After Long Downturn, Beer Sales Are Back
Helped by Craft Brews, Shipments in the U.S. Are Up so Far in 2012, Breaking a Three-Year Decline
Shipments of Americans’ long-standing go-to alcoholic drink are rising for the first time since 2008 in another sign that consumers—particularly young men—are slowly but surely emerging from the recession.
Much of the rebound is being driven by small-batch “craft” brewers, reflecting shifting tastes and forcing dominant players Anheuser-Busch InBev NV (ABI.BR) and MillerCoors LLC (TAP) to increasingly borrow from upstarts’ playbooks. Big brewers also are rolling out alternative malt beverages after liquor companies swiped drinkers.
Beer shipments in the U.S. rose 1.9% to 141.4 million barrels in the first eight months of 2012 after falling three straight years, according to the Beer Institute, an industry group. Beer sales had fallen 1.5% in 2011.
Beer has struggled in recent years partly because its key customers, blue-collar males in their 20s, were battered by an economic downturn that hammered industries such as construction.
“If they’re hit, we’re hit disproportionately,” said David Almeida, vice president of sales at AB InBev’s U.S. unit, which has nearly a 50% market share, much of it on the back of its Budweiser and Bud Light brands.
Job numbers are still much worse than before the downturn, but improving. The unemployment rate for males 20 to 24 years old stood at 15.2% in August. The rate for men 25 to 34 fell to 8.3% in August, from 11.7% in 2009, according to the Bureau of Labor Statistics.
To see the correlation, look at beer sales in North Dakota, where an energy-sector boom is fueling lots of blue-collar jobs. The state’s overall unemployment rate is 3%, the lowest in the country. Beer shipments in North Dakota are up 18% through August.
Americans are branching out from traditional American lager to sample ales, porters and wheat beers from fast-growing small brewers.
The number of breweries in the U.S. topped 2,000 earlier this year for the first time since the late 19th century and another 1,300 are in planning stages, according to the Brewers Association, which represents craft brewers.
Craft beer sales rose 12% in volume terms to 6 million barrels in the first half of 2012, according to the Brewers Association, which represents craft brewers. The association estimated craft beer represented 6% of U.S. beer market by volume and 9% in dollar terms last year.
Lagunitas Brewing Co. more than doubled its brewery’s capacity in Petaluma, Calif. to 600,000 barrels after completing a $19 million expansion this spring.
Its sales are up about 40% this year and the company is spending another $25 million to convert a 300,000 square foot steel fabrication plant in Chicago into a second brewery scheduled to open next year. Its top seller is a hop-heavy India pale ale, a category often called IPA.
“There’s a shift in the palate,” said Tony Magee, founder and part owner of Lagunitas, which began brewing in 1993. IPAs, for instance, are heavier and more bitter.
Even the White House is getting into the act after President Barack Obama bought a home-brewing kit last year. Staffers have made honey brown ale, honey porter and honey blonde, sourced from a beehive on the property. It is believed to be the first time alcohol has been brewed or distilled inside the White House.
The move to craft-style beers could limit consumption even though it lifts profits in the $100 billion beer industry. In addition to charging higher prices, many specialty brews have a heavier taste and higher alcohol content than mainstream beers, making them less likely to be guzzled in rapid-fire.
MillerCoors is posting healthy growth in its biggest-selling brand, Coors Light. But it also has broadened distribution of small brands such as Henry Weinhard’s, a Northwest brewer it owns, to tap growing thirst for IPAs and other niche beers. It recently rolled out Redd’s, an apple-flavored ale, and Coco Breve, a malt beverage containing coconut water, in some markets.
“I think it’s woken up a lot of folks who have not considered beer and is bringing them into the category,” said Tom Long, chief executive at MillerCoors, which controls about a quarter of the U.S. market and still derives the bulk of its sales from Miller and Coors lagers.
Shipments of AB InBev’s Bud Light, the country’s top-selling beer brand, are rising for the first time in four years, lifted by the launch of Bud Light Platinum and Bud Light Lime-A-Rita to compete against liquor. Platinum is sweeter and has higher alcohol content than regular Bud Light. Lime-A-Rita tastes more like a margarita than a beer.
Big brewers are increasingly working the craft-beer craze. Anheuser-Busch’s Goose Island (acquired last year) and Shock Top are both posting double-digit growth.
At MillerCoors, Blue Moon and Leinenkugel’s are also posting double-digit growth.
Courtesy of Mike Esterl | The Wall Street Journal