- Goldman Sachs has lowered its U.S. beer volume forecast, saying it expects a 0.7% decline in 2017. In addition, the Wall Street analyst has downgraded beer makers Constellation Brands and Boston Beer Company stocks, reports CNBC.
- Changes in alcohol penetration and consumption trends are being driven by a shift in preferences among younger consumers. “The youngest demographic (< 35 year olds) overall penetration rates are not increasing. The 35-44 year-old cohort shows a shift away from Beer to Wine & Spirits," wrote Goldman Sachs analyst Freda Zhuo, according to CNBC.
- CNBC reports that Nielsen data shows U.S. beer penetration is dropping, from 26% in 2016 to 25% year-to-date this year. In contrast, penetration of wine and spirits is holding steady.
According to statistics from the U.S. Treasury Department, Americans' thirst for beer has dropped and U.S. production along with it, from 191.1 million barrels produced in 2013 to 189.2 million barrels in 2016. The decline in beer sales accelerated in 2016, dropping 1.8% — compared with a five-year decline rate of 0.6%, according to IWSR, which tracks the alcohol industry.
At the same time, sales of hard alcohol — such as gin, tequila and whiskey — rose 0.04%. Mixed drinks, like pre-made cocktails, surged 1.6%. According to Wine Spectator, millennials drank 42% of all the wine consumed in the U.S. in 2015, a rate more than any other generation. As millennials come of age and their disposable incomes rise, their penchant for premium drinks and wine will likely only increase, much to the dismay of beer manufacturers.
One of the bright spots in the beer industry has been the meteoric rise of craft brews. With millennials gravitating toward craft beers — and their bold and authentic flavors as well as standout names — big brewers have little choice but to develop their own craft brands or acquire them. Last year, AB InBev purchased craft brewers Devils Backbone and Karbach Brewing Co. Its buying spree continued this year with the acquisition of Wicked Weed Brewing. MolsonCoors also has bought several craft beer makers.
However, even red-hot craft beer sales have begun to cool. According to Brewbound and IRI Worldwide, craft beer’s growth slowed to 4% by volume last year, the first time it hasn’t increased by double-digit percentage points since 2004. This has made it imperative for beer companies to innovate and push into new markets.
Some brewers see an opportunity in claiming a new part of the day: breakfast. AB InBev, Harpoon, Dogfish Head and Founders are rolling out beers with flavors better suited to the morning. Creating new brews with bold and authentic flavors, like fruity and spicy, could be a way to attract consumer attention, especially among millennials eating weekend brunch at their favorite restaurant.
Brewers large and small are also trying to spur sales by centering their marketing efforts on local appeal and authenticity. In a salute to its roots and its manufacturing communities, Budweiser recently debuted bottles and cans featuring the names of the 11 states where its beer is produced. This is not just about hometown pride, but about maintaining product authenticity as well. In fact, authenticity was found to be an important brand choice criterion among millennials, according to Conde Nast and Goldman Sachs' annual Love List Brand Affinity Index.