Mainstream & Premium cider brands under threat?

The emergence of the ‘hybrid consumer’ is likely to see the market focus on super-premium and value options at the expense of the mainstream and premium ones that presently dominate the market.

With global cider consumption increasing by 50% in the past decade, the emergence of the ‘hybrid consumer’ is likely to see the market focus on super-premium and value options at the expense of the mainstream and premium ones that presently dominate the market.

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In the meantime, apart from emerging cider markets such as the US, significant room for expansion still exists in the UK, “the most developed cider market”, according to Rabobank in a new report on the cider market where demographics and consumer preferences look set to support further increases in cider sales.

Traditionally, cider has been a very small beverage category but in the past 10  years the industry has undergone a period of rapid expansion, posting an impressive average annual volume growth rate of 6%. Even so, cider sales are still outpaced by beer – even in the UK, consumption rates are just 20% that of lager – meaning that there’s ample room for the industry to expand, believes Rabobank.
 
“The opportunity for cider companies is more than just simple expansion” explained Rabobank Analyst Francois Sonneville,  “behavioral patterns in their core demographic suggest that the ‘hybrid consumer’ trend will have a profound effect on the industry.
 
“55% of cider drinkers are women, most of whom are under 30 years-of-age. This so-called female millennial is the demographic most likely to exhibit hybrid consumer behavior in which people eschew mid-market options in favour of brands at the extreme end of the product spectrum, switching between super-premium and value options as the occasion demands.

“The premium and mainstream cider brands that currently dominate the sector will need to differentiate themselves or risk losing share. These companies would be well-advised to follow the example of major US brewers and invest in the super-premium segment at an early stage.”
 
Both the super-premium and value segments of the cider industry are underdeveloped, especially when compared to beer, where craft brewers flourish and cheap options account for up to 20% of the market.

Super-premium cider companies face more cost disadvantages than microbreweries when compared to mainstream rivals; limited scalability, lack of tax breaks and low availability of fruit all result in higher costs which are hard to pass onto consumers in markets where cider is only just emerging.

It is also difficult for the value segment to establish a cost advantage versus mainstream brands because of the strict regulation around the minimum fruit content which results in high input costs.

Despite these hurdles, Rabobank predicts that the super-premium and value end segments will outgrow mainstream offerings in the long-term. The international premium brands that dominate the present market run the risk of getting stuck in the middle. Mainstream players that react early to the hybrid consumer trend, developing their own super-premium products and investing in strong branding should continue to flourish, facilitating the future growth of the cider industry, concludes Rabobank’s report.

The emergence of the ‘hybrid consumer’ is likely to see the market focus on super-premium and value options at the expense of the mainstream and premium ones that presently dominate the market.

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