Editor’s Note: 3 Up, 3 Down with 3 Tier Beverages is a quarterly insights series available to Brewbound Insiders, via the Chicago-headquartered, beverage-alcohol-focused consulting and data firm.
In this latest installment of 3 Up, 3 Down, 3 Tier product team consultant Stephanie Roatis shares a trio of insights on industry growth and three underperforming areas through the halfway point of 2023.
Roatis examines the growing number of non-alcoholic beer products, FMBs growing share of ready-to-drink (RTD) offerings, and the surge in imperial ciders. She also offers analysis of craft’s declining shelf presence, liquor channel struggles and more.
Below is Roatis’ analysis, using NIQ data through July 15.
THREE UP:
Non-Alc Continues to Draw a Crowd
More than 100 new non-alc beer products have entered the off-premise channel in the latest quarter, with most of the dollar growth coming from non-alc craft (+77%) and non-alc imports (+37%). Roughly two-thirds of new offerings came from craft, while import brands Corona, Peroni, and Dos Equis launched most of the remaining new non-alc import items. Both segments are well-poised to stay on top of trends; craft with its agility and import with its strong distribution.
Within craft, Athletic holds six of the top 10 non-alc items, while existing craft brands Lagunitas, Sierra Nevada, and Sam Adams continue to launch line-extensions in the space. Within imports, Corona holds the No. 2 rank after Heineken and earned all 14 points of its dollar share and 31 points of distribution in the latest year. As both segments expand to make room for new entrants and consumer preferences evolve, rankings are constantly shifting.
FMBs Reshape the RTD Landscape
As the lines blur among RTD product categories (flavored malt beverages, seltzers, wine RTDs, spirit RTDs), at least 54% of bev shoppers have purchased RTDs across beer, wine, or spirits.
RTDs have grown to a nearly $11 billion industry, with malt-based offerings holding the greatest share. Flavored malt beverages (FMBs) have surpassed seltzers, with dollars up +21% in the latest 52 weeks, growing to a $4.3 billion segment.
In control states where spirits cannot be purchased in grocery stores, consumers reach for higher-ABV FMBs. Texas, Florida, New York, North Carolina, and Colorado each saw the largest dollar percentage growth in their “high” ABV price-tiered items (high defined as 8% ABV or higher).
Twisted Tea is the first FMB to break into the top 10 brand families in total beer/malt, with the second-largest volume gain in the latest 52 weeks, after Modelo. However, as FMBs continue to grow, SKU rationalization will force newer brands to put forth only their best to compete with existing giants.
Cider’s Imperial Surge Helps Bolster the Segment
Cider is up +4.3% in the latest quarter. While cider’s sales previously declined -7.7% in 2022, new items and flavor expansions have injected $7.6 million into the segment this quarter versus last year.
High-ABV ciders (greater than 8%) now bring in more than 15% of the segment’s dollar share, and imperial-labeled ciders bring in 10.2% of total dollar share. Three of the top 10 items are now imperial ciders, and these items alone bring in more than 4% of total cider dollars. This increasingly popular style grew +19% in this past quarter, with at least 15 new items entering the off-premise playing field.
Top regional cideries 2 Towns, Bold Rock, and Schilling Cider each grew sales about $2 million, due largely to expansion into high-ABV offerings.
THREE DOWN:
Craft Distribution Declines as Shelf Space Remains Competitive
Craft’s total points of distribution (TDP) declined -2.1% in the latest 52 weeks, and volume remains down -2.3%. Sixteen of the top 20 craft brands lost distribution in the latest quarter. All of these brands continue to have substantial distribution, above 25% nationwide and as high as 71%.
RTD spirits, FMBs, and imports are all increasing their distribution and taking away from craft placements. However, craft holds double the TDP of the next most-widely distributed segments: domestic premium, imports, and FMBs.
While overall craft distribution is down, sales in the latest quarter are up slightly (+1.5%). Regional brands are nurturing strong placements and dollars before over-expanding. Of the 20 largest absolute dollar gaining items in craft, 14 of them have 15% distribution or less. The largest distribution gainers of this quarter were Athletic, Big Deal, Hop WTR and Kona.
Liquor Channel Beer Sales Down Compared to Other Trends
Liquor channel total beer dollar sales, which make up roughly 8% share of total off-premise sales, remain down -1.2% in the latest period, while convenience continues to grow its total beer dollar sales +6.3%. Total U.S. xAOC (made up mostly of food stores) is up +1.8%.
The decline we see in liquor comes largely from hard seltzer and craft, where volume is down -28% and -10%, respectively, in the latest 52 weeks. The two segments dropped a collective $125 million. As consumers seek out higher ABV products, we see the liquor channel swapping seltzer space in its beer aisle for competing full-flavored segments such as spirits-based RTDs and FMBs, and consumers are also reaching more frequently for import options, up $52.7 million. Eight of the 10 largest brand extension decliners by absolute dollar sales, across total beer, are all seltzers brands.
$10 and Under Wine Declines, Still Holds 67% of Total Table Volume
The premiumization of the bev-alc category as a whole continues to negatively impact more affordable brands and segments, particularly in $10-and-under table wine.
In the latest quarter, under $10 wine volume has declined -5.4% and lost -0.9 points of dollar share. Notably, the $10 and under category still drives more than 67% of all table wine volume sales across total U.S., while $10-19.99 makes up less than half (28%) and the remainder of the category makes up just over 4%.
The largest declines in dollar sales for wine, similar to beer, occurred in the liquor and drug channels. Wine captures roughly 29% of its sales in the liquor channel, but sales are down -5.1% and much of the volume loss is coming from the more affordable price tiers.