Buy it cheap, quaff at home

MASS-MARKET beers taste like soapy water. Or so many real-ale snobs insist. So it is hardly surprising that they are now being marketed like soap powder.

People in rich countries are not drinking enough beer. By volume, sales in 2010 fell by 1.5% in America and 2.3% in western Europe, says Nomura, a Japanese bank. Only “craft” ales from small independent breweries did well, rising by 11% in America. Wealthier drinkers quite like these exclusive brews but have, overall, gone off their beer in favour of wine and spirits.

Until recently big brewers tried to make up for flagging sales in the rich world by pushing into emerging markets. Over the past decade they have bought or merged with local brewers, thereby gaining access to their all-important distribution chains. A $52 billion tie-up in 2008 between Anheuser-Busch, the American brewer of Budweiser, and InBev, a Brazilian-Belgian firm, saved a fortune. Cost-cutting through mergers will have boosted global brewers' profits by $3 billion over the five years to 2012, estimates Credit Suisse, a bank.

But although consumption per mouth in poorer countries has far to go to catch up with the West (see chart), growth is set to slow, predicts Nomura. Worse still, emerging markets are not nearly as profitable as rich ones. Anheuser-Busch InBev (ABI), now the global leader, sold a third of its beer in North America in 2010 yet reaped 46% of its profits there.

So the “big four” brewers (which control about half of the global beer market) need to look at home for future profits. The trouble is, boozers in rich countries are increasingly drinking at home. In Britain, for example, about half of all beer is bought for swilling on the sofa. By 2018, thinks Molson Coors, a Canadian brewer, as much as 70% could be. Since the margins in supermarkets are thinner than those in bars, that spells trouble for brewers.

In response, they are changing their business model. Their dream is to sell beer like premium-priced detergent, using uniform global marketing campaigns organised from head office. Last month Carlsberg, a Danish brewer, launched a new worldwide slogan: “That calls for a Carlsberg”. Like its peers, it has been furiously recruiting managers from big consumer-goods firms. (Its boss, Jorgen Buhl Rasmussen, previously worked for Duracell, a battery-maker, and Gillette, a purveyor of razors.) ABI has similar plans for a global marketing push for Stella Artois and Becks.

This will cost money, of course. Shoppers can easily buy the supermarkets' cheaper own-label beer instead of costlier brands. Few drinkers might want to be seen in public necking such downmarket stuff, but in the privacy of their own homes, who can tell the difference, especially after five or six? To retain their price advantage without losing sales, the brewers will need to market their brands as heavily as soapmakers do.

Advertisers have coined memorable beer slogans in the past, such as “Heineken refreshes the parts other beers cannot reach” and “This Bud's for You”. Yet the big brewers have been parsimonious in their marketing budgets, typically investing just 10% or so of their revenues, compared with around 15% at companies like Unilever and Procter & Gamble. They will need to spend more just to stand still.

More aggressive marketing could help them in emerging markets, too. Brewers are hoping that, as incomes continue to rise in India and China, drinkers will abandon moonshine, tea and other poisonous muck, and upgrade to premium beer.

Meanwhile, the biggest brewers are consolidating. The combined market share of the top four grew from 22% by volume in 1998 to nearly 50% in 2010 (from which they pocket two-thirds of combined global revenues). But that is nothing compared with the dominance of the big two soft-drinks makers: Coca-Cola and PepsiCo together have three-quarters of their market. So investors in breweries are licking their lips as they contemplate a fresh round of takeovers.

SABMiller has been talked of as a potential buyer for Molson Coors, Australia's Fosters, Efes, Turkey's largest brewer—though it might find itself in competition with Heineken. ABI, it is said, may seek to take full control of Groupo Modelo, Mexico's number-one beermaker, of which it already owns half.

At the other end of the scale, microbreweries are bubbling. Mikkel Borg Bjergso, the proprietor of a bar in Copenhagen, makes a wonderfully light and floral pilsener, and markets it through word of mouth. He has helped to pioneer a crafty new business model. “Gypsy brewers” produce tiny quantities of inventive and flavoursome beers by hiring or borrowing other people's breweries.

These little brewers are so tasty that big ones are lining up to swallow them. In March ABI bought Goose Island, one of the larger American microbrewers, for $39m. Molson Coors recently bought Sharps, a British brewer of stupendous real ales. But such microdeals make little impact on the bottom line. America's 1,800 craft brewers account for a mere 5% of the domestic market.