By Jonny Forsyth, Mintel
Craft beer is thriving in Australia and represents a sizable portion of the beer market. What’s more, annual sales growth for craft is well into the double digits despite a struggling overall beer market (IBISWorld). In fact, Australian craft beer brands are outperforming exports.
Craft beer is, today, a big part of the Australian beer scene; but are we just seeing a growth bubble or something that’s more long-term? Mintel’s view is the latter. In fact, as craft beer grows further, it is likely to segment into two distinct tribes: ‘mass craft’ or ‘true craft’.
Mintel defines mass craft as when big brewers enter the category either by acquiring a smaller microbrewery or by creating their own craft-style beer brands. True craft, on the other hand, tends to be brands that are small, independent and experimental.
Mass craft, as compared to true craft, has wider appeal because the majority of drinkers just want a beer they like. They might want something that’s slightly more premium (e.g. fresh, local, hoppier), but nothing too experimental. They might be willing to pay a bit more for craft, but not a lot more. As mass craft evolves, true craft brands can position themselves even more powerfully as authentic underdogs, which has huge appeal to younger, cosmopolitan, affluent Australians.
Feral Brewing, for example, used this positioning to great effect—and still does—but was acquired by Coca-Cola Amatil in 2017. In fact, many high-profile local craft beers are not actually ‘craft’. A handful of multinational drinks companies have rapidly acquired popular microbreweries and/or created their own craft-style brands.
AB InBev, for instance, owns Pirate Life and 4 Pines; Coca-Cola Amatil owns Feral Brewing; while Asahi invested early on in Cricketers Arms and Mountain Goat. Australia’s largest brewer Lion (a subsidiary of Kirin) owns a number of brands that the average Australian beer drinker would define as ‘craft’, including Little Creatures, James Squires and White Rabbit.
As seen in the US, mass craft is much more scalable than true craft. The advantage of mass craft for consumers is that it is cheaper due to economies of scale and more readily available due to better distribution access. In addition, the beer is often brewed to appeal to a more mainstream palate rather than being too experimental.
Mass craft appeals to a vast swathe of drinkers who are seeking a slightly more premium and full-flavoured beer but have been weaned on mild-tasting Australian lagers. Many drink beer for refreshment as much as taste, and balk at paying very high prices. Indeed, between January 2017 and June 2018, Mintel Global New Products Database (GNPD) shows that 47 percent of Australian beer launches were pale ales or IPAs.
Globally, craft drinkers tend to be drawn to the intense flavours of the aroma hops characterising these ale styles. In contrast, lager, which long-dominated Australian beer sales, can seem too mild in taste, and emblematic of bygone industrial brewing.
However, US and UK craft brewers have started to revisit easier drinking lagers with a craft edge. This has meant reinventing the wheel with German lager styles the likes of Kölsch and Helles. Guinness Hop House 13—a double-hopped lager—has also proved to be a big hit in Europe and recently arrived in Australia. Sydney Beer Co. is also one of the few local craft brands to target this opportunity.
Australian craft beers are outperforming imports because Australians hugely value local; Mintel research reveals that over a fifth of urban Australians would pay a premium price for local everyday goods. Australians are also motivated to drink local primarily because products are fresher and support the local economy.
This means all Australian craft brands—whether mass or true craft—will benefit from talking up local and fresh attributes. This could be through the use of Australian hops or fruits or communicating personal stories of farmers and brewers.
Australian craft brands can also accentuate their freshness by releasing unpasteurised or unfiltered beers. Such unprocessed beers often retain more flavour yet have a much shorter shelf-life. This makes them an especially good option for hyper-local true craft Australian brands.
Jonny Forsyth is Associate Director, Mintel Food & Drink, monitoring and engaging with latest innovations and market developments in all alcohol and coffee categories.