micro brewers, there is still plenty of room for consolidation.
Despite a host of new product developments, the British beer industry is still seeking 'the next widget' - something to breathe fresh life into the market in the same way as that remarkably simple gadget did back in the late 1908s, the report suggests.
Campaigns to rid beer of its unhealthy image and tap into the growing demand for good-for-you products is at best likely to have a limited success, and for the short term at least, consumption is predicted to continue falling, Canadean concludes.
For details of how to buy Canadean's UK Beer report, click here.