New Year, New ABV

A number of drinks brands are responding to increasing taxes by marginally reducing their alcohol content. Is this a wise move? And can drinkers really notice the difference?

With many adults likely to have found bottles of their favourite drinks in this year’s Christmas stockings, the importance of brand name cannot be underestimated: for example, brand is the leading factor driving purchase in a variety of markets such as wine, beer and cider, even ahead of price. The British affinity with alcoholic drinks brands is well-publicised and means that users often respond with a mixture of outrage and disappointment when brands tweak their recipes. Indeed, Sailor Jerry’s and Strongbow’s recent woes at least partly stem from this very reason, with a number of new brands taking advantage and stealing market share.

The taxation of alcoholic drinks in the UK is rather complex but broadly speaking, stronger drinks bear higher taxes. Problematically, these taxes are rising annually and with consumers continuing to feel the pinch financially, brands are met with notable resistance when it comes to charging more for their products.

According to Mintel’s recent Beer – UK, December 2012 report, 62% of beer drinkers would cut back on the amount of beer or lager they drink if the price continues to rise.

Does 0.2% really make a difference?

Instead of jingle bells, alarm bells appear to be ringing for beer operators and many have looked to manage this pressure by reducing the alcohol content of their products. This issue is particularly acute in the beer market where the generally lower ABV of drinks (typically under 5%) is more visible. 5% is also widely, albeit unofficially, referred to as the point at which a beer becomes ‘premium’. Despite the fact that only a quarter of beer buyers associate a higher ABV beer with the premium tier, it is risky for brands positioning themselves as premium to dip below this threshold, something which has appeared to have harmed Stella after its ABV was reduced to 4.8% (along with Budweiser and Beck’s) in late 2011.

Despite the reduction in alcohol content being small, beer producers can make significant savings on taxes and it is therefore perhaps an understandable move in the current environment, simultaneously helping to meet government aims to boost ‘responsible drinking’. While producers would also be somewhat justified in thinking that most drinkers would be unable to notice such a small difference in alcohol content, a quick look at online forums shows a wave of discontent with such changes which can seriously threaten a brand’s fortunes, as previous enthusiasts make bold claims such as never buying this drink again.

A cautionary tale…

This approach was also used by the popular Australian beer brand Victoria Bitter (VB) which steadily reduced its ABV in its local market from 4.9% to 4.6% over the period 2007-09. Sales crumbled in kind as drinkers abandoned the brand. However, VB returned to its original ABV in autumn 2012 using the tagline “We heard you…we’re fixing it”. It is unclear whether British brands are concerned enough to do the same and ensure that they are in a similarly strong position come Christmas 2013.

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