Lagunitas Brewing Co. has confirmed it will lower the ABV of its flagship IPA for the U.K. market, citing changing consumer demand. The reduced strength of 5.5% ABV will only apply to its draft product—branded as “Lagunitas Draught IPA” in accordance with the British spelling. It’s bottled equivalent will remain at the original 6.2% ABV within the U.K. The beer will continue to be brewed at its Chicago facility, although Lagunitas brewmaster Jeremy Marshall has previously confirmed that building a U.K. brewery is part of the company’s long-term plans.
The brand was first exported to the U.K. four years ago and in this time has been “embraced” by its beer drinkers, says Lagunitas U.K. sales-lead Everest Curley. However, Curley indicates that the brewery has been listening to its U.K. customers, who have been requesting a full-flavored IPA, albeit with less alcohol. A similar move has been taken in the past for brands from Anheuser-Busch InBev.
The Petaluma, California and Chicago-based brewery was acquired in two separate deals by Heineken, the first a 50% stake in September 2015 and the remaining half in May 2017. Heineken’s acquisitions team has been busy in the U.K. market too, picking up a 49% stake in South London’s Brixton Brewery in November 2017, followed by an investment of £40M ($53M) in North London’s Beavertown Brewery this June, in return for an undisclosed minority stake in the business.
WHY IT MATTERS
British drinking culture differs somewhat from that in the United States. Beer is served in 20-ounce imperial pint measures as standard—as opposed to the 16-ounce norm within the U.S. Unlike the States, it’s also a legal requirement to display the ABV of a beverage, all which makes the U.K. a particularly alcohol-conscious market. Lagunitas isn’t the first to make this kind of decision, either. In 2012, AB InBev lowered the ABV of flagship brands Stella Artois and Becks from 5% to 4.8%. And when Bud Light was relaunched in the UK in 2017, it was done so at 3.5%, as opposed to the 4.2% product available in the United States.
It’s also worth noting that within the U.K., beer taxation is calculated by ABV. Whatever the motivations behind Lagunitas’ decision to drop the ABV of its flagship, this move indicates that it still seeks to drive significant volume within the United Kingdom. However, now that its parent company has a stake in two exciting, young, British breweries—both making U.S.-driven styles—the competition it faces is only likely to increase, whether from growing external forces or from new “sister” breweries under the Heineken banner. Lagunitas has not yet confirmed if the lower ABV also means a reduction in price.
The U.K. is one of the fastest growing markets for exported American beer. It currently accounts for 10.5% of Brewers Association defined exports, which are supported in part through its Export Development Program. U.S. craft exports to the U.K. saw 7.1% growth in 2017, making it the second-largest export territory behind Canada for BA-defined craft beer.
However, the BA data only includes breweries that fall under its own definition of a “craft brewer,” meaning that figures don’t include beer from breweries that fall outside of its craft definition, such as Goose Island and, of course, Lagunitas. It also doesn’t include the majority of the beer from Stone Brewing Company—another major player in the U.K. market—as most of its beer is shipped from its Berlin facility. In actuality, the volume of U.S. beer in the U.K. market is much higher than what the BA figures show.
One brewery that does fall within the U.K. figures is Brooklyn Brewery, which has previously revealed that it now exports more than 50% of the beer it produces in the United States. Along with brands like Goose Island and Sierra Nevada, Brooklyn—which is 24.5% owned by Japan’s Kirin Brewery and thus within the BA definition of “craft”—have been selling into the U.K. for over a decade. The longevity of their market presence perhaps indicating the importance of this territory to these brands.
And yet, the U.K. beer market is practically unrecognizable today from what it was a decade ago. Over the past six years, the number of breweries has increased from 1,218 to over 2,000. Coupled with rapid expansion and consolidation of some of these businesses through acquisition, the marketplace has suddenly become a lot more competitive—especially given that many young breweries focus on interpretations of hop-forward beers popularized in the U.S.
Where previously a certain share of volume and turnover may have been a given for a U.S. brewery, now they are faced with a market full of fresh and local alternatives from British breweries. For Lagunitas, altering its flagship product for one of its international markets is a step closer to embracing its position as a multinational business within the beer industry, as it seeks continued growth overseas.