Supermarkets busting a move in the $6 billion beer market

Retail supermarkets Coles and Woolworths are investing in the beer business. The two chains are spending up on marketing the brands they are exclusively importing in an attempt to grab a bigger share of the $6 billion domestic beer market.

Woolworths distributes Bitburger, Lowenbrau and Amsterdam Mariner, and Coles sells Hollandia, Cantina Cerveza, Bavaria, Estrella Damm, Harviestoun, La Trappe and Konig Pilsner. It also contracts Boag’s – now owned by Lion Nathan – to make Tasman Bitter, Tasman Gold and Hammer ‘n’ Tongs for the chain, reports the Sydney Morning Herald.

Beer was one of the final frontiers to remain free of home brands. But Coles and Woolworths have likely been spurred on by the success of in-house beer at local ALDI outlets and at British bulk retailer ASDA.

But it won’t be an easy sell. Home brands in other product segments have relied on price to capture market share, a tactic that will have limited success with beer. The beer market is bitterly competitive, requiring large brand investment to capture fickle younger consumers.

AC Nielsen data released earlier this year showed that sales of mainstream beer labels were in decline. Market growth was focused on premium imports, boutique Australian brews and low-carb alternatives.

The drinking habits of Australians have moved beyond a slab of VB or XXXX, with modern consumers more likely to be sipping a Stella Artois, BlueTongue or Pure Blonde. AC Nielsen data shows that Mexican brand Corona is now the eighth most popular beer in the nation.

Woolworths and Coles will both have to compete with established giants Foster’s and Lion Nathan, which import the most popular global beer brands. The retailers plan to push their lesser known brands by;

• Giving the brands prominent shelf position in their liquor outlets.
• Aggressive advertising in print, online and television.
• Woolworths will introduce the brands at its own hotels.

At present these in-house brands make up less than 2% of a mature market. The home-beers mainly target the value-conscious drinker. But the success of Woolworths’ Mexican import Sol, a direct competitor to Corona, shows that a well thought-out strategy can challenge the established players.

If there is a pricing war at the premium end, the big retailers will absorb margin compression far easier, a Citigroup analyst told the Sydney Morning Herald today. ac”While it’s unlikely that there will be any steep change in industry dynamics, we believe these implications could play out longer term if retailer products gain any traction,” Citigroup says.