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26/02/2019

Beer, a leader in the agri-food sector

Ángel Marqués Ávila. Journalist

Spain ranks fourth in Europe in terms of beer production, trailing Germany, the UK and Poland.

This historical drink, which came from the Iberians, has very close ties to our Mediterranean culture and was consumed in moderation back in the day. In fact, Spain is the leader in the EU not only in terms of consumption, but also in the production of alcohol-free beer.

Beer is a part of Spaniards' daily life, at bars and restaurants, and it's the perfect accompaniment to Spanish tapas. It's an important part of the sector and it's very important for the national economy.

2019: Going from strength to strength

Spain's beer sector will continue to perform well this year and it will continue to reinforce its position as a pillar of the agri-food sector. The trend from previous years was visible at the end of 2018, with an increase in production, sales and consumption, according to Jacobo Olalla Marañón, General Director of the Brewers of Spain.

In 2019, he expects the pace of growth to get stronger due to increased trade, the strong relationship with the hospitality industry (the primary channel for beer consumption), and tourism, since almost all foreigners over 18 drink beer during their stay in Spain.

Growth of the beer industry perfectly reflects this trend of expansion, as there are new opportunities and new varieties of beer, adapted to society's needs and preferences.

Last year, Spain produced 40 million hectoliters, ranking it fourth in terms of volume on a list of 31 countries, after Germany (95 million), the UK (44) and Poland (42) and just ahead of the Netherlands (25) and France (21).

Spain's figure slipped by 1.5 million hectoliters compared with 2017, according to the Brewers of Spain; however, the data suggests that sales increased by 3.4% in 2018.

With regard to per capita consumption, Spain ranks 27th on the list of 31 countries, with an average of 48 liters per person per year, ahead of France (33 liters) and Italy (31) but a long way away from the Czech Republic (143), Germany (104) and Austria (103).

The country that leads the ranking in Europe in beer imports is the UK, with 10.5 million hectoliters per year, followed by France (7.6 million), Germany (7.2), Italy (6.9) and Spain (4.5).

The country that exported the most beer in 2018 was Germany, with 17 million hectoliters, followed by the Netherlands (15 million), Belgium (14) and France (7), while Spain ranked 11th with 2.3 million hectoliters exported.

The European Union as a whole exported 77 million hectoliters, or over 80 million if you include neighboring countries like Norway, Switzerland and Turkey.

As for active beer production, Spain is sixth, with 753 breweries, although the UK tops the list with 2,250.

Craft beer becomes more popular

All beer is made with four basic ingredients: hops, malt, water and yeast. However, the difference between craft and industrial beer lies in the way they are made, the quality of the ingredients and the recipe created by the brewer.

Spain ranks sixth in the number of craft breweries, a long way away from the UK (2,647), France (850), Germany (738), Switzerland (718) and Italy (703).

It's a segment that's on the rise, as visible by the number of small companies that have increased 10-fold in the last decade in Spain, from 50 microbreweries in 2010 to almost 500 currently.

The total of all craft beers is still less than 1% of all market revenues. They are usually 250% more expensive than regular beer, according to the study “A General Overview of Beer,” conducted by Celia Rodríguez, Client Support Manager at Nielsen.

According to Rodríguez, from the standpoint of sales or the size they represent, craft beer is still a very small market segment to compete with large brewers. Even though they account for less than 1% of sector revenues, they are playing a very important role in the qualitative development of Spain's beer market.

Olalla Marañón has welcomed the new brewers in Spain in recent years; according to him, they increase competition, benefit the beer culture and drive economic and social growth. In fact, many of the new companies are already part of the Brewers of Spain.

In Spain there are around 500 brewers, all different sizes and productive capacities, that are constantly changing. They all have important scope for growth and the ability to continue offering a quality product and adapting to the market situation.

In 2018, Spanish brewers sold almost 40 million hectoliters and more than 22 million were consumed by the hospitality channel. The remaining hectoliters reached consumers through the food and distribution channel.

This channel's proportion of beer sales is on the rise; in fact, in 2018, beer sales for home consumption increased by more than 3%. Indubitably, growing interest by consumers in the "beer culture" and its gastronomic and social impact have provided access to a large variety of beer options, including craft beer.

New moments for consumption

Although beer consumption in the hospitality segment represents almost 65% of the total, in line with the typical social consumption pattern that is prevalent in Spain, the number of beers sold at supermarkets continues to grow and is a decisive factor for the growth of the product category.

Large stores and supermarkets have responded successfully to demands from consumers who are increasingly immersed in the beer culture. Spaniards' beer experience is leading to the deseasonalization of consumption and is enabling the category to grow in terms of value and volume.

Craft beer, which is a premium product, is normalizing beer consumption and making them into more "gourmet" moments for personal enjoyment. Large brewers are taking advantage of this situation to launch premium or higher quality products.

In view of this, local consumption is increasing, due mainly to the fact that most craft beers come from small, local companies. One of their most appealing qualities is the fact that they are local. This trend is visible not only in the beer market but also in many others, such as in the kilómetro cero movement (sustainable, responsible consumption) and the focus on eating local products.

Another consumption trend that this sector is creating is the premiumization of the category, as consumers are increasingly demanding better quality beer, which boosted the segment's revenues by 3%. Around 63% of the price increase is due to the consumption mix in the market, i.e. more expensive or more premium beers are increasingly consumed more often.

And a factor that's also contributing to growth in consumption is the growing offer on supermarket shelves, thanks to innovation by large brewers and the development of craft beers, consumers increasingly have more variety in supermarkets. In 2018, there were 170 brands/new brand extensions in the market, and so far this year there have been 100. Not only do we have more variety, but also a greater offer as stores increase the products they sell.

In short, although it seems like the craft beer market isn't contributing to sales, from a qualitative standpoint it's helping larger brewers develop an already mature market.

An economic driver

The beer sector is expanding and changing continuously. Consumer demand for new recipes, innovation, flavors, presentations and brewing methods will favor not only the presence of new products in the market and especially the premium category, but it will also drive collaborations between sector companies, regardless of their size.

The close ties with the hospitality segment will continue to define the sector and will be one of the main focuses for expansion, with new gastronomic spaces and bars which drive entrepreneurship.

This is a sector with notable scope for innovation, which thinks beyond the short term and is committed to creating value at all levels.

Spain's beer industry has an excellent image and results in international markets. Spain exported over 3 million hectoliters in 2018, up more than 240% in the last decade.

Countries with a long-standing beer tradition, such as the UK and Ireland and also China and Portugal, import a large part of Spanish beer expertise.

The beer production sector is responsible for 5,900 direct jobs in Spain, in line with those in the Netherlands (6,100), Italy (5,350) and quite a distance from Germany (27,200) and the UK (14,300).

New regulations

On December 29th, the Official State Gazette published Royal Decree 1512/2018 which, among other things, modified the Regulation on Special Taxes and, by extension, the Special Tax on Beer, which recognizes, for the first time in Spain, the distinct situation of microbreweries, setting the production threshold at 5,000 hectoliters of beer per year.

The application of the Royal Decree simplifies the accounting paperwork required by small brewers vis-à-vis the government and recognizes an increase and simplification of the waste. However, for the moment it does not effect the reduction of the tax on alcohol, which allows European legislation for small, independent breweries that produce less than 200,000 hectoliters. This remains unchanged, regardless of a brewery's size.

For the Brewers of Spain that support this new regulation, it represents a change to the Regulation on Special Taxes, including the tax on beer. That organization has collaborated actively on drafting the Royal Decree. The goal is to make progress in the beer sector's regulatory framework, distinguishing between accounting procedures and deadlines among brewers and having consideration for their production capacity, establishing the threshold at 5,000 hectoliters per year.

This new regulation completes the steps taken by Royal Decree 678/2016, which determined the quality rule for beer and malt beverages and establishes a stable framework to be applied throughout Spain which favors the competitiveness and development of the sector.

The creation of these rules aims to respond to the beer and malt beverage sector in view of producers' needs, the appearance of various technological innovations, market performance and changes in consumer profiles.

All of this will impact the competitiveness of the industry and favor the flow of information to consumers.

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