Hall & Woodhouse Premium Ale Insight Report

Premium Ale INSIGHT REPORT

2016

Hall & Woodhouse Premium Ale Insight Report

02

Contents Introduction:.......................03 Category Overview:...........04 • Beers, Wines & Spirits Performance • Beer Category Trends • Premium Ale Performance & Trends Deflation:..............................14 • Impact of Deflation on Beers, Wines & Spirits Categories • Premium Ale Category Cost of Deflation • Premium Ale Customer Measure Trends • Bottled Ale Multipacks

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape:........26 • Changing Shopper Behaviour • Convenience Channel • Discounter Channel • On-line Channel • Grocery Retailer Performance & Drivers • Customer Evolution • Premium Ale Category Sources of Growth • New Product Development & Category Trends • Bottled Ale Style Trends • Craft Beer

Driving Value:......................56 • Building Value into Premium Ale • Bottled Ale Customer Considerations • Bottled Ale Category Tiers Badger Commercial Break:............67 Glossary & Contact:..........68

Contents

Introduction

03

The Premium Ale category is in an enviable position during a time of challenging market conditions, enjoying sales growth of 9% driven by the continued increase in the popularity of Premium Bottled Ale. Bottled Ale shopper numbers have increased by 1.5 million over the past 5 years.

Premium Canned Ale is also attracting new shoppers but no value growth has been added due to increased investment levels.

Macro trends in the Grocery market, and the resulting changes to retailer strategies, offer both opportunities and challenges. With an increasing shopper appetite for authentic, premium products and BWS becoming increasingly diverse, innovative and competitive, Premium Bottled Ale has to ensure it does not miss the opportunity.

Whilst much has been done to enhance the Premium Ale category in store, shoppers are

David French Beer Company Director Hall & Woodhouse Ltd

still presented with a seemingly uniform range and category offer at a time when there is an increased desire for information and diversity. Opportunities remain to differentiation through pack design, product communication via packaging and at fixture to highlight the really new and different.

Hall & Woodhouse Premium Ale Insight Report

Introduction

Category Overview

Hall & Woodhouse Premium Ale Insight Report

04

Category Overview

BWS Category Value Sales (including duty and VAT)

05

Source: Nielsen ScanTrack, total coverage, MAT to 02/01/16 vs year ago

Beer, Wines and Spirits are growing in value year on year; as a category dominated by brands and perceived by shoppers as more of a ‘treat’, alcohol tends to be more resistant to deflation than categories such as Household, Frozen & Bakery.

Total BWS £15,789.1m +1.3% YoY Wine £6,808.6m +1.9% YoY

Total beer £3,745.8m -0.1% YoY

LADs £5,012.8m -0.9% YoY

Cider and perry £1.038.0m -2.8% YoY

Hall & Woodhouse Premium Ale Insight Report

Spirits £3,967.6m +3.4% YoY

RTDs £229.0m -5.6% YoY

Remarkably, with a growing proportion of UK adults choosing not to drink alcohol, an increase in the number of households buying BWS over the last year has helped drive growth, and shoppers are spending more. Quantities purchased per trip have declined, reflecting both the shopper trend towards smaller, more frequent shopping trips, and also changing retailer promotion strategies across a number of BWS categories.

The Wine category attracted 600,000 new customers in 2015, meaning that household penetration has reached 75% of the UK. An overall reduction of Wine promotions, in conjunction with less aggressive discounts on offer, is also leading to wine buyers paying more per litre.

Volumes purchased per trip are declining due to lighter shoppers entering the category in addition to a decline in the number of case deals, in favour of price reductions on single bottles. Normally we would expect frequency of purchase to increase as a result; however a reduction in display space given to Wine in Grocery Multiples has, in fact, reduced this slightly.

Category Overview

BWS Category Value Sales (including duty and VAT)

06 Sparkling Wine remains the sector in strongest growth, increasing by £130m driven by the continued growth of Prosecco brands such as Plaza Centro, Canti and Dino.

Most Spirit sub-categories are in year on year growth, but outstanding performances come from Gin & Vodka, each growing by £35million in 2015.

Spirits are performing extremely well; deals on 1 litre bottles of standard Spirits, at c25% discount versus 70cl equivalents, are driving volumes, whilst growth of premium brands is protecting average category price per litre. In addition, increasing display space and premium product introductions are bringing in valuable new customers who are younger and more affluent.

Most Spirit sub-categories are in year on year growth, but outstanding performances come from Gin & Vodka, each growing by £35million in 2015. Smirnoff Red, with growth of £25million, has now overtaken Fosters lager to become the second largest alcohol brand by value in the off trade.

Long Alcoholic Drinks (LADs) are not faring as well, with Beer, Cider and Ready to Drink (RTDs) in value decline. Although Cider is attracting new households via canned & glass bottle formats, growth rates of flavoured Cider are slowing and large PET Cider bottles remain in steep decline. Shoppers are also increasing the variety of alcohol they drink, leading to Cider being bought less often.

Hall & Woodhouse Premium Ale Insight Report

Category Overview

Beer Category Trends

07

Source: BWS Nielsen Scantrack MAT 07.11.15 Ale figures to 02.01.16

16

15

12

4

-8

-4

-7

Lager

-4

-1

Ale

0

0

-7

5

-11

0

Bottled Ale

4

Premium Canned Ale

5

Canned Ale

8

Lager, which accounts for over 80% of Beer category sales, is declining slightly year on year. Customers are shifting spend to Ale and Craft beer, in addition to buying a wider range of other alcohol categories. They are therefore buying Lager less often & in smaller quantities.

Ale, driven by bottle format, remains in strong growth. Despite falling prices, Standard Canned Ale volume continues to decline, with its customers leaving the Ale category altogether, dropping Standard Canned Ale from their Ale repertoire, or shifting spend to other BWS categories such as Wine.

All major Standard Canned Ale brands are losing distribution and display as a result, leading to the remaining customers buying less often, the main contributor to category decline.

In addition, the increase in price cut promotions vs. multibuys is driving down volumes customers buy each trip.

Standard Canned Ale

11

Beer customers are buying less volume each shopping trip, driven by the increase in popularity of single bottled beers and new, lighter shoppers entering the category.

Customers are, however, buying more often as a result. Price deflation is having a greater impact on Beer than on other BWS categories.

-12

■ Vol % Chg

Hall & Woodhouse Premium Ale Insight Report

■ £ % Chg

Category Overview

Bottled Ale 5 Year Volume Trend (indexed to 2010)

08

Source: Nielsen Scantrack MAT to 02.01.16

160

153

140

Bottled Ale remains one of the strongest performing categories within BWS, significantly outperforming total Beer and growing by £130million over the last 5 years.

120

100

92 80 2010 2011

2012

2013 2014

2015

■ Bottled ale ■ total beer

Hall & Woodhouse Premium Ale Insight Report

Category Overview

Bottled Ale Key Performance Indicators

09

Source: Nielsen Homescan MAT to 02.01.16

Although decreasing prices held back Bottled Ale growth in 2015, ½ million new households bought into the category and penetration remains the main growth driver.

Vol per Trip Ltrs

1.64 Penetration (HH Num)

26.5%

7.6 trips

-£23,950k

+£19,816k

+£7,195k

£2.99 -8.7%

-20,000k -10,000k

+6.7%

0

■ Price Contribution (52w) ■ penetration Contribution (52w)

Hall & Woodhouse Premium Ale Insight Report

Freq.

+£5,148k

Price per Ltr

+2.8% +2%

10,000k 20,000k 30,000k

As a result of new category entrants buying less and the movement from multi-buy activity to increased price cuts, fewer single Bottled Ales are being purchased each trip. This has, however, been counteracted by the success of Bottled Ale multipacks, which are driving total Bottled Ale trip volumes. Households are adding bottled ale multipacks to their repertoire and sales are shifting from most other BWS categories, particularly Canned Ale, Single Bottled Ale and Cider.

Households are adding bottled ale multipacks to their repertoire and sales are shifting from most other BWS categories.

■ frequency Contribution (52w) ■ trip volume Contribution (52w)

Category Overview

Top Bottled Ale Brands

10

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

2015 saw the rise of large, international brewers within the Bottled Ale category.

+3% +26% +11% +72% -9% -6% -4% +5% +1% -3% +115% +30%

morland Wychwood marstons Sharps Badger Shepherd Neame fullers private label newcastle brown greene king brewdog st austell

0

1

7.9

Under Molson Coors, sales of the Sharps brand remain in strong growth. High rates of sale, growing distribution of new product introductions and the successful roll out of the Doombar 6 pack has driven the Sharps bottled ale brand to become the 4th largest in the UK.

8.5 6.9 7.5 6.5 7.4 6.3 6.0

Diageo’s Guinness Golden Ale & Porters are also performing well. Following a strong launch plan and good distribution growth, Guinness became the 13th largest bottle ale brand by the end of 2015.

6.2 6.2 6.2 6.8 4.8

Heineken entered the growing ‘golden style’ section of the bottled ale category with the launch of John Smith’s Golden Ale. To date, although distribution growth has been strong, sales would suggest that the ale is struggling to appeal to either bottled ale shoppers or existing John Smith’s customers.

4.6 4.5 4.1 3.9 4.3 3.8 4.1

% Value Growth (Market +11.3%)

2.9 1.9 2.4 2.3

2

3

■ value share

Hall & Woodhouse Premium Ale Insight Report

4

5

6

■ volume share

7

8

9

Brewdog’s success has continued in 2015, with increased investment and steady distribution build doubling the number of households that buy the brand and driving growth of £5.5 million.

A key factor impacting bottled ale brand performance over the last year has been the ongoing price matching of Discounters by the major grocery multiples. This has driven strong growth of Wychwood’s Hobgoblin & Hobgoblin Gold bottled ales. Morland was also affected although the level of price reduction subdued value growth.

Category Overview

Premium Canned Ale – Topline Sales Trends

11

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

Value Sales and % Change YA

VALUE (Thousands)

100

81,384

77,428

80 60

+5%

40

+0%

315

400 Volume (Thousands)

81,195

Volume (1000s HLs) and % Change YA

20 0

336

353

Premium Canned Ale has faced a challenging year. During 2013/4, the category enjoyed strong volume and value growth, whereas in 2015, average price reductions of 5% year on year has continued to grow volume but at the expense of value.

300

200

+6%

+5%

100

0

Mat 2ya mat ya mat ty

Mat 2ya mat ya mat ty

Price per Litre £2.45

£2.43

£2.30

-1%

-5%

price per volume

2.5 2.0 1.5 1.0 0.5 0

Hall & Woodhouse Premium Ale Insight Report

Mat 2ya mat ya mat ty

Category Overview

Premium Canned Ale Key Performance Indicators

12

Source: Nielsen Homescan MAT to 02.01.16

Freq.

Despite falling prices, moving away from multibuy promotions in this category has dramatically reduced quantities bought by shoppers. Frequency has not, as would be expected, increased as a result; a decrease in the amount of display given to Premium Canned Ale, in addition to an increase in on-going lower pricing (not highlighted on shelf), is failing to remind shoppers to purchase.

+£492k

The Premium Canned Ale category is currently in a precarious position.

In categories that are shopped infrequently, with customers who have a wide BWS repertoire, this strategy potentially risks long term category health. Over reliance on price reductions, whilst removing other sales drivers, will simply erode category value. Although new customers are now buying into Premium Canned Ale, they are more likely to be lighter shoppers, thus not mitigating the loss.

5.6 trips Vol per Trip

Price per Ltr

3.66Ltrs £2.14 -£3,496k

-5.6%

-£3,188k

-5.1%

-8,000,000 -6,000,000 -4,000,000 -2,000,000

■ trip volume Contribution (52w) ■ Price Contribution (52w)

Hall & Woodhouse Premium Ale Insight Report

Penetration (HH Num)

5%

+£3,433k

+4.6% +0.8%

0

2,000,000 4,000,000

■ penetration Contribution (52w) ■ frequency Contribution (52w)

Over reliance on price reductions, whilst removing other sales drivers, will simply erode category value.

Category Overview

Top Premium Canned Ale Brands

13

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

morland mcewans 7.4

Badger

7.7 7.0

Greene King

7.3 5.2

wychwood

5.1 4.7

fullers

4.5 4.0

Gold Label

2.2 3.7

newcastle brown

3.8 3.4

bass

3.6 3.2

Wells

3.4 2.5

Ruddles

2.4 1.9

marston’s

1.8 0

5

+5% +3% 14.715.6 -9% -3% +10% +20% -5% -11% -16% -21% % Value Growth -17% (Market +0.2%) -29%

10

■ value share

Hall & Woodhouse Premium Ale Insight Report

15

20

25

30

As a consequence of these challenges, the major Premium Canned Ale brewers are experiencing very little growth.

33.7 35.1

Of these, Wychwood are being driven solely by the launch and distribution roll out of Hobgoblin Gold canned ale, whereas Fullers are recovering from a poor performance during the previous year.

There are emerging ‘Craft’ style brands within Premium Canned Ale that are in good growth.

Albeit from a small base, American brands Broadway Brewing and Founders, and UK brands producing American style Canned Ales such as Fourpure, Beavertown & Roosters, are starting to make inroads into the category.

There are emerging ‘Craft’ style brands within Premium Canned Ale that are in good growth.

35

■ volume share

Category Overview

Deflation

Hall & Woodhouse Premium Ale Insight Report

14

Deflation

BWS Category Segment Performance

15

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

■ Volume % Chg

■ value % Chg

4

3.4 3.1

3

Wine and Spirits are both in growth, with value sales rising ahead of volume. Within these, the mix of fortunes across subcategories is managing to maintain value growth.

1.9

2 1.3

The BWS category enjoys a level of protection against the current price war and the resulting changes to retailer strategy, with customers prepared to pay more for premium products or ‘treats’.

1.3

1 0.2

Long Alcoholic Drinks

0

Total BWS

Wine

-1

-0.9

■ Volume % Chg 1

Spirits

-0.4

0.5

■ value % Chg

Cider & Perry

0

RTDs

-0.1 -1 -2

Total Beer

-3 -3.2

Long Alcoholic Drinks Segment Performance

Wine and Spirits are both in growth, with value sales rising ahead of volume.

-2.8

-4 -5 -6

Hall & Woodhouse Premium Ale Insight Report

-5.7

-5.6

Deflation

BWS Category Segment Performance

16

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

25

Sparkling Wine

Growth by premiumisation

MAT Volume % Change

20

Volume growth through price reductions Champagne

Ale Lager

15

Profitable category growth

10

Spirits 5

Fortified Wine

0 -1.75 -1.25 -0.75 -0.25

0.75

MAT Price per Litre % Change -5

Unprofitable decline

Hall & Woodhouse Premium Ale Insight Report

Light wine -10

Cider RTDs

Increasing prices impacting volume growth

Light Wine & Fortified Wine volumes have fallen marginally as average prices increase, whereas Champagne has grown volumes but at the expense of price. This however is balanced by the increase in popularity of Sparkling Wine, which has held average prices, whilst driving strong volume growth.

Similarly, Spirits category volumes are being driven on core brands with price cuts on 1Ltr bottles, whilst increased in-store displays and new premium product launches are increasing customer numbers and maintaining category value.

Lager remains on the cusp of falling into unprofitable decline. The volume growth enjoyed by Stella Artois has been as a result of increased price investment, whilst Fosters, Carling & Carlsberg are declining despite cutting average prices.

Due to their availability in a wide range of pack formats, major Lager brands are also under threat as retailers reduce breadth of ranges across the store.

Lager remains on the cusp of falling into unprofitable decline.

Deflation

Ale – at risk of becoming devalued

17

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

Volume growth through price reductions

+19.3% Multi Bottle

25

20

Single Bottle

-3.2

-3

Bottle

+14.7%

+14.2% +5.3%

+5% Ales

Can Premium -1 -4.8

MAT Volume % Change

-0.6

-3.7%

15

-3.2

-4

Can

For Premium Canned Ale, Discounter price matching is less of a challenge as Aldi & Lidl’s ranges are limited.

5

Price matching across the top 5 Grocery Multiples, combined with retailer corporate strategies creating a more value led offering, threatens to drive Premium Canned Ale down the commodity route suffered by Standard Canned Ale.

0

MAT Price per Litre % Change -5

Can Standard

-10

Unprofitable decline

Hall & Woodhouse Premium Ale Insight Report

Due to the expansion of ranges and growth of the category within the Discounter sector, Bottled Ale has become increasingly susceptible to price matching by the Grocery Multiples, which has impacted on the rate of value growth.

10

-5 -4 -3 -2 -1

-6.9%

Although Bottled Ale remains in strong growth, this is mainly being driven by price reductions. After a number of years helping to maintain total Ale category value, Bottled Ale average prices have declined considerably over the last 2 years.

Despite a 5% reduction in average price, premium canned ale value is flat year on year.

Bottled Ale has become increasingly susceptible to price matching by the Grocery Multiples...

Deflation

Premium Ale Category Cost of Deflation

18

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

£

-£2m

Bottled Ale

Premium Canned Ale

-£4m

-£6m

-£4,100,000

In total, the cost of deflation to the Premium Ale category over the last year has been almost £15 million.

-£8m

-£10m

-£10,500,000 -£12m

Hall & Woodhouse Premium Ale Insight Report

Deflation

Premium Ale Category Penetration Change

19

Source: Nielsen Scantrack Total Coverage MAT to 02/01/16

There is, of course, an argument that sharpened retail pricing and deeper promotional discounts have attracted new customers into the Premium Ale category.

Bottled Ale 6,634

Whereas household penetration is in growth for Premium Canned Ale, and is the main driver for Bottled Ale, over reliance on price as a lever to recruit new customers is often not sustainable.

This is particularly the case for Premium Canned Ale.

519

Premium Canned Ale

The investment required to attract each new customer to the category is currently costing more than the average Premium Canned Ale customer spends per year.

1,266 74

0

2000

4000

■ Households LY 000s

6000

8000

■ Incremental Households TY 000s

Category Cost of Recruitment per Household

Household Recruitment Cost Bottled Ale Premium Canned Ale

Average Annual Category Spend per Household

£20 £37 £55 £44

Hall & Woodhouse Premium Ale Insight Report

Over reliance on price as a lever to recruit new customers is often not sustainable.

Deflation

Base & Incremental Volume by BWS category

20

Beer

Bottled Ale

Premium Canned Ale

27.8% 26.5% 23.4%

23.8% 21.2% 15.6%

19.7% 21.3% 13.9%

90%

Light Wine

44.6% 41.9% 40.4%

100%

Spirits

35.5% 37.5% 38.6%

Source: Nielsen Scantrack Grocery Multiples MAT to 02/01/16

80%

70%

Other wider changes taking place within UK retail are also risking the health of the Premium Ale category.

Base volumes (volume which would have been sold at full retail price) across most BWS categories are growing, which is in line with changes to retailer’s strategies across the store towards on-going lower prices and away from promotions.

From a retailer’s perspective, an EDLP strategy does offer benefits; reduced activity implementation costs, smoother demand and simplified supplier support.

60%

80.3% 78.7% 86.1%

76.2% 78.8% 84.4%

30%

72.2% 73.5% 76.6%

64.6% 62.5% 61.4%

40%

55.4% 58.1% 59.7%

50%

20%

In many categories, high low strategies may been seen to be punishing regular, loyal shoppers or risk encouraging promotion dependency, but moving to an EDLP approach is less appropriate for Premium Ale. Premium categories, that attract a lower proportion of customers and are shopped less frequently, need to remind shoppers to purchase, particularly as people’s BWS repertoires continue to expand.

The removal of promotional offers can reduce Premium Ale’s visibility and shopper focus, within an increasingly crowded section of the store.

10%

0

MAT mat mat mat mat mat mat mat mat mat mat mat mat mat mat 2ya YA TY 2ya YA TY 2ya YA TY 2ya YA TY 2ya YA TY

■ Base Volume ■ Incremental Volume

Hall & Woodhouse Premium Ale Insight Report

Deflation

Premium Ale Display by Retailer

21

Source: Nielsen Scantrack MAT to 02/01/16

90

84

Bottled Ale Wtd Dist Feature & Display

80

85

70 60

■ MAT YA

■ MAT TY 51

50

46

45

40 30

Bottled Ale display, although flat year on year, has been cut in Sainsbury’s and significantly in Tesco, who account for a significant proportion of category sales.

37 30

31 27 20

20

12

15

Levels of Premium Canned Ale display have been reduced across all major Grocery Multiples bar Waitrose.

10 0 Grocery Multiples tesco

Sainsbury’s

asda morrisons waitrose

Premium Canned Ale Wtd Dist Feature & Display

35

34

33

30

30 24

25

■ MAT YA

■ MAT TY

21

20

20 16

16 15

13

10 6 5

A valuable tool in increasing awareness and prompting purchase of Premium Ale is secondary display in store.

With available display space becoming increasingly sought after by all categories across the store, Premium Ale is coming under pressure.

8

With available display space becoming increasingly sought after by all categories across the store, Premium Ale is coming under pressure.

5

0 Grocery Multiples tesco

Sainsbury’s

asda morrisons waitrose

Hall & Woodhouse Premium Ale Insight Report

Deflation

Bottled Ale - Customer Measure Contribution to Growth

22

Nielsen Homescan Rolling 12wk periods to 02.01.16

■ trip volume contribution 52w ■ frequency contribution 52w

■ price per Eq contribution 52w ■ penetration contribution 52w

125m

100m

75m

50m

25m

0

-25m

-50m

-75m 29 mar 2014

26 APR 2014

24 maY 2014

21 JUN 2014

19 JUL 2014

16 AUG 2014

13 SEP 2014

These factors are leading to a challenging environment for Premium Ale. For Bottled Ale, decreasing pricing is bringing in new customers, but sales to these lighter category shoppers are not mitigating the value lost; they typically buy less and shop the category less often.

Hall & Woodhouse Premium Ale Insight Report

11 oct 2014

8 nov 2014

6 dec 2014

3 jan 2015

31 jan 2015

28 feb 2015

28 mar 2015

25 apr 2015

23 may 2015

This is compounded by display reductions in Tesco and Sainsbury’s, failing to remind existing customers to buy and thereby reducing purchase frequency further.

20 jun 2015

18 jul 2015

15 aug 2015

12 sep 2015

10 oct 2015

7 nov 2015

5 dec 2015

2 jan 2016

a key growth driver for Premium Bottled Ale. This is due to how the category is generally consumed – in low volumes per occasion. As a consequence, trip volumes have remained unchanged over the last 10 years.

Although volumes purchased each shopping trip rose over Christmas due to the increase in bottle multipack purchases, trip volume is not

Deflation

Premium Canned Ale - Customer Measure Contribution to Growth

23

Nielsen Homescan Rolling 12wk periods to 02.01.16

■ trip volume contribution 52w ■ frequency contribution 52w

■ price per Eq contribution 52w ■ penetration contribution 52w

25m 20m 15m 10m 5m 0 -5m -10m -15m -20M -25m 29 mar 2014

26 APR 2014

24 maY 2014

21 JUN 2014

19 JUL 2014

16 AUG 2014

13 SEP 2014

In addition to a more profound reduction in display, for Premium Canned Ale these trends have been compounded by an increase in 4 pack price cuts rather than multibuy promotions.

Hall & Woodhouse Premium Ale Insight Report

11 oct 2014

8 nov 2014

6 dec 2014

3 jan 2015

31 jan 2015

28 feb 2015

28 mar 2015

25 apr 2015

23 may 2015

In a category with an average basket size of between 7 and 8 Cans, moving away from ‘two 4pks for £X’ activity has seriously impacted trip volumes.

20 jun 2015

18 jul 2015

15 aug 2015

12 sep 2015

10 oct 2015

7 nov 2015

5 dec 2015

2 jan 2016

Including the drop in average price per litre, the total decline of Premium Canned Ale customer measures far outweighs any growth driven by new shoppers.

Deflation

Multipack Volume Share of Bottled Ale

24

Nielsen Scantrack Total Coverage MAT 02.01.16

Multipack & Single bottled ale – average price per litre last 3yrs

11.2% 11.2% 11.6%

100%

£3.60

90%

£3.50

80%

£3.40

70%

£3.30

60%

£3.20

£3.36 £3.35

40%

88.4%

50%

88.8%

88.8%

■

30%

£3.24 ■

£3.10 £3.00

£2.85

£2.90

20%

£2.80

10%

£2.70

0%

■

■

£2.82 £2.81 ■

■

MAT YA

MAT TY

Multipack Bottled Ales enjoyed strong growth in 2015, particularly over Christmas where they contributed over a 1/3 of absolute category sales growth. Driven by increased display, multipacks have gained share of total Bottled Ale. Although performing well, multipacks have limited appeal with bottled ale households, with less than a third of shoppers likely to purchase.

These customers are however, very valuable to bottled ale. They are the most knowledgeable and confident, the least price sensitive and buy the most across the year.

Although average pricing has been fairly stable over the last year, multipacks command an average price per litre well below that of single bottles; the deflationary effect of multipacks on the category is c£5.5million per year. As they do not drive trip volumes outside of peak periods, price positioning of multipacks needs to be managed carefully to ensure that the value of these core category shoppers is maintained.

£2.60

MAT 2YA

MAT YA

MAT TY

■ Single Bottled Ale ■ Multipack Bottled Ale

Hall & Woodhouse Premium Ale Insight Report

MAT 2YA

■ Single Bottled Ale ■ Multipack Bottled Ale

Driven by increased display, multipacks have gained share of total Bottled Ale. Deflation

Bottled Ale Multipack Sources of Growth

25

Nielsen Scantrack Total Coverage MAT 02.01.16

Actual

(£000s)

Source of change %

+30%

5,378

Bottled Ale Multipack Shifting Gains / Losses

+1.4%

248

Canned Ale

549

544

lager

98

410

total spirits

59

356

+2.7%

484

Shifting Gains/Loss % 20.9 15.7 13.7

cider 130 333

12.8

single bottle ale

356

258

9.9

total light wine

71

257

9.9

163

150

+11.4%

2,041

Index / Act (£000s)

fortified wine

5.8

champagne 214 121

4.6

stout 229 83

+14.5%

2,605

■ ■ ■ ■ ■

Total Mkt pen awop repertoire shifting

all other

302

38

rtd 141 35

1.4 1.3

129

33

1.3

198

11

0.4

0

0

0

bottle ale multipack

perry 56 -1

0

-0.9

Hall & Woodhouse Premium Ale Insight Report

ale keg

1,066

-23

In addition to shifting gains from single Bottle & Canned Ale, sales are also shifting from a wide number of BWS categories.

Once introduced to bottle ale, multipack buyers are very loyal to the pack format and are less likely to progress to buying higher margin single bottles. This, combined with the only shifting losses being to Ale Kegs, suggests that there are a proportion of customers that are bulk buying ale infrequently for specific occasions. As these will be more impulse driven purchases, availability & visibility of a multipack offering will be more important than price discounts.

3.2

sparkling wine all other wine

Multipack growth is predominantly being driven by spend shifting from other categories and by BWS shoppers adding bottle multipacks to their repertoire.

Once introduced to bottle ale, multipack buyers are very loyal to the pack format and are less likely to progress to buying higher margin single bottles.

Deflation

Changing Landscape

26

With an evolving retail market structure, increasing customer expectations, price wars and the expansion of new BWS subcategories, the grocery market presents many opportunities as well as challenges for Premium Ale. Many developments play directly to the category’s strengths.

Increased demand for provenance and authenticity mean consumers search for ‘real’ from producers with authentic brand stories and depth of character.

Renewed interest in beer in part can be attributed to this, with ‘craft’ supporting the growing number of micro-breweries and consumers having a greater understanding of beer styles and ingredients.

The Bottled Ale market has benefitted, with value growth of over 60% in the past 5 years.

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Changing Shopper Behaviour: implications for Premium Ale

27

Source: IGD Retail Analysis

• Shopping little and often / mission based - Ensure appropriate product presentation is available (chilled premium ale) - Understand changing shopper missions across different formats e.g. ‘meal for tonight’, which offer increased opportunities for BWS categories

Grocery Channel Value Share Forecasts

superstores and small hypermarkets supermarkets

convenience

+10.5bn

discount

+8.3bn

-0.3bn 6.2% 5.4%

21.2% 22.0%

20.0% 17.8%

40.4% 34.7%

+0.3bn

+6.4bn

■ 2020

5.0% 8.6%

■ 2015

7.2% 11.6%

-2.1bn

online

other

£bn Change total

+23.1bn • Shopping habits are expanding across different retailers and formats - Build premium ale offering outside of main estate supermarkets – over a 1/5 of Bottled Ale customers buy most often in other outlets - Tailor range, pack formats & promotional activity by trade sector to increase category purchase frequency

Hall & Woodhouse Premium Ale Insight Report

• Despite the movement towards every day lower pricing, promotions are still a key part of shopping habit - Activity is still required to maintain focus on categories that are shopped less frequently, such as premium ale

• Shoppers perceive convenience stores as more expensive - P rice marked packs to reassure - S imple & clearly communicated promotional offer •S hoppers are switching tiers; to cheaper brands to save money but also to more premium - Differentiate tiers within Ale to maintain category value and offer a ‘reason to buy’ outside of price • Customers expect more: - Choice: of store, in-store, of format. ‘Real’ NPD within premium ale, differentiated ranges - Availability: key for bottled ale. Ensure brands have adequate facings on shelf to satisfy sales demand - Ease of selection: rationalise ranges whilst retaining core category ‘signpost’ brands - I nformation: range segmentation, ale styles, brewer, ingredients - Real: convey provenance of premium ale, highlight British heritage - Personal: targeted activity, consistent loyalty building campaigns

Changing Landscape

Convenience Channel Growth: opportunities & challenges for Premium Ale

28

Source: IGD ShopperVista 2016

Top convenience store shopper missions

54%

1: Top-up on staple products 2: Snack between meals

27%

3: Buy a newspaper/magazine

27%

4: Buy alcohol

23%

5: Buy something for an evening meal

23%

6: Top-up on fruit & vegetables

23%

7: Use cash machine or get cash back

21%

8: Buy lunch - cold food-to-go

18%

9: Buy cigarettes or tobacco

18%

10: Buy a lottery ticket

Hall & Woodhouse Premium Ale Insight Report

18%

Total meal on the go = 26% (Lunch cold or hot food or breakfast) Total Lottery = 23% (Lottery ticket or scratchcard)

Buying alcohol is the 4th highest convenience store mission.

Changing Landscape

Convenience Channel Growth: opportunities & challenges for Premium Ale • An additional 38% of Convenience store shoppers would buy alcohol than currently buy (23%); suggesting that the range on offer is not satisfying demand - Expand the range of Premium Ale in sector to satisfy increasing number of category shoppers - Clear promotional strategy; mechanics that take into account smaller basket size

Convenience shoppers value local & British products; recognisable brands names reassure shoppers of quality

Hall & Woodhouse Premium Ale Insight Report

• Impulse sector currently under trades in ale by £100m vs. total BWS - Stimulate impulse purchase by increasing availability of chilled Premium Ale (60% of customers drink their Bottled Ale chilled) - Increase Premium Ale display to highlight category availability - Feature Premium Ale in promotional leaflets to drive category shoppers to store - Include Premium Ale within seasonal events to drive penetration • Convenience shoppers value local & British products; recognisable brands names reassure shoppers of quality - Point of sale to highlight provenance of Premium Ale - Stock key category brands to highlight category quality credentials - Regional origins of Premium Ales (NB. local to actual store less important)

29 • ‘Long Drinks’ are in decline within Impulse, driven by Lager & Cider; Premium Ale is in growth - D rive growth and total Long Drinks category value by offering a core range & highlighting Premium Ale availability in store - A dapt offering to store location, shopper missions & demographics e.g. selection of chilled ales for immediate consumption - I nclude Premium Ales in meal solutions to encourage increase in consumption occasions • Value for money is a key factor in choosing where to ‘top-up’ shop - I ncrease of ‘value focussed’ Convenience (One Stop Local Value, Booker Family Shopper) may be a challenge for Premium Ale; ranges are more likely to be based around Canned Lager and Standard Canned Ale - P rice marked packs reassure shoppers as perceived to offer honest value - C learly displayed promotional offers • Appropriate pack formats are important but more challenging for Bottled Ale - B ottled Ale carry packs, branded bottle holders, smaller multipacks

Changing Landscape

Discounter Channel Growth: opportunities & challenges for Premium Ale

30

Source: Nielsen MAT 02.01.16

• Growth shopping missions within Discounter sector are main shop (38% of shoppers) and evening meal (22%) - Increase in missions that are more likely to include alcohol

Value % Share of Total GB, Beer & Cider 8.7% 7.3% 6.7%

• Discounters will be looking to expand their branded ranges as they aim to recruit more customers to do their main shop • Conversion of beer shoppers is low; 58% of beer purchasing households shop at Discounters, but less than a third of these actually buy beer in this trade sector, due to non-availability of brands they want • Almost half of all Discounter Beer & Cider sales are own label (driven by lager & cider); whereas almost 80% of total BWS sales in UK are branded... ...and 92% of Beer consumers are brand loyal •S ince the introduction of a more branded offering, beer & cider share of sales through discounters has grown & is approaching that of total grocery

Hall & Woodhouse Premium Ale Insight Report

■ ■ ■ ■

Total discounters MAT TY MAT YA MAT 2YA

• Own label bottled ale sales make up less than 5% of the total category. Expansion of brands within this category in Discounters has driven strong growth, leading to a £26m over trade versus their share of total Beer - L eading to increase in price matching by Grocery Multiples, risk of devaluing overall category - P roduct portfolio needs to be managed carefully to reduce conflict; separate Discounter strategy required • 27% of bottled ale shoppers have purchased bottled from a Discounter over the last 3 months, however only a fifth of these name it as their main channel - D iscounters have the potential to become a key choice for core bottled ale customers - A dded interest is needed within Discounter ranges to increase customer engagement and reduce sole focus being price e.g. bespoke brands, style information, ‘British’ focus

Changing Landscape

Discounter Premium Ale % Share of Trade vs. Beer

31

Source: Beer - PanelVision 30.01.16, Ale - Nielsen Homescan MAT 02.01.16

Bottled Ale in the Discount sector is now worth £50m, significantly overtrading versus their share of total beer. Following a very strong year two years ago, sales performance is now in line with total Beer, but behind Discounter’s total grocery growth rate.

20

18.8

Premium Canned Ale growth rate has accelerated rapidly over the last year, but this is from a very small base; a very limited number of brands are available in this sector

17.9

18

16.5

16

% Value Share

14 12 10

+8% +25%

9.1 7.9

8 6.4 6

+8%

4

4.8

5.1

+52% +3%

+31%

2

8.1

0

Share of Beer

Share of Bottled Ale

■ MAT 2YA

Hall & Woodhouse Premium Ale Insight Report

■ MAT YA

■ MAT TY

Share of Premium Canned Ale

Bottled Ale in the Discount sector is now worth £50m, significantly overtrading versus their share of total beer.

Changing Landscape

Discounter Premium Ale Share Trend

32

Source: Nielsen Homescan MAT 02.01.16

Bottled Ale Share growth plateaued briefly when Grocery Multiple price matching intensified in Q3 2014. It soon recovered, albeit at a slower rate of growth due to a poorer performance from Aldi.

â– bottled ale rolling mat value share

â– premium canned ale rolling mat value share

25

20

16.5

17.9

18.8

14.3

15

8.1

10

6.3

4.8

5.1

5

2

2

fe b 2 m 013 ar 30 2 m 013 ar 20 27 ap 13 r 25 2 m 013 ay 20 22 ju 13 n 20 201 3 ju 17 l 2 0 au 13 g 14 201 3 se 12 p 2 0 o 1 ct 3 20 9 n o 13 v 2 7 d 013 ec 20 4 ja 13 n 20 1 fe 14 b 2 1 m 014 ar 29 2 m 014 ar 20 26 ap 14 r 24 2 m 014 ay 20 21 ju 14 n 19 201 4 ju 16 l 2 au 014 g 13 201 4 se 11 p 2 o 014 ct 2 8 n 014 o v 2 6 d 014 ec 20 3 ja 14 n 20 31 ja 15 n 28 201 5 fe 28 b 2 0 1 m ar 5 20 25 ap 15 23 r 20 1 m ay 5 2 20 0 ju 15 n 18 201 5 ju 15 l 2 0 au 15 g 12 201 5 se 10 p 2 0 o 1 ct 5 20 7 n o 15 v 2 5 d 015 ec 20 2 ja 15 n 20 16

0

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Discounter Bottled Ale % Category Conversion

33

Source: Nielsen Homescan MAT 02.01.16

A high % of Discounter customers buy Bottled Ale as the range contains a high proportion of branded products versus other BWS categories.

Aldi conversion has dropped year on year, with 130k households leaving the category, either completely or shifting to other retailers.

14%

Lidl have attracted almost 300k households to their Bottled Ale category, outperforming Aldi and attracting PBA spend from most other major retailers

12%

10%

8%

6%

12%

10.2%

8.5%

9.9%

4%

2%

0% aldi

â– LY

Hall & Woodhouse Premium Ale Insight Report

lidl

â– Ty

Changing Landscape

Aldi Bottled Ale Performance Factors

34

Source: Nielsen Homescan MAT 02.01.16

Actual (£000s)

Source of change %

-11%

-3,053

Shifting Gains/Loss % Index / Act (£000s) 53.5%

79

259

morrisons bottled ale

47.5%

153

230

sainsburys bottled ale

5.2%

97

25

0

0

-1.4%

-403

-7.4%

-2,066

-0.4%

-101

-1.7%

-483

■ ■ ■ ■ ■

tesco bottled ale

aldi bottled ale

total coops bottled ale

-18.1%

62

-87

all other

-19.5%

82

-94

waitrose bottled ale

-26.2%

61

-127

lidl bottled ale

-67.5%

136

-326

asda bottled ale

-75%

111

-363

Despite a strong performance at total Grocery level, Aldi bottled ale performance is faltering.

Although increasing customer numbers overall, they are failing to convert these into bottled ale shoppers. Existing customers are also buying less and, although bottled ale spend is being gained from Tesco & Morrisons, sales are shifting to other retailers, particularly Waitrose, Lidl & Asda

Despite a strong performance at total Grocery level, Aldi bottled ale performance is faltering.

Total Mkt pen awop repertoire shifting

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Lidl Bottled Ale Performance Factors

35

Source: Nielsen Homescan MAT 02.01.16

Actual (£000s)

Source of change %

+36.4%

6,816

+9.6%

1,805

+8.6%

1,614

+5.3%

993

Shifting Gains/Loss % Index / Act (£000s) sainsburys bottled ale

30.3%

111 729

all other

27.1%

274 651

morrisons bottled ale

25.6%

151 616

13.6%

106

326

total coops bottled ale

8%

73

191

waitrose bottled ale

4.6%

60

111

0

0

-4.6%

120

-110

-4.6%

51

-110

+12.8%

2,404

■ ■ ■ ■ ■

aldi bottled ale

lidl bottled ale

asda bottled ale

tesco bottled ale

Conversely, Lidl had a strong year with bottled ale. As overall customer numbers increase, a higher percentage of these are shopping the category and buying more. Households have added Bottled Ale from Lidl to their repertoire and significant shifting gains have been seen from all major retailers except Tesco & Asda

Households have added Bottled Ale from Lidl to their repertoire.

Total Mkt pen awop repertoire shifting

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

On-line Channel Growth: opportunities & challenges for Premium Ale

• 74% of on-line shopper missions are big shops with average spend of £75, only 17% are top up - Modify deals to upweight ale volume purchased at peak period or during events e.g. ‘8 ale bottles for £X’ - Opportunity for larger pack formats

Source: Nielsen Homescan Data to 52 WE 02.01.16 Vs YA

Ale Online sales Value Sales

Penetration

+16.5%

ale bottled ale

■ MAT YA

canned ale

■ MAT TY

• Although in strong growth, the share of Ale sold on-line remains very small at under 7% - Immediate consumption requirement is barrier to purchase - Bottled Ale customers, in particular, enjoy perusing range of ales on shelf (Bottled Ale on-line share is <6%) - Opportunity to increase information available; style of Ale, ingredients, regionality, food matching recommendation Hall & Woodhouse Premium Ale Insight Report

ale bottled ale

■ MAT YA

0.94 1.31

1.77 2.19

2.38 3.06

£10.2M £13.7M

+33.9% £12.7M £14.8M

£23.2m £28.7m

+28.3%

36

canned ale

■ MAT TY

• Significant opportunity as a quarter of UK households shop on-line, with Ale only being bought by 3%!

- Tailored activity such as coupons, free samples, recommendations, meal deals, product suggestions - encourage customers to shop for Premium Ale on-line

• Reduced delivery lead times and click & collect will drive top up and meal for tonight missions - Increase in missions that are more likely to involve BWS purchases - Reduces immediate consumption barrier to purchase • Need to simplify hierarchy to enable shoppers to find Premium Ale - Reflect ale drinker’s language - Allow customer to also shop by brand, brewery and style • Opportunity to add excitement and encourage impulse purchases - Bespoke area within site dedicated to Ale, with additional information for enthusiasts such as guest expert views, new product, ale style or ingredient features, recipes, brewery features - Increase disruption – food matching, meal deals, Ale suggestions alongside complimentary BWS categories such as Wine or Whiskey - More compelling pack shots? Lifestyle images to showcase each Ale - Increase relevance of Premium Ale by including in on-line events to encourage impulse purchases and attract new on-line Ale shoppers

Changing Landscape

Premium Ale Performance & Drivers by Major Grocery Retailer

37 Large format stores will remain the place where most groceries are bought and the Grocery Multiple sector accounts for almost 90% of all Ale volume. Over the last 3 months, 97% of Bottled Ale customers have purchased from a supermarket.

H&W Bottled Ale Customer Research 2016 - Base: Total buyers (1000)

Price matching, range rationalisation, reduction of promotional activity, increasing hurdle rates to obtain secondary display space are contributing to an increasingly challenging environment, for both retailers and suppliers.

Customer trade sector preference – Bottled Ale ■ bought pba from in last 3 months ■ buy pba from most often ■ Conversion (l3m/most often) 100%

80% 80%

60%

40%

22%

10%

20%

35% 13% 10%

0%

14%

17%

Hall & Woodhouse Premium Ale Insight Report

1%

6%

1%

7%

0%

10%

2%

20%

7%

20%

3%

24%

6%

27%

3%

30%

78%

97%

0% supermarket pub discount store off-licence supermarket local corner shop brewery cash & carry specialist drinks website website

Changing Landscape

Retailer Bottled Ale % Share of Trade vs. Beer

38

Source: Beer - PanelVision 30.01.16, Ale - Homescan MAT 02.01.16

Tesco have reduced their Bottled Ale undertrade versus total Beer which has been driven by a declining share of total Beer in conjunction with growth of Bottled Ale.

■ total beer

A number of existing customers have stopped buying Bottled Ale in Tesco, partly due to a reduction in display and shifting sales to Craft Beer, but non-category shoppers have been attracted. These are customers shifting spend from Canned Ale, taking advantage of deep price cuts on leading bottled brands such as Old Speckled Hen and Hobgoblin, and also customers, new to Ale, buying Bottled Ale multipacks.

■ bottled ale

25

20

2.0 4.8

7.5 6.1

14.7 10.8

11.0 11.2

12.7 12.3

5

9.1 18.8

10

24.1 22.2

15

0 tesco discounters sainsburys morrisons asda coop waitrose Bottled Ale Over/ under -£5.1m £25.9m -£1.0m £0.6m -£10.4m -£3.8m £7.5m trade vs. Beer

Hall & Woodhouse Premium Ale Insight Report

A fall in Tesco total customer numbers, with Grocery sales shifting to all other major retailers, means that a greater proportion of remaining Tesco shoppers are now buying Bottled ale.

Existing customers are also buying more volume, driven by the performance of multipacks over Christmas and increasing purchase frequency. Net shifting is flat; Tesco Bottled Ale spend is being lost to Asda, Aldi & Co-op, but attracted from JS, Waitrose & Lidl

Changing Landscape

Bottled Ale % Category Conversion by Retailer

39

Source: Nielsen Homescan MAT 02.01.16

■ Ly

Sainsbury’s are losing grocery customers as a whole and, with reductions in display, also Bottled Ale households. With spend shifting to most other retailers, the % of their shoppers who buy Bottled Ale has fallen.

■ TY

12%

Those remaining are buying more, shopping more frequently and buying into multipacks over Christmas, but Sainsbury’s is still underperforming the market.

10%

8%

Despite having the largest under trade versus Beer, Asda has increased Bottled Ale category customer conversion, with display increasing over the last year.

6%

0%

Tesco Asda

Sainsbury’s

Hall & Woodhouse Premium Ale Insight Report

Waitrose Co-­op

7.8% 9.3%

4.2% 3.5%

6.4% 7.1%

9.5% 8.6%

6.0% 7.0%

2%

10.3% 10.8%

4%

Morrisons

Although they are losing grocery shoppers overall, with sales shifting to all other major retailers, Bottled Ale is bucking this trend, with spend being attracted from JS, Aldi & Tesco in particular.

With increased display prompting more frequent purchase, their existing customers are also buying in greater volumes

Changing Landscape

Major Retailer Bottled Ale Shifting (£)

40

Source: Nielsen Homescan MAT 02.01.16

Morrisons are driving Bottled Ale volume, but at the expense of value growth which remains behind the market. They have increased display significantly and, as a result, converted a higher proportion of their customers to the category.

sainsburys bottled ale

asda bottled ale

Morrison’s are also attracting new Grocery Multiple customers to Bottled Ale, plus spend is being gained from most other major retailers.

morrisons bottled ale waitrose bottled ale

However, rotating £1 per bottle deals have led to volume growing far ahead of value. Combined with an increasingly flat category offer, this could reduce the ability to drive volume growth outside of price investment.

total coops bottled ale tesco bottled ale

aldi bottled ale

lidl bottled ale

all other

0.5m

■ ■ ■ ■ ■ ■ ■ ■ ■

1m

1.5m

2m

2.5m

sainsburys bottled ale asda bottled ale morrisons bottled ale waitrose bottled ale total coops bottled ale tesco bottled ale aldi bottled ale lidl bottled ale all other

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Retailer Premium Canned Ale % Share of Trade vs. Beer

41

Source: Beer - PanelVision 30.01.16, Ale - Homescan MAT 02.01.16

■ total beer

Premium Canned Ale is heavily reliant on Tesco & JS due to the proportion of category sales they account for. Although they overtrade versus Beer, a reduction in Premium Canned Ale display in both retailers has reduced customer numbers. Trip volumes are also declining, particularly in Tesco, due to reduced multibuy activity in favour of price cuts on Premium Canned Ale 4 packs.

■ Premium Canned Ale

50

Tesco attracted sales from Morrison’s over the period that Morrison’s stocked a reduced range, but has lost the equivalent amount to Aldi & Co-op.

40

30

2.0 3.2

7.5 3.5

11 6

9.1 8.1

14.7 11.3

12.7 20.7

10

24.1 41.4

20

0 tesco sainsburys asda discounters morrisons coop waitrose Premium Canned Ale Over/ £10.2m £10.7m -£2.0m -£3.3m -£2.9m -£2.4m £0.7m Under Trade vs Beer

Hall & Woodhouse Premium Ale Insight Report

Premium Canned Ale is heavily reliant on Tesco & JS due to the proportion of category sales they account for.

Changing Landscape

Premium Canned Ale % Category Conversion by Retailer

42

Source: Nielsen Homescan MAT 02.01.16

■ Ly

■ TY

3%

2.5%

2%

0%

Tesco Asda

Sainsbury’s

Hall & Woodhouse Premium Ale Insight Report

Waitrose Co-­op

1.0% 1.1%

1.2% 0.9%

1.9% 1.6%

0.8% 1.1%

0.5%

2.8% 2.7%

1%

0.4% 0.9%

1.5%

Both Sainsbury’s & Tesco have reduced the percentage of their customers who buy Premium Canned Ale.

Morrisons

Changing Landscape

Major Retailer Premium Canned Ale Shifting (£)

43

Source: Nielsen Homescan MAT 02.01.16

Morrisons are attracting customers back to Premium Canned Ale after expanding their range to satisfy the wider repertoire of core category shoppers. They have gained sales from Asda and Co-op, but a lack of display has held back recovery & their performance is behind the market.

total coops premium canned ale waitrose premium canned ale morrisons premium canned ale

asda premium canned ale

sainsburys premium canned ale tesco premium canned ale

aldi premium canned ale

lidl premium canned ale

all other

200,000 400,000 600,000 800,000

■ ■ ■ ■ ■ ■ ■ ■ ■

total coops premium canned ale waitrose premium canned ale morrisons premium canned ale asda premium canned ale sainsburys premium canned ale tesco premium canned ale aldi premium canned ale lidl premium canned ale all other

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Bottled Ale Customer Evolution

44

H&W / Insitas Customer Segmentation Research 2016 - Base: Shoppers - Sainsbury’s buyers 2010 (1261); All supermarket buyers 2016 (1000)

Percentage of category shoppers who drink Bottled Ale

■ 2010

■ 2016

Indicates sig diff vs. 2010 @ 95%

100%

60%

40%

0

The composition of Bottled Ale shoppers has been one of the key changes. Category shoppers who also drink Bottled Ale now account for a greater proportion of the market.

In 2010, non-drinking shoppers bought a significant percentage of the category (31% volume). Understandably, these shoppers had less Bottled Ale knowledge and were less engaged with the category. As a result the main factor driving their purchase decision has always been price.

80%

20%

Over the last five years, over 1.5million new customers have entered the Bottled Ale category, which has fundamentally altered the profile of the Bottled Ale customer.

38%

22%

Shopper only (does not consume)

62%

78%

Shopper who consumes

Now in 2016, we have seen a reduction in the size of this more price sensitive customer segment, who now account for just 15% of Bottled Ale category volume sales.

Category shoppers in 2016 are therefore a much more engaged audience, with 4 in 5 being consumers.

Over the last five years, over 1.5 million new customers have entered the Bottled Ale category.

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Bottled Ale Category Shopper Demographics

45

H&W / Insitas Customer Segmentation Research 2016 Base: Drinkers – bought from Sainsbury’s 2010 (707); bought from any supermarket 2016 (750)

■ 2010

■ 2016

Indicates sig diff vs. 2010 @ 95%

Age (%) 50%

Gender (%)

40%

30%

32%

20%

68%

33% 24%

50% 40%

17% 36%

10%

78%

22% men

0

under 36

36-55

women

over 55

Social Grade (%) 2010

2016

22% 13%

31% 35%

5% 16%

17%

12%

15%

19%

7% 9%

Bottled Ale drinkers have also changed demographically; comprising of far more females and a much younger profile; over a third are under 36.

■ A ■ B ■ C1 ■ C2 ■ D ■ E

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Bottled Ale Shopper Attitudes 2016 vs 2010

46

H&W / Insitas Customer Segmentation Research 2016 - Base: Shoppers - Sainsbury’s buyers 2010 (1261); All supermarket buyers 2016 (1000)

■ 2010

■ 2016

Indicates sig diff vs. 2010 @ 95%

I like to try a different ale every time I buy one

29% 50%

I spend a long time at the shelf choosing which beer to buy

42% 62%

I know a lot about real ale

26% 42%

I find the large range confusing

10% 26%

I buy bottled ale as a treat, it’s not my main drink

43% 49%

I look out for beers of the month/seasonal ales

48% 54%

Hall & Woodhouse Premium Ale Insight Report

Along with consumer’s younger age profile, the growth in size and choice of the Bottled Ale category since 2010 is reflected in a shift in attitudes.

The increasing diversity of Premium Ale, and of BWS as a whole, has helped consumers become more experimental and knowledgeable, who love the variety that Bottled Ale offers and appreciate anything new and different.

As customer’s repertoires of total BWS expands however, Bottled Ale does face increased competition from other categories. With Bottled Ale less likely to be customer’s main drink, the category needs to work harder to hold their interest, deliver excitement and remain relevant.

With Bottled Ale less likely to be customer’s main drink, the category needs to work harder to hold their interest, deliver excitement and remain relevant.

Changing Landscape

Premium Ale Category Sources of Growth

47

Source: Nielsen Homescan MAT 02.01.16 Multiples

Bottled Ale Performance Factors

Actual (£000s)

Source of change %

+6.0%

13,959

Shifting Gains/Loss % Index / Act (£000s) standard Canned Ale

+1.3%

3,012

5,329

+2.3%

639

+0.3%

4,979

+2.1% ■ ■ ■ ■ ■

Bottled Ale’s main source of growth is new customers.

all other

56.9%

22.9%

87 2,835

140

1,140

premium canned ale

18.3%

110

912

1.8%

231

92

ale keg

These are a combination of new customers to the ale category, many via multipacks, and shifting spend from Canned Ale, attracted by price match discounts on key Bottled Ale brands.

Existing customers are also buying in greater quantities driven by multipack growth.

Outside of Ale, spend is shifting from Lager, Cider & Wine, shoppers again attracted to heavy discounts on single ale bottles and to multipacks during peak periods.

Total Mkt pen awop repertoire shifting

Hall & Woodhouse Premium Ale Insight Report

Bottled Ale’s main source of growth is new customers.

Changing Landscape

Premium Ale Category Sources of Growth

48

Source: Nielsen Homescan MAT 02.01.16 Multiples

Premium Canned Ale Performance Factors

Actual (£000s)

-3,194

Source of change %

-5.2%

Shifting Gains/Loss % Index / Act (£000s) All other

+0.4%

222

-1,220

-2.0%

-983

-1.6%

-1,213

-2.0% ■ ■ ■ ■ ■

85

183

3.0%

300

37

standard canned ale

-42.9%

116

-521

-75.2%

93

-912

Total Mkt pen awop repertoire shifting

Hall & Woodhouse Premium Ale Insight Report

ale keg

15.1%

bottled ale

After gaining sales from Standard Canned Ale, Bottled Ale and most other BWS categories in 2014, Premium Canned Ale suffered significant losses last year.

Customers are dropping Premium Canned Ale from their repertoire and spend is shifting back to Standard Canned and Bottled Ale. Despite decreasing prices, remaining Premium Canned Customers are also buying less, with the reduction of multi-buy promotions and levels of display reducing purchase frequency and trip volume.

Outside of ale, Premium Canned Ale spend is shifting to many other BWS categories, including Sparkling Wine, Spirits & Cider

Customers are dropping Premium Canned Ale from their repertoire and spend is shifting back to Standard Canned and Bottled Ale.

Changing Landscape

New Product Development & Category Trends

49

Source: Nielsen Scantrack Data to 52 WE 02.01.16 Vs YA

NPD contribution by category

17%

1B 800M 600m 400m

16%

200m 0 spirits wine (light)

70m

■ ■ ■ ■

new growth decline lost

26% cider

7% lager

60m 50m

10% ■ ■ ■ ■

new growth decline lost

Premium trends are evident in Lager. Growth is being driven by Corona, Stella Artois, San Miguel and Peroni, and half of total NPD sales are coming from Fosters Rocks Spiced Rum and Desperados Red.

40m 30m 20m

27%

-200m

10m

-400m

0m bottled ale premium canned ale

-600m

-10m

-800m

-20m

-1B

-30m

NPD has been prolific within the Cider category, accounting for 26% of annual growth. Much of this however is due to the ‘churn’ of Cider flavours, with other variants in decline or dropping from the category. Key growth drivers are ‘premium world’ ciders such as Kopparberg and Old Mout, plus the continued success of Strongbow Dark Fruit.

Hall & Woodhouse Premium Ale Insight Report

Spirit growth is mainly being driven by core category brands, including Smirnoff & Bells, featuring in regular £15 price cut deals on litre bottles. Sales declines are being suffered by own label products as shoppers trade up to the brands on offer.

There are three themes driving NPD in the Spirit category: low price, premium and flavours. Glen Stag Scotch, retailing for £16, and Glenlivet Founders Reserve at £48 are the two best-selling launches, making up almost 40% of all NPD value. Flavoured non-cream liqueurs also feature, particularly Jack Daniels Honey and Tennessee Fire.

Bottled Ale NPD is all about golden style ales.

Guinness Golden Ale accounts for a quarter of NPD sales, with Spitfire Gold and John Smith’s Golden Ale also contributing.

Sharps Doombar and the Guinness Porters are strong performers within the bottled ale growth skus, with Hobgoblin Gold a significant new product despite loss of Tesco distribution.

Hobgoblin Gold is also a key brand within Premium Canned Ale NPD and is, along with Brewdog’s Punk IPA, a major contributor. An accelerating trend, albeit still small in value terms, is the plethora of new Craft canned ales which look set to gain further distribution over the next year.

Changing Landscape

Bottled Ale Style Trends

50

Source: Nielsen Scantrack MAT to 02.01.16 Total GB (based on brands making up 83% category, excludes mixed packs & smaller regionals)

Performance by Bottled Ale style

Bottled Ale style trends are being influenced by younger consumers entering the market; premium lager drinkers, who are adding ale to their beer repertoire, and more experimental customers who have a higher degree of knowledge of, and interest in, different styles of beer.

Total Bottled Ale

Golden ale launches, combined with the growth in popularity of pale ales, has maintained Light/ Golden as the fastest growing style within Bottled Ale.

+11% YOY

Darker ales are also in strong growth. The well supported launches of the Guinness porters are driving this, along with Wychwood’s Hobgoblin, one of the key skus caught up in Grocery Multiple matching of Discounter pricing.

Although still contributing over 50% of category value, sales of Amber ales are fairly flat by comparison.

Amber 52.3% £ Share

Dark 24.2% £ Share

+3% YOY

+16% YOY

Hall & Woodhouse Premium Ale Insight Report

Light/ Golden 23.4% £ Share +33% YOY

Impressive growth by Sharp’s Doombar and Timothy Taylor Landlord has been somewhat mitigated by the decline of a number of core brands such as Shepherd Neame Spitfire, Badger Fursty Ferret, Greene King IPA and Fullers London Pride, under pressure in an expanding, increasingly innovative market.

Changing Landscape

Bottled Ale Style Preferences

51

H&W / Insitas Customer Segmentation Research 2016 - Base: All supermarket buyers (1000)

Percentage of total customers without a style preference

From a consumer perspective, style preferences bear out these category trends.

Versus research findings in 2010, customers in 2016 are more likely to have a preferred style, although this still does not factor in the purchase decision for more than 1 in 3 customers.

45%

38%

■ 2010

Of those who do have a preference, almost 40% seek out Light/Golden ales, suggesting that there is plenty of headroom for the growth of this style. This could possibly be at a cost to more traditional Amber ales.

■ 2016

Preferred style % share of customers who expressed a preference

25% 37%

■ dark ■ amber ■ golden/light

Of those who do have a preference, almost 40% seek out Light/Golden ales, suggesting that there is plenty of headroom for the growth of this style.

38%

Hall & Woodhouse Premium Ale Insight Report

Changing Landscape

Ale Bottle Colour Preferences

52

H&W / Insitas Customer Segmentation Research 2016 - Base: All supermarket buyers (1000)

Percentage of total customers without a bottle colour preference

81%

56%

■ 2010

■ 2016

Preferred bottle colour % share of customers who expressed a preference

Clear

53%

Clear

57%

brown

47%

brown

43%

■ 2010 Hall & Woodhouse Premium Ale Insight Report

From our research we also know that customers do want to try different ales, but within a fairly narrow range of styles. An increasing preference for clear bottles suggests that shoppers welcome ways to reduce the risk of buying ale they won’t enjoy.

Other initiatives are helping to make the selection easier such as style information on shelf, simplified ale descriptions on bottle labels, category leaflets and increased information on retailer websites.

Off shelf display, showcasing a range of different Bottled Ale brands with similar styles would also increase shopper confidence, drive purchase frequency and expand customer repertoires. This, in turn, would help build category loyalty, increasing the breadth of choice available to each consumer within their preferred style range.

An increasing preference for clear bottles suggests that shoppers welcome ways to reduce the risk of buying ale they won’t enjoy.

■ 2016

Changing Landscape

Craft Beer

53

Source: Nielsen Scantrack MAT to 02/01/16 vs year ago

Definitions of what qualifies as a ‘Craft Beer’ vary widely.

Craft Beer, Total Coverage, Volume Sales (000’s)

10m

40k

8m

30k

6m

20k 10k

+11%

0 mat ya matya

Hall & Woodhouse Premium Ale Insight Report

4m 2m

Unfortunately, with these requirements difficult to quantify, larger manufacturer’s launching ‘craft style’ sub brands and with an increasing number of Craft brewers being acquired by large, international breweries, the lines between types of premium beer have become blurred, with the term ‘Craft’ being dropped by some brewers as it becomes increasingly ambiguous.

+10%

11,840

50k

48,387

12m

36,757

60k

8,970

Craft Beer, Total Coverage, Value Sales £000’s

Unique flavours, higher quality, traditional production methods, with smaller volumes produced, are all cited by consumers as necessary attributes in a Craft Beer.

0 mat ya matya

Based on Nielsen’s categorisation, Craft Beer remains in strong growth, outperforming total mainstream beer but in line with Premium Ale performance.

Growth is being driven by new customers adding Craft to their repertoire, with customer spend shifting from Bottled Ale, Wine and Lager. Existing customers are also increasing volumes by shopping the category more frequently.

Changing Landscape

Demographic Breakdown of Craft Beer Buyers

54

Source: Nielsen Homescan MAT to 02.01.16 Multiples

Social Class

12.7% 10% 14.4%

14.2% 6.7% 11.9%

30.7%

26.7%

33.1%

40.5%

households buying brand

% expenditure

Region ■ ■ ■ ■ ■

e d c2 c1 ab

39%

22.3% 38.6%

25.9%

21.6%

19% 1.8%

17.4% 0.3%

households buying brand

15.9%

10.8%

7.1% 3.6% 8.2% 6.9% 1.4% 6.7% 4.9%

4.2% 9.1% 10.4% 1.7% 11.9%

Age Main Shopper

14.3%

15.3%

■ ■ ■ ■ ■

65+ 45 - 64 35 - 44 25 - 34 16 - 24

% expenditure

Hall & Woodhouse Premium Ale Insight Report

6.4%

19.7%

9.1% 20.4%

households buying brand

25.7%

Craft Ale customers are more affluent, with slightly older shoppers (45yrs+) accounting for over half of category sales, roughly in-line with Bottled Ale customers.

Sales by region highlight a marked difference between Craft Beer and Premium Ale. There is a significant bias towards London and the South East for Craft, with over 45% of sales through these regions (vs. 29% for Premium Ale), due to the expansion of on-trade Craft Beer interest in this area.

With a 16% share, Scotland also buys a far greater proportion of Craft Beer than of Premium Ale (7%) or total Beer (9%). This is predominantly due to the success of Brewdog; almost a fifth of Brewdog UK sales are in their heartland.

■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Central & North scotland Lancashire & borders north east yorkshire wales & west south west central east of england south & south east london

% expenditure

Changing Landscape

Craft Beer Drivers & Trends

55

Source: Nielsen Scantrack MAT to 02/01/16 vs year ago

Share of Craft Beer category by pack format Value % share 100%

1.03%

Volume % share

3.51%

100%

90%

90%

80%

80%

70%

70%

60%

60%

50%

98.1%

95.77%

50%

40%

40%

30%

30%

20%

20%

10%

10%

0 mat ya mat ty

■ bottled craft Although still representing a small percentage of the market, canned formats are gaining share of Craft Beer.

Hall & Woodhouse Premium Ale Insight Report

1.09%

3.89%

This initially created merchandising challenges but retailers are now adapting layouts to accommodate the 330ml/355ml Cans. Often sold as singles, their natural position is alongside Craft bottles, offering a wider range of beers in a format that has become increasingly prevalent and popular in on-trade Craft bars.

Due to the wide range of styles and high level of activity in the category, other distinct Craft Beer sales trends are less immediately apparent.

97.74%

95.12%

0 mat ya mat ty

Thwaites skus currently account for over 20% of the category growth driven by NPD, with Curious Brew from Chapel Down and Bootlegger Prohibition, an apple ‘speer’ from Dockyard Distillers, also featuring.

Other fruit flavoured Craft Beers are not faring as well, with a number in decline alongside wheat beers. Brewdog alone accounts for over 30% of category growth.

Although Craft Beer is currently a small category, around a 1/10th of the size of Premium Ale, the value of the media coverage, and subsequent customers it attracts, cannot be underestimated.

■ canned craft Brewdog and Thwaites 13 Guns are currently driving much of this growth but an increasing number of British and American canned brands are starting to gain meaningful distribution in mainstream retailers.

As Craft Beer and Premium Ale/Lager categories become less distinct, an increasing number of consumers will be looking to broaden their repertoire, providing a route into the Bottled Ale market and driving value into Beer as a whole.

Changing Landscape

Driving Value

Hall & Woodhouse Premium Ale Insight Report

56

Driving Value

Beer Subcategory Average Pricing

57

Nielsen Scantrack MAT to 02.01.16

Wine with the growing popularity of Prosecco; even Lager pricing has remained almost flat due to Premium Lager gaining category share at the expense of Standard.

£4.50

■ MAT Jan 15

■ MAT Jan 16

£4.00

£2.50

£2.00

£2.60 £2.58 £3.29 £3.19 £1.89 £1.81 £2.42 £2.30 £2.55 £2.48 £4.10 £4.09 £4.11 £4.11 £3.86 £3.69 £2.98 £2.88

£3.00

£2.15 £2.14 £2.08 £2.07

£/Litre

£3.50

£1.50

Beer lager ale total standard premium stout craft bottled canned world/ bottled canned canned beer* craft* craft* discovery ale ale ale beer* Sales £m

£3,746 £3,088 £553 £342 £123

£81 £104

£48

£46

£2

£646

*not exclusive categories, also included in Ale or Lager

Whereas average prices of Wine, Spirits & Cider have increased, all Beer subcategories are falling in price except Bottled Craft beer.

Other BWS categories have been able to effectively manage the product mix in order to drive value ahead of volume. Whilst this may Hall & Woodhouse Premium Ale Insight Report

not always drive absolute category growth, it does enable retailers and brand owners to balance the value delivered by ranges across different types of product.

Cider average price is being maintained by the development of Premium World & Craft Ciders,

With the Spirit category this is particularly apparent. Whilst still offering lower priced options for more value conscious category shoppers, ‘Core’ Spirit brands such as Bell’s, Bacardi & Gordon’s have driven volume through regular price deals, predominantly on 1 litre formats. This increased category investment has been offset by the growth of Premium Spirits.

Consumer interest in Premium Spirits continues to grow, driven by the on-trade, cocktail trends, the increase of craft distillers and the resulting media coverage.

Premium Spirits are offering customers something different, either through provenance, craft production and quality ingredients as with Grey Goose Vodka and Williams Chase Gin, or with the promise of a new experience from products like Haig Club Whisky or Jack Daniel’s Tennessee Fire.

Premium Spirits are attracting more experimental consumers and are justifying their premium price points by clearly communicating product benefits, through media, on packaging and on-line. At fixture, their point of difference is also made clear to shoppers; premium brands tend to be merchandised together, above core Spirit ranges.

Driving Value

Premium Spirits Key Performance Indicators

58

Nielsen Homescan MAT 02.01.16

The primary source of growth for Premium Spirits is new customers, adding to their repertoire and trading up from Standard Spirits. Volumes are also increasing, with customers being drawn to the fixture more often and buying in greater volumes.

Price per Ltr

£26.04

2.9

+£33.5m

+£9.9m

+£14.9m

+9.7%

+2.9%

+4.6%

-£7.5m

-2.3%

-10m

Freq. Vol per Trip Ltrs trips

Penetration (HH Num)

26.5%

0

10m

20m

■ price per volume ■ households

Hall & Woodhouse Premium Ale Insight Report

30m

Although there has been increased investment in Premium Spirits, they are gaining share of the total Spirits category and, commanding a £10/litre price premium, are helping to maintain overall category value.

40m

■ frequency ■ trip volume

0.76

50m

Premium Spirits are also changing the demographics of total Spirits, attracting younger, more affluent customers.

In addition, as the category is offering excitement to shoppers and generating incremental sales, Spirits have gained additional display space in store over the last year.

60m

As the category is offering excitement to shoppers and generating incremental sales, Spirits have gained additional display space in store over the last year.

Driving Value

Building Value into Premium Ale

59

Nielsen Homescan MAT to 02.01.16

Total BWS average annual spend per Buyer

Premium Ale shoppers are important to retailers. They spend, on average, a large amount on the BWS category as a whole; Bottled Ale customers spend £80 more per year than Wine shoppers.

£900

Premium Canned Ale shoppers spend the most annually, and, although Canned Ale forms a large proportion of their repertoire, they also spend the equivalent amount across other BWS categories.

£800

£700

£600

£500

£400

£300

£462

£426

£475

£488

£497

£499

£529

£554

£563

£592

£616

£100

£772

£200

cider

rtd

Bottled Ale customers spend £80 more per year than Wine shoppers.

£0

Premium Premium standard stout bottled standard spirits world bottled light

canned canned canned ale canned beers lager wine Ale lager Ale lager

Hall & Woodhouse Premium Ale Insight Report

Driving Value

Bottled Ale Customer Considerations

60

H&W / Insitas Customer Segmentation Research 2016 - Base: All supermarket buyers (1000)

Total BWS average annual spend per Buyer

■ Don’t know ■ Neither agree nor disagree

■ Completely disagree ■ Agree

I love the fact that there is such a wide variety of different ales I like to buy new brands of bottled ale

9

5

44

17

I like to try a different ale every time I buy one

16

Hall & Woodhouse Premium Ale Insight Report

10

45

48

23

I often buy bottled ale on impulse, when I have gone into the shop for something else

I like to buy ales with flavours other than hops (e.g. elderflower, honey etc.)

■ Disagree ■ Completely agree

24

31

20

24

89

23

43

Total agree

12

71

The average Bottled Ale customer is now younger and more knowledgeable about brewers, ale styles and ingredients. Over half always read the label when making a selection and the heritage of breweries and authenticity of ales are important factors.

Although customers are becoming more experimental, the Bottled Ale category is shopped fairly infrequently and customer spend is shifting to Craft Ale and Spirits. This would suggest that the increasing need for ‘something different’ is not currently being met.

55

38

12

50

32

14

46

The average Bottled Ale customer is now younger and more knowledgeable about brewers, ale styles and ingredients.

Driving Value

Customers are prepared to pay a premium for Bottled Ale

61

H&W / Insitas Customer Segmentation Research 2016 - Base: All supermarket buyers (1000)

■ Don’t know ■ Neither agree nor disagree

I like to buy the more premium brands of bottled ale

Bottled ale is a treat, it’s not the main drink I buy

If a brand is always on offer, I believe it’s not worth its full price

Hall & Woodhouse Premium Ale Insight Report

■ Completely disagree ■ Agree

11

30

17

16

41

30

27

■ Disagree ■ Completely agree

39

33

23

Total agree 57

10

49

9

32

In general, Bottled Ale customers are more affluent (63% ABC1), with flavour/taste the most important factor when making a selection rather than price.

Driving Value

Share of Category Shoppers & Spend 2016 vs 2010

62

H&W / Insitas Customer Segmentation Research 2016 - Base: All supermarket buyers (1000)

â&#x2013; Shopper only

Category shoppers who do not drink Bottled Ale are the most price sensitive customer segment.

With less category knowledge, they have little, other than price, upon which to base their decision.

â&#x2013; shopper & consumer

Over the last five years the importance of this segment to the category has been reduced as a greater proportion of buyers now also drink bottled ale.

100% 90% 80% 70% 60%

62%

78%

70% 86%

50% 40% 30% 20%

38%

10%

22%

30%

14%

Category shoppers who do not drink Bottled Ale are the most price sensitive customer segment.

0

% households 2010

%households 2016

Hall & Woodhouse Premium Ale Insight Report

% spend 2010

% spend 2016

Driving Value

Core & Premium Bottled Ales Category Shares

63

Nielsen Scantrack MAT 02.01.16 (based on single bottles in distribution 10%+) Pricing based on 500ml Bottle equivalent

100% 90%

■ core

17% £1.92/btl

80%

This is borne out by actual shopping behaviour.

The more premium or ‘discovery’ brands within the Bottled Ale category are outperforming the ‘core’ mainstream brands, despite selling at an average price over 20% higher.

■ premium

20% £1.87/btl +29%

Shoppers are prepared to trade up; less reliant on promotions they are paying an additional 34p per bottle in order to buy something special.

70% 60% 50% 40%

83% £1.61/btl

30%

80% £1.53/btl +10%

20% 10% 0 mat yag mat ty

Hall & Woodhouse Premium Ale Insight Report

The more premium or ‘discovery’ brands within the Bottled Ale category are outperforming the ‘core’ mainstream brands, despite selling at an average price over 20% higher.

Driving Value

Bottled Ale customers remain cautious or confused

64

H&W / Insitas Customer Segmentation Research 2016 - Base: All supermarket buyers (1000)

■ Don’t know ■ Neither agree nor disagree

■ Completely disagree ■ Agree

■ Disagree ■ Completely agree

I tend to buy ales that are on offer

11

24

46

17

63

I spend a long time at the shelf choosing which beer to buy

14

23

46

16

62

I’d like to try new ales, but I don’t know which ones to go for

4

I find the large range confusing

Hall & Woodhouse Premium Ale Insight Report

13

20

26

35

37

25

19

Total agree

12

49

7

26

Customers are however, looking for help whilst navigating the category. While some shoppers spend longer at fixture by choice in order to peruse the range, the purchase decision can still be challenging. Bottled Ale is commonly presented as a homogenised category, with little to differentiate between brands.

As such, shoppers often default to using promotional activity to guide their decision.

Promotional activity is still important to highlight the category and remind infrequent shoppers to purchase, but customers need to be given a reason to buy outside of just price.

Bottled Ale is commonly presented as a homogenised category, with little to differentiate between brands.

Driving Value

Bottled Ale Category Tiers

65

H&W / Insitas Customer Segmentation Research 2016 - Base: All supermarket buyers (1000) Bottle Size - Customers who expressed a preference

Bottle Size Preference

Replicating the successful model seen within other categories, i.e. building a tiered structure highlighting a selection of more premium Bottled Ales, would: • Help customers navigate the fixture to find new and/or more interesting beers • Allow brewers to create some ‘real’ innovative NPD rather than ‘me too’ products that simply move spend around the category • Add interest to the category, giving shoppers a reason to come back • Attract customer spend back from categories seen as more innovative, such as Spirits or Craft Beer • Stimulate trial by customers seeking more variety from BWS • Encourage customer interest in authentic ales, specialist ingredients and brewing methods • Elevate customer perception of Bottled Ale quality and craft credentials

Hall & Woodhouse Premium Ale Insight Report

Creating a tier of more premium, ‘discovery’ bottled ale does present a number of challenges: • A uniformed pricing structure and flat category promotional offer are limiting Bottled Ale product development as new brands need to fit within current market constraints • Shoppers have been conditioned to expect a standardised Bottled Ale offering • Increased alcohol content is not sufficient as a point of difference. Stronger ales feature regularly in category deals; customers have noticed and taken advantage of this!

• Reducing bottle size may not be a successful way to convey premium within this category.

4 in 5 Bottled Ale consumers prefer 500ml bottles • Merchandising tiers within the existing range may be more difficult in some retailers if ale style merchandising also has to be taken into consideration • The introduction of tiers needs to fit alongside category multibuy strategies

■ 330ml

■ 500ml

20%

80%

Driving Value

Bottled Ale Category Tiers Primarily, in order to create a Bottled Ale category that delivers what customers are looking for, whilst also driving value growth, requires a more collaborative approach between brewers and retailers.

Retailers cannot artificially construct tiers within a range without sufficient justification; it is predominantly the responsibility of Brewers to communicate to consumers why their ales should be viewed as more premium.

If an ale offers consumers more, be it specialist brewing techniques, unusual ingredients or a unique style and flavour, it needs to be presented as such, showing customers why it commands a higher price point.

Continual inclusion in deep category deals, or launching products at ÂŁ1 per bottle, risks the complete opposite.

To convey an aleâ&#x20AC;&#x2122;s premium positioning, it needs to be communicated at all points of contact with customers; on bottle labels, at shelf, in all media content and where the product is sold.

Brewers wanting their brands to be ubiquitous across all trade sectors and retailers can be a contributing factor to category value pressures.

A brand needs to ensure that its distribution is consistent with its intended positioning.

66 The development of elevated Bottled Ales which not only offer a genuine point of difference for customers, but are also treated as such, will enable retailers to showcase these as a more specialised offering.

This, in turn, will interrupt Bottled Ale customersâ&#x20AC;&#x2122; automated shopping behaviour, satiate their need for added excitement, create interest for, and drive trial by, new customers and give existing consumers a reason to visit the category more often, ultimately driving long term, sustainable growth.

If an ale offers consumers more, be it specialist brewing techniques, unusual ingredients or a unique style and flavour, it needs to be presented as such.

Hall & Woodhouse Premium Ale Insight Report

Driving Value

Hall & Woodhouse Premium Ale Insight Report

CATEGORY FLAVOURED BEER: FRUIT

CATEGORY FLAVOURED BEER: HERB & SPICE

CATEGORY PALE BEER: PALE ALE

68

Glossary Bottled Ales

All ale sold in a bottle, regardless of alcoholic strength, bottle size or pack size

Category Loyalty

Impulse Sector (Nielsen Definition)

Remainder of UK retail trade – Convenience Multiples, Off Licences, Forecourts, Symbol groups and Independents

The proportion of a shopper’s total spend that is spent on a specified category

MAT

BWS

Multibuy Promotional Mechanics

Beer, Wine & Spirits

Category Penetration

The % of UK households who have purchased from the specified category over the last year

Moving Annual Total – 12 months to the specified date

A quantity of products offered at a fixed price (e.g. 3 bottles for £5) or offered for the price of fewer units (e.g.

3 bottles for the price of two)

Nielsen HomeScan

Display

Any secondary siting of a product in store in addition to its standard shelf position

Measures the “Why Behind the Buy”. Panellists scan their takehome purchases to provide consumer measures such as weight of purchase and penetration, and to generate more complex analyses, for example switching and repertoire

Grocery Multiples (Nielsen Definition)

Nielsen ScanTrack

Tesco, Asda, Sainsbury’s, Morrisons, M&S, Iceland, Co-op, One Stop & Booths

Hall & Woodhouse Premium Ale Insight Report

Provides a read of the retail Off Trade market, reporting on “What People Buy”. The data combines weekly EPoS scanning data for all key Grocery Multiples with the most up-to-date read of the Impulse market

On Trade Market

Alcohol sold for immediate consumption in pubs, bars, restaurants, etc.

Off Trade Market

Alcohol sold for later consumption through retailers

Premium Ale Category

Total bottled ales and premium canned ales

Premium Canned Ales

All ale between 4.2% and 7.5% ABV sold in can format, regardless of pack size

Purchase Frequency

The number of occasions a specified category or brand is shopped over the last year

Standard Canned Ale

All ale between 2.9% and 4.1% ABV sold in can format, regardless of pack size

Trip Volumes

The average volume purchased by consumers during a single shopping trip

Glossary & Contact

69

Contact For further information about this report, please contact: Melinda Bowles Category Controller Hall & Woodhouse Ltd marketing@hall-woodhouse.co.uk

Graphic Design: www.lunatrix.co.uk

Premium Ale

Hall & Woodhouse Premium Ale Insight Report

Glossary & Contact