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In Downturn, Britons Seek Solace in Local Beer

Friday, 7 Aug 2009 | 10:32 AM ET

It's almost cliche thought that during a recession consumers move to creature comforts like booze. But in Britain, beer sales have been falling and pubs have been closing at rapid rates as consumers cut back on spending.

But a visit to the Great British Beer festival in London reveals a landscape in the beverage industry that is managing to buck the soft trend seen by global megabrewers. The event, arranged by non-profit, consumer organization CAMRA (the Campaign for Real Ale), is on its way to meeting similar figures to its record-making year in 2006 where it brought in over 66,000 consumers over the 4-day period it was held.

CAMRA was formed by four people in 1971 "who wanted to save the British beer industry at the time," Since then, CAMRA's membership has risen to 100,000 people.

"The simple fact is the whole (beer) industry, including lagers and ales is in decline," Simon Theakston, executive director of T&R Theakston, a traditional brewing company that is 182 years old, said.

But "at the moment we're seeing, for the first time in a generation, a resurgent interest in cask ale," Theakston said.

Cask ale is a traditional English style of beer that has no additional carbon dioxide injected and is served at warmer temperatures than the more mass-market chilled lagers.

For the technical, real ale (phrase coined by CAMRA) or cask ale is "a top fermented beer that, following fermentation, is put into a cask with yeast and some residual fermentable sugars from the malted barley." It undergoes a "slow secondary fermentation in the cask to produce a gentle carbonation in the beer.

"The fact is that cask condition beer can only be served in pubs," Theakston said.

"Broadly speaking, the ale trade is holding up well during the recession. It's been driven by a greater consumer interest in our product category," Hogs Back Brewery regional sales manager Stuart Ottignon-Harris told CNBC.com.

"The real growth in real ale over the last few years has been driven by free trade," he said. "Free trade" meaning independent pubs that have their choice of what beers to incorporate.

Cask Ale as Savior of Pub Industry?

"We're seeing an overall difficulty in the pub trade," Ottignon-Harris said. "The losers tend to be pubs that don't center or focus on real ale."

"Most pubs in Britain recognize that to be successful, to be seen in the eyes of the consumer as successful, they must have a cask ale offering – which is distinct from a few years ago," Theakston told CNBC.com. "On the whole, those pubs that actually have cask condition beer on sale are the ones that are tending to be successful."

Even with a reported 52 UK pubs closing a week in the first half of 2009, local ale brewers told CNBC.com they were increasing production and creating new beer-pouring devices, like Greene King's revolutionary beer engine — which can produce two different types of head on pints — in an effort to appease their fans.

Consumers Look for Low-Price Premium

"Consumers are much more demanding in terms of their purchasing. They understand the qualities that go into making proper cask ale. It is much more crafted and less mass produced. The tradition of English brewing is omnipresent among consumers," Theakston said.

"We're trying to give the public what they want — real good cask beers," Greene King event manager Sean Wiggins told CNBC.com. "Quality is what matters to people."

"(Ale makers) differentiate really on a sort of quality and services angle," Ottignon-Harris said. "More of the market has been opened up to brewers like us, driven by customer choice."

CAMRA research showed that twice as many women have tried Britain's national drink compared to a year ago, 30 percent of women drinkers have now tried real ale, compared to just 16 percent in 2008.

Its popularity could stem from it being recognized as a luxury beer at an affordable price as it is made locally and distributed locally and so is often less expensive than larger European companies' beers.

Cask ale pints retail between 2 and 3 pounds, whereas international beers like Stella Artois and Kronenburg retail above 3 pounds a pint.

Government Cooperation is Needed

In a press statement, CAMRA called for the UK government to introduce a "People's Pint" by abolishing excise duty on all beers with a 2.8 percent alcohol ratio or below in order to save consumers 60 pence on a pub pint of lower strength beer, therefore drawing more people into pubs and advocating responsible drinking, as huge beer tax increases and fierce competition from supermarkets selling alcohol at lower prices.

According to Simon Theakston, the government raising beer taxes by 20 percent in its last two budgets is an "appalling injustice."

"We need a change of approach from the government," British Beer and Pub Association chief executive Rob Hayward said. "Brewing is a major industry, beer our national drink and pubs a treasured part of our national culture."

Pubs and brewers have also criticized supermarkets for selling multipacks of drinks at below cost to lure in customers The BBPA's quarterly beer barometer highlighted the growing trend for drinkers to enjoy a pint in the comfort of their own home instead of at the pub.

While overall sales are down, sales in shops and supermarkets rose nearly 4 percent.

"There's no question that home consumption is in growth," Theakston said.

"We're seeing growth in our off-trade sales," Ottignon-Harris said, adding that more consumers are buying beer for drinking at home. Surrey-based Hogs Back Brewery does sell their ale at a 25 percent discount if consumers buy it direct from the brewery.

Volunteer organizer and CAMRA member Bob Jones said that although the recession has affected the sales of the event's peripheries like T-shirts and glasses, there have been increased sales in core items like tickets and beer.

He acknowledged that the recession took its toll on entry figures last year, which dropped to just below 60,000, but not substantially. Admission is priced at £10 per person, and £8 if you are a CAMRA member.

At the 32-year old festival, brewer staff all said that although the economic downturn is obviously taking its toll on major beer companies, sales of real ale have increased during the period.

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