Beer industry faces tough competition from flavoured alcohol beverages

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The beer industry is facing tough competition from flavoured alcohol beverages as prices creep up and more players enter the market.

Speaking at the event, Linette Ellis, a consulting economist at the BER, said that over the last decade, beer prices have been becoming more expensive for consumers, which has negatively affected the sales of beer in the country.She attributed this to the high inflation rate, which has left consumers with less disposable income to spend on beer, and tough competition in the industry.

She added that the income elasticity of flavoured alcohol beverages, or ciders, has been on an upward trajectory over the last couple of years as new entrants to the market continue to be introduced:"There are a couple of reasons we believe that the price of beer has become more price-sensitive over the last decade. There's been an increase of competition within the liquor industry.”

One of the interesting findings made by the BER is the correlation between social grants and beer sales in the country.Ellis said that the introduction of the Social Relief of Distress grant, popularly known as the R350 grant, in 2020 at the height of the Covid-19 pandemic largely benefited the beer industry along with interest rate cuts at the time that left consumers with more disposable income.

On the positive front, the Consumer Price Index has been slowly decreasing this year and according to Ellis, this will likely benefit the beer industry over time.We also expect to see at least an inflation-linked increase in social grants next year, including the SRD grant, and that will be good news for the lower-income groups.

 

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