Carlsberg: Tetley's Original ale may find a niche

Carlsberg's decision to launch a new dispensed ale brand, Tetley's Original, in the UK market is a bold one. Beer sales in Western Europe continue to slow and the UK ale market is declining in value. Nevertheless, Tetley's is already a successful brand in the off-trade and, as the world's fourth-largest beer company, Carlsberg has the resources to take a calculated risk.

In February 2005, Carlsberg reported a 3% fall in annual profits, while one of its main rivals in the UK, Heineken, saw its annual profits fall 33% in the same period. Both companies blamed the drop on waning European demand and increased marketing costs, and Carlsberg has since said it will focus on Russia and China as its main future markets, as well as close of a number of plants across Europe.

As such, the launch of Tetley's Original CO2 dispensed ale is intriguingly risky. Carlsberg is pulling out all the stops with the launch of the new 3.6% ABV ale, dedicating marketing support of GBP13 million over the next 12 months to fund sponsorship, national TV and press advertising and promotions.

However, given the future of the UK ale market, a marketing push will certainly be necessary. Datamonitor figures show that the UK market for ales, stouts and bitters is predicted to experience an annual decline of 1.4% over the next five years, falling in value from $9.1 billion to $8.5 billion by 2009, as well as slowing growth in the wider UK beer market and in the ale category across Europe.

Nevertheless, Carlsberg believes there is a gap in its portfolio that needs to be filled. Indeed, Tetley's is already a successful brand in the off-trade with a high recognition amongst ale drinker, while the ale, stouts and bitters category still accounts for almost a third of the value of the UK beer market and is faring better than standard lager.

The UK alcohol industry is going through a period of considerable change, with the passing of new late-licensing laws and the possible banning of smoking in pubs. While the smoking ban is expected to hurt sales, new 24-hour licensing rules could change the on-trade landscape considerably.

As such, the makers of Tetley's original are perhaps right to be confident in the new variation's chances of success. Tetley's is the ninth largest beer brand in the UK, whilst Carlsberg is the fourth largest beer company, according to Datamonitor figures. If anyone has the resources to take the gamble then it is Carlsberg.