The hype over low-carb beers

We have always admired Australia’s brewers for their innovation drive. No year went by without brewers launching new brands. Low-carb beers have been all the rage for the past six years since Pure Blonde by CUB, the domestic beer unit of the Foster’s Group, hit the market. In 2009, the low-carb beer segment – if you want to call it that – represented some AUD 600 million in sales and 10 percent of all beer sold.

But why has Foster’s decided to launch at least four more low-carb beers since Pure Blonde? Wouldn’t one do?

Rival Lion Nathan has not been tardy either. By our counts they have four low-carb beers on their portfolio, while the Coca-Cola Amatil-SABMiller joint venture, Pacific Beverages, has two.

The privately-owned Coopers brewery from Adelaide has one too. Wisely, they chose to call it Coopers Clear and not something-or-other Blonde to make a point that theirs is not another copy-cat product.

And last but not least, there’s the two major retailers – Coles and Woolworths – which also have their own private label low-carb offerings: Maxx Blonde and Platinum Blonde respectively.

Which proves to show that the segment is getting really crowded.

Although there are already 14 low-carb brands clamouring for attention, whose benefits to the nation’s waistlines are hardly noticeable, the segment is still growing, while the overall beer market has been flat at 17.2 million hl.

Foster’s should be glad that they own the segment leader, which has a 5 percent share of the domestic beer market (3.6% in the off-premise). Unfortunately for Foster’s, Pure Blonde has not been able to compensate the brewer for the decline in its major seller VB, whose market share in the off-premise has dropped to 16 percent in February 2010 from 19 percent two years’ previously.

Foster’s has been the biggest loser in the fight for drinker loyalty over the past five years, with its share of the market shrinking from 53 percent to 48 percent (2010), according to market researcher IBISWorld.

Other figures from market analysts ACNielsen put Foster’s market share at 49.9 percent in March 2010 – the first time the company has accounted for less than 50 percent of the Australian beer market – but also confirm a 5 percent slide in market share since 2005.

Part of this is due to the expanded range of beers the average drinker buys regularly which has more than doubled from three in 2000 to seven, amid changing tastes and increased competition.

But another view often heard is that Foster’s level of engagement with customers has fallen behind its competitors. Foster’s Pure Blonde has been its only genuine low-carb innovation. All the other low-carb beers that Foster’s has are brand extensions. And its core brands are hardly what you’d call exciting.

Lion Nathan has upped its stake from 39 to 42 percent, partly due to its 2007 acquisition of Tasmanian brewer Boag’s, whose market share is about 2 percent.

Analysts put the shift away from Foster’s down to years of underinvestment in brands at a time when Lion was pouring more than USD 500 million into "breweries, brands and people" as part of the imaginatively titled Project Invest, including a 30 percent increase in marketing expenditure.

While the two bigwig brewers were clobbering each other, newcomer Pacific Beverages nabbed a 2 percent market share and Coopers quietly upped its market share from 2 percent to 3.5 percent over the past five years, doubling beer output to 600,000 hl as it expanded its presence in the eastern states.

Foster’s is still the market leader by a large margin and a highly profitable business but after years of having been bled dry (to fund the foray into wine) its brands will require lots of TLC (aka tender love and care) from any prospective buyer.