Sobering developments: Alcoholic beverage companies branch out as people drink less beer
- Beer brewers and spirits makers are increasingly producing beverages without alcohol, such as teas and energy drinks, The Wall Street Journal reported. This is in response to health-conscious consumers turning away from traditional alcoholic drinks, drinking less or not at all.
- Alcohol volumes fell 0.8% last year, compared to a 0.7% decline in 2017, according to data from industry tracker IWSR compiled by The Wall Street Journal. While wine and spirits lagged, beer performed the worst. Beer volumes were down 1.5% this year, compared to a 1.1% drop in 2017. IWSR expects low- and no-alcohol beverages to climb 32.1% from this year to 2022, which would be three times their growth during the past five years.
- As a result, Molson Coors has been making kombucha and is even considering coffee. AB InBev is marketing a spiked coconut water, and Diageo is turning out a pricey, alcohol-free gin alternative to mix with cocktails.
It seems like the only place alcoholic beverage companies are performing well nowadays is in products that go beyond their classic items. Brewers have reported sales growth in their low- or no-alcohol portfolios and predict more to come. According to an IRI Worldwide report, the three top-selling beers in the U.S. are Bud Light, Coors Light and Miller Lite — all reduced-calorie domestic lagers. Meanwhile, large brewers such as Constellation Brands and AB InBev have rolled out their own lower-calorie beers at higher prices to seize a slice of the premium market.
Other major beer companies also have products in the sector now, with Heineken launching its 0.0% MAXX in 2017 and Coors offering its own non-alcoholic brand. Guinness owner Diageo has Open Gate Pure Brew, and Carlsberg has been making nonalcoholic beers since 2015.
It's worth noting that Mexican imports and craft beers have been enjoying greater popularity lately because of their flavor and quality, and no-alcohol and lower-calorie beverages can't always measure up in those areas.
Beer companies may also draw more consumers if brewers toss in some transparency — even though it's not required. Bud Light recently debuted nutrition labels on its 12-ounce beers featuring the total number of calories and carbohydrates, highlighting that it's made from just four ingredients. Consumers may not think of beer as a "clean-label" product, but any competitive advantage a brewer, wine or spirits maker can get these days can't hurt.
At the same time, big beverage companies can now offer nonalcoholic drinks spanning all times of day and occasions — such as kombucha or an alcohol-free gin to mix into a mocktail. These products might help industry giants such as AB InBev and MolsonCoors enhance their bottom lines since both have seen their U.S. sales drop in recent quarters and beer volume has declined for five years straight.
But companies getting into the mocktail sector need to carefully tailor and brand their offerings. Otherwise, they risk becoming much like other beverage companies that only produce soda, juices and teas. Coca-Cola is wading into the mocktail area, and other companies may not be far behind. Consumers currently have a wide array of faux and low-alcoholic drinks to pick from.
One place that traditional alcohol companies have tried to grow is in developing cannabis-infused beverages or drinks containing CBD from hemp, which can be sold in Canada and some states — and may be fully legal in the U.S. in the future. According to a recent study from A.T. Kearney, 30% of Americans would be willing to try a cannabis-infused nonalcoholic beverage, and 17% would be interested in an alcoholic drink containing the substance. Constellation has already invested in the segment, and Molson Coors formed a joint venture with Hydropothecary Corp. to make nonalcoholic, cannabis-infused beverages to sell in Canada. AB InBev and Tilray have invested $100 million in a joint venture to develop CBD and THC drinks. It may only be a matter of time before the other big brewers try to boost slumping sales by following suit.
- The Wall Street Journal As Americans Drink Less Alcohol, Booze Makers Look Beyond the Barrel