Page last updated at 09:19 GMT, Monday, 27 October 2008

Can new beers prevent trouble brewing?

By Simon Atkinson
Business Reporter, BBC News

An SAB Miller 'innovation'
For some reason, this beer innovation is yet to catch on

Green beer. Blue beer. Beer with the frothy 'head' in the middle of the glass, rather than at the top. Beer which emits light.

For Barry Axcell, chief brewer at the world's third-largest brewer, SABMiller, these are some of the more outlandish concepts he has helped design.

But, perhaps unsurprisingly, none have yet made it behind the bar or onto the supermarket shelves.

"We've done lots of things which are technically very possible," Mr Axcell says.

"You can have an idea but if the market is not ready for it then it can just sit on hold for years and years or be shelved completely."

Falling sales

As it is, Mr Axcell has overseen a number of marginally less unorthodox developments. His firm launched a black lager called Miller Midnight into Russia this month.

It has also successfully produced a pineapple version of the Chinese beer brand Snow it part owns.

Barry Axcell
The British brewing industry has declined and you could argue that was partly due to its failure to innovate
Barry Axcell

And Miller Chill, brewed with lime and salt to tap into the Latinisation of American culture, became a hit after its US launch last year.

But finding successful innovation in the mature UK beer market is proving tough.

Cider has been seen as the more innovative drinks sector - with the "over ice" concept pioneered by Magners giving it a sharp, if short-lived, sales surge.

Overall UK beer sales are falling, with about 161 million fewer pints sold in pubs between July and September compared with the same period a year ago, a fall of 8.1%, according to the British Beer and Pub Association.

Beer sales in supermarkets and off-licences fell 6% over the same period.

The gloomy figures are partly being put down to drinkers' worries over whether they can afford a pint or two.

But it is a climate in which firms say they have to keep developing new products and, some argue, gimmicks, to win customers.

'Corridor of safety'

SABMiller - which brews brands such as Grolsch, Pilsner Urquell and Peroni Nastro Azzurro - has hired a team to work on new products and packaging in the quest to reignite interest.

"The British brewing industry has declined and you could argue that was partly due to its failure to innovate," says Mr Axcell.

"Beer comes with a lot of heritage and tradition so to innovate successfully, you need a functional beer with a functional benefit - one that has got to deliver something for the customer.

Guinness products
Sales performance will decide the future of Guinness Red

"If you play in that area then there's a corridor of safety. If you go a long way from that then you risk alienating the majority of drinkers."

Innovation vital

Also no stranger to innovation is Guinness, which introduced widgets to cans in the late 1980s and 10 years ago launched its Extra Cold variety.

Now it is trialling Guinness Red - which it says is lighter in colour and taste than the traditional black stuff.

The brew is aimed at those who like the brand but only drink it rarely - perhaps while watching sport or on St Patrick's Day.

And like most extensions of a brand, the plan of Guinness owner Diageo is to steal market share from rival brewers.

Innovating is difficult but the worst thing you can do right now is batten down the hatches
John Roscoe
UK brand manager, Guinness

After a trial in 140 pubs in 2007, it has been extended to about 700 in central England, as well as O'Neills outlets, as the firm tries to gauge whether it is a viable long-term prospect.

"In the present climate it's the best time to be innovating - so long as you give customers what you want," says Guinness UK brand manager, John Roscoe.

"Innovating is difficult but the worst thing you can do right now is batten down the hatches."

Guinness sales grew 2% last year - despite the overall declining market - which Mr Roscoe believes has boosted the odds of its spin-off succeeding.

"It's when you're innovating off the back of a brand that is losing ground that it is much harder," he says.

Scottish & Newcastle drinks
Canned lager, which has played a central role in the social lives of consumer for several decades has, until now, seen little or no innovation
Dr Jon Brown
Scottish & Newcastle

Early sales indications have been promising, Mr Roscoe adds, with more than half of those who have tried the beer making repeat purchases and only 10-20% of sales being cannibalised from other Guinness brands.

"But before we spend the kind of money it costs to roll it out nationally, we need to make sure that we have got it absolutely right," he says.

Crucial Christmas

Probably the most heavily marketed innovation of 2008 has come from Heineken-owned Scottish & Newcastle (S&N)- which put a widget in cans of Fosters and Kronenbourg 1664 - the first time this has been done for lager.

Costing up to 1 more per four-pack than their parent varieties, Kronenbourg Dynamo Systeme and Fosters In-Can Scuba have "exceeded expectations" since it launched in June, S&N says.

But Christmas - a time when customers traditionally stock up on alcohol to drink at home - will be a crucial gauge of whether it has taken off, and if it is heavily eating into sales of regular Fosters and Kronenbourg 1664.

Dr Jon Brown, who led the research into the S&N widget, says the technology resulted in a smoother drink - more similar to that served in the pub.

And he claims it is a milestone development in beer to be drunk at home.

I'd just love to make the perfect beer
Barry Axcell
SABMiller

"For years technological advances, from music systems to televisions have made in-home entertaining an easier and more pleasurable experience," he says.

"But canned lager, which has played a central role in the social lives of consumer for several decades has, until now, seen little or no innovation."

Back in South Africa, SABMiller's Barry Axcell says that most innovation in the beer market has continued to come from packaging.

But as for the contents he admits that - for all his attempts to play with the colour and appearance of beer - his ultimate career ambition does not lie in anything too unusual.

"I'd just love to make the perfect beer," he says.

"One that when you drink it, it really hits all the right notes."

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