Editor’s Note: 3 Up, 3 Down with 3 Tier Beverages is a new, quarterly insights series exclusively available to Brewbound Insiders. 3 Tier Beverages is a Chicago headquartered beverage-alcohol-focused consulting and data firm.
Non-alcoholic beer, the convenience channel and imports are three bright spots in the beer business for the second quarter of 2022, according to bev-alc data firm 3 Tier Beverages.
In this new quarterly series – 3 Up, 3 Down – Stephanie Roatis, 3 Tier consultant, product team, identifies three winners and three losers across bev-alc scan data.
“Our goal with this whole series is to give a bit of a prediction of what’s going on in the future and again, to not just reiterate points that are already being made,” 3 Tier co-founder Joe Sepka told Brewbound. “We want to dig a little bit deeper here into what’s going on.”
The inaugural 3 Up, 3 Down comes at a time when bev-alc lines have never been blurrier, so cross-category introspection is imperative, he said.
“We are seeing the walls between beer, wine and spirits start to fall down in some key ways,” Sepka said. “There’s a lot of spirits that look like beer, a lot of wine that looks like spirits in packaging and flavor profile, etc. It’s important to look outside of beer, because those trends also affect what’s going on in the beer/malt world.”
As beer category producers begin planning innovation products for 2023 and beyond, examination of trends across all of beverage-alcohol can offer meaningful insights into what consumers are looking for.
“In the bev-alc aisle, the amount of diversity we’re seeing today on the shelf is unprecedented,” Sepka said. “There are so many new types of offerings: There’s spirit RTDs, there’s wine-based RTD cocktails like Rancho La Gloria and Flybird. There are a lot of new things that are coming out and it’s almost overwhelming a little bit, and I think a lot of suppliers are feeling the pressure of what they need to do to stay relevant.
“Hopefully this series will help people focus in on a couple of trends that they need to be thinking about when working on their portfolio, or just need to get a pulse on what’s happening in the market,” he continued.
Below is Roatis’ analysis of the top three trends and the three industry sectors that have cooled off the most, according to data from NielsenIQ through June 18.
3 Up
Non-Alc Continues to Surge
“In beer, non-alc continues its growth surge, logging +16% dollar sales growth in the last 13 weeks versus general beer/malt at roughly flat (-1%). Unsurprisingly, a primary driver of this growth is coming from craft with Athletic Brewing, which has more than doubled its distribution versus last year across TUS. Non-Alc beer currently makes up about 0.7% of total beer/malt annual sales. Non-Alc wine, though still just a small percentage of total wine sales, is also surging at +21% growth versus a year ago (compared to all wine at -4.7%). The two largest NA wine brands – Fre and Ariel NA – are helping to grow this segment into a roughly $50 million segment by the end of 2022.”
Convenience Stores Outperforming Other Channels in Sales Growth, Opportunity in Spirits/RTD
“The spirits category within c-store is one of the only areas of bev-alc experiencing year-to-date growth versus a year-ago at +5.9%. Compared with two years ago, spirits sales have grown by nearly 50% overall across the channel. We think that c-store – which over indexes heavily on beer/malt (nearly 84% of all annual bev-alc category sales) – has even more room from growth for this category over the next 1-2 years, especially as spirit-based RTDs continue to gain new distribution, driving its nearly +84% sales growth in the L13 weeks versus a year ago.”
Imports
“This has been a long-standing trend extending a while back, but imports continue to be the primary source of growth for the beer category, and are expected to end the year roughly $500 million dollars larger in 2022 vs. 2021. It should be a surprise to no one that Mexican imports are the primary driver behind the large raw growth in dollars, but it should be noted that brands like Asahi, Sapporo, Peroni, Estrella Jalisco, Carlsberg and others are surging as well (most of which have a lot of headroom for growth in the U.S.).”
3 Down
Seltzer has Hit the Ceiling
“Hard seltzer as a category across total U.S. has declined in dollar sales by about -14% versus a year ago in the L13 weeks, as 2022 is marking the end (or at least a pause) to the epic multi-year growth run for the subsegment. In 2018, hard seltzer was roughly a $500 million sub-segment, and it has since grown by 9x to a current annual rollup of about $4.5 billion (retail sales) across total U.S. As prepared cocktails continue to surge, the question will be how much dollar share will be chipped away from seltzer in the coming months and years. However, we should look at seltzer as being at the maturing end of an ‘S’ curve, and a sub-segment that is obviously not going anywhere and now driving nearly 10% of all beer/malt sales.”
Craft in the Valley
In the last 52 weeks, craft has declined by roughly -8%, with recent L13 trends showing not too much of a change (compared to a roughly flat overall beer/malt). This isn’t very surprising given some of the changes and waves happening across bev-alc since 2020 with the growth of seltzer, RTDs, and other forms of new and exciting alcoholic innovation taking up more and more space on the shelf. So without a doubt, craft is sitting squarely in a valley right now, and will continue to face headwinds for the foreseeable future as more cuts are expected to continue into 2023. However, don’t forget that not all craft is in decline (imperial IPAs, sours, non-alc, and others continue to shine), and that this valley is just part of a broader cycle that will eventually find its way back uphill.”
$10 and Under Wine
“The premiumization of the bev-alc category as a whole has (as you can imagine) negatively impacted some of the more ‘affordable’ brands from a dollar growth perspective, and one of these areas is $10 and under table wine (750 mL), which continue to struggle YTD as we head into the middle of the summer season of 2022. In the last 52 weeks, $10 and under wine has declined by nearly -10%, shedding away nearly two points of dollar share to some of its more pricier alternatives. However, we must not forget that $10 and under category still drives more than 43% of all wine sales across total U.S., while $20 and up still only make up about 15%. Recent trends for $10 and under are also improving, so a lot of what the future holds is still TBD across this rapidly changing landscape.”