Brewers and hospitality groups are preparing for a hit to beer sales this year after signs emerged of UK and European consumers limiting their drinking budgets.
The squeeze on the cost of living has so far affected big-ticket purchases such as electronics and clothing more than drinks, but people are beginning to hold back from spending in hospitality venues or are choosing less expensive brands of beer, brewers and pub groups said.
In the UK, beer purchasing across bars, pubs, restaurants and stores declined 2.6 per cent year on year in the third quarter of last year to 7.1mn barrels, according to the British Beer and Pub Association. Both Heineken and Carlsberg have warned of early signs of softening demand in Europe.
“People are still out and about but understandably are cautious,” said Tim Martin, chair of JD Wetherspoon, one of the UK’s largest pub groups. The company said sales in the five weeks to November 6 were down 1.1 per cent from the same period in 2019.
Oliver Robinson, managing director at Robinsons brewery in Stockport, said: “We are starting to see less frequent visits, and people are very happy to spend £5.50 on a pint but maybe two rather than three.”
Spiros Malandrakis, head of research for alcoholic drinks at Euromonitor, said there was a “clash between the cost of living squeeze and the need to go back and socialise after three years of being stuck in our basements . . . this creates volatility”.
The World Cup and Christmas are expected to provide a seasonal boost, and not all pub groups are suffering: in the 10 weeks to December 3, like-for-like sales at Mitchell & Butlers, the UK’s largest listed pub group, were up 9.2 per cent compared with the same weeks in 2019.
“Everyone is expecting that the real squeeze in disposable incomes is going to come next year,” said Trevor Stirling, analyst at Bernstein.
“For the brewers, input cost inflation in Europe is going to be very high. For example the price of malting barley . . . is up about two-thirds compared with the prior year. So we will see another round of big price increases in the spring.”
He added: “And if the consumer is more fragile, another round of big price increases will have a big volume impact.”
He said the UK had some of the lowest consumer confidence in Europe but there were signs of declining volumes in Spain and of trading down in France, where mainstream brands are growing faster than premium beers, reversing a long-lasting trend of premiumisation.
“The alcohol business — beer, wine and spirits — is declining both in terms of value and volumes,” said Ananda Roy, senior vice-president at data analytics firm IRI.
He said the World Cup would provide a boost, though not as strongly as when the tournament is held in summer. Seasonal drinks such as champagne and port are also expected to hold up this month, he said.
A large decline in drinking volumes will only occur if there is large-scale unemployment, said Stirling.
Heineken’s president for the Europe region, Soren Hagh, told investors this month that the war in Ukraine “has had a major impact on consumer confidence across markets [and] on inflation, which hits consumers in all countries”.