Analysts from 3 Tier Beverages and CGA by NIQ shared a “surprising” and optimistic story about beer’s performance in on- and off-premise channels Thursday, during a webinar hosted by the Beer Institute (BI).
In the last 52 weeks (through May 20), beer increased dollar sales +3.8% in NIQ-tracked off-premise channels (total U.S. xAOC + liquor + convenience), according to 3 Tier Beverages consultant Mary Mills. Comparatively, spirits increased dollar sales +2.4% and wine declined -1.7%.
Many webinar viewers and the analysts were surprised that beer was outpacing spirits, which has benefitted from the rise of spirits-based, ready-to-drink canned cocktails (RTDs). That discrepancy is at least partially due to consumers trading down in the spirits category, choosing a lower-priced pack of RTDs instead of a higher priced bottle of straight spirits, Mills said.
Additionally, beer has increased prices at a stronger rate than wine and spirits, as seen in the latest Consumer Price Index (CPI) from the U.S. Bureau of Labor Statistics.
Beer’s gains could also be due to the category performances in their respective strongest channels, Mills said. Spirits posted larger 52-week dollar sales gains in the convenience channel (+8%) than beer (+6.4%), but the channel only makes up 15% of spirits’ total dollar sales, versus 50% of beer’s, indicating the dollar gains are actually larger for beer. Similarly, beer posted a larger dollar sales decline in the liquor channel (-1.7%) versus spirits (-0.5%), but the channel accounts for 7% of beer’s total dollar sales in the period, versus 45% of spirits’ sales.
A similar story is playing out in the on-premise, according to Matthew Crompton, CGA regional director, North America. In the 52-week period ending March 25, beer dollar sales increased +13.6%, while spirits dollar sales increased +10.8%.
“Spirits has taken so much share over the last few years that it does have such a big part of the pie in on-premise now,” Crompton said. “So you can’t just keep growing forever and ever and ever. Eventually you do have to hit that plateau.”
Again, those increases could be due to price increases. However, what should be “comforting” for beer industry members is that the category is starting to outpace spirits in volume gains in the on-premise, increasing volume +0.9% in the last 12 weeks (ending March 25) while spirits volume declined -1.7%, Crompton said.
“I will say that we don’t have some of the latest news stories, which have been going on in the industry around the beer category included in this number, so we will obviously have to keep an eye on that,” Crompton said, likely referencing the declining sales of Bud Light that began in April.
“We do feel that from some of the early research we’ve seen into it in the on-premise that that hasn’t seen people move away from beer, it’s just seen people move around the brands that they drink within the category,” he continued.
BI VP of research Danelle Kosmal also shared some of the trade group’s 12-month rolling sales-to-retailer (STR) volume trends through April. In that data set, spirits had the smallest decline (-0.5%) versus beer (-3%) and wine (-6.4%). However, when spirits-based RTDs were taken out, spirits volume declines were larger than beer, at nearly -4%.
RTD Market Reaching Maturity
RTDs – including flavored malt beverages (FMBs), hard seltzers, canned wine and spirits- and wine-based canned cocktails, in this data set – exceeded more than $10 billion in dollar sales in NIQ-tracked off-premise channels in the last 52 weeks (through May 20).
Spirits-based RTDs recorded the largest percentage increase in dollar sales in the period (+62%). However, malt-based RTDs such as hard seltzers and FMBs claim the majority of the dollar sales in the segment, according to Mills.
Hard seltzer dollar sales declined -13% in the period, but still account for $3.9 billion of that total $10 billion pie, while FMBs increased dollar sales +20%, to $4.2 billion. Spirits-based RTDs recorded $1.3 billion in dollar sales.
Spirits-based RTD distribution gains are also starting to slow, suggesting that the boom of the subsegment may be leveling off. While spirits-based RTDs were posting double-digit gains in points of distribution at the end of 2022, the segment only increased total off-premise distribution points +1.6% over the last 52 weeks, Mills said.
“As the category has become more saturated, has so many players, this is potentially an early sign of starting to see that the category has matured a bit, and so we might start seeing that in growth rates soon as well,” Mills said.
“The fact that it has dropped so dramatically, that really says that the expansion and explosion of all of these new brands and products has really peaked, especially when we’re looking at distribution, and has really started to level off now,” Kosmal added. “And I think we’ll start to see those corresponding growth rates leveling off too.”
RTD growth is also starting to wane in the on-premise, a channel the segment was already struggling to find footing in, according to Crompton. When surveying consumers, CGA found that the amount of respondents who reported “typically” drinking RTDs on-premise fell from 18% in the fall 2021 and spring 2022, to 16% in the fall 2022. A quarter of RTD consumers also said they were very or quite likely to trade up to a better quality mixed drink over an RTD when at on-premise establishments.
Where RTDs can potentially get back some momentum and win in the on-premise is in the “experiential channel,” at places such as Topgolf, where consumers are doing things while consuming bev-alc, Crompton said. There could also be opportunities at high turnover bars and restaurants, to eliminate drink wait times and in the hotel space, he said.
Craft and Hard Seltzers Facing Toughest Battles in Beer
Shelf space remains competitive across the board for beer, with every segment recording distribution point declines in the 52-week period except for FMBs (+13.5%) and imports (+5.5%). Craft recorded a -2.6% decline in distribution points in the period, tied with below premium for the third largest percentage decline, after cider (-5%) and hard seltzer (-9.2%).
However, off-premise dollar sales across beer were up in nearly every segment in the period, except for craft (-1.1%) and hard seltzer (-13.1%). FMBs, which accounted for 9.1% of total beer dollar sales, led the category in growth (+20.3%), followed by imports (+9.6%, with 23.3% total share), below premium (+6.2%, 11.5% total share), and domestic super premium (+4.8%, 10% total share).
Mills noted that a -1% decline for craft “isn’t too bad” and actually shows improvement for the segment.
Similar segment trends have played out in the on-premise, according to Crompton. All segments increased dollar share in on-premise channels in CGA’s 52-week period (ending March 25), led by FMBs (28.2%), imports (+18.8%) and below premium (+18.7%). Craft (+9.4%) and cider (+6.5%) posted the smallest dollar sales percentage gains.
“You can see everything’s in growth, which is great, but we do know that prices have increased and that is against more softer comparisons last year as well,” Crompton said.
In terms of share gains of total on-premise beer dollars, imports recorded the largest increase (+0.9 share points, to 21.5% share), followed by domestic premium (+0.3 share points, to 30.2%), below premium (+0.1 share points, to 3%), and FMBs (+0.1 share points, to 0.8%). Craft recorded the largest decline in share (-1.2 share points, to 29.7%), while domestic super premium, hard seltzer and cider all lost -0.1 share points.
Crompton added that the import growth is not just Mexican imports, and Diageo’s Guinness is one of the “fastest growing brands” right now. He noted that Guinness is now the No. 1 draft beer in the U.K., with new growth emboldened by new social media campaigns targeting younger legal drinking age consumers, and suggested that similar trends could make their way to the U.S.