Does The Declining U.S. Beer Trend Spell Doom For Brewers?

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While the U.S. is the 2nd largest beer market in the world by total national consumption, behind China, and the 14th largest beer drinking nation by per capita consumption, [1], the trends in U.S. beer are not bringing cheers to brewers’ hearts.

While beer “preference” (preferred alcohol category) in the U.S. is basically flat over the past 20 years in the 50+ age group, and down only a few percentage points in the 30-49 age category, in the important 18-29 year-old age group, preference for beer has dropped from 71% to 41% over the past 20 years. This implies that while almost three-quarters of younger people were enthusiastic about beer 20 years ago — less than half feel that way now.

Does this declining trend spell doom for BUD and the other brewers?  Maybe not, and here’s why:
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— Millennials have gravitated toward import and craft beers — not drinking “what their parents did” — which seems to be a repeatable pattern. While Budweiser has seen a 28% drop in domestic sales volume over the past 5 years and Bud Light has seen a 10% drop, craft beers have grown about 14% per year over that period. However, BUD and other brewers are venturing into the craft and imported beer segments now, which make up only about 11% and 15%, respectively, of the total market at present, in a bid to drive growth in U.S. beer. Anheuser is introducing the Mexican beer Montejo in the U.S., and has acquired a handful of locally-established craft beer brands in the recent past.

— While 71% of the 18-29 year-old population chose beer as their favorite alcoholic drink twenty years ago, in 2013, only 41% made the same choice. Out of all adults, only 36% chose beer. However, last year these numbers improved somewhat, as 48% of the younger group and 41% of the total group, chose beer.

beer graph
                                                             (Source: Gallup, Goldman Sachs Investment Research)

— While health trends and a shift to harder alcohol and wine have dampened beer sales, higher alcohol content in craft beers may also be a draw. Brewers are now putting out “premium” and flavored drinks, such as Bud Light’s Lime-a-Rita drinks, to appeal to more people.

— Despite lower volume sales, the conducive market conditions in the U.S. helped improve the industry-wide average revenue per hectoliter, bolstering the beer market’s net value to $101.5 billion last year, up 1.5% over 2013 levels. BUD — which mostly sells premium beers —  could gain from the rising revenue-per-unit sold. Imported and craft beers also operate on higher price points, which fits right into Anheuser’s premium brand image.

So, despite lower consumption trends, awareness of health considerations, and a search for a new variety of tastes, there are still options for brewers to try to re-capture and reinvigorate the American beer buying public, and the younger demographic segment of the population.

See the links below for more information and analysis:

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Notes:
  1. Kirin Beer University Report, Global Beer Consumption by Country in 2012 []