Industry members should “expect to see an increase in ‘change’” during fall shelf resets versus “what you have seen in the past,” Bump Williams, president and CEO of Bump Williams Consulting (BWC), wrote in the company’s “Monthly Update.”
The retail landscape “changed dramatically” this spring, following the conservative-led boycott of Bud Light and the sales decline of many previously high-volume Anheuser-Busch InBev (A-B) brands, Williams wrote. As such, some retailers are expected to make changes sooner than they have in the past – something A-B CEO Michel Doukeris and Molson Coors CEO Gavin Hattersley both confirmed earlier this week during their respective Q2 2023 earnings calls.
“I’ve said this many times in the past, ‘The most sensitive nerve in the human body is the one attached to the wallet’ and some hard decisions are being made today that will impact facings, share of shelf, space, display inventory, cooler door presence and SKU-count this Fall,” Williams wrote.
“The status quo cannot be maintained if a retailer wants to keep fast-movers in-stock, make room for innovation, increase foot-traffic, drive up market basket rings, attract new shoppers, build shopper loyalty, drive share of market/ACV and increase revenue, profits and margin,” he continued. “Changes are coming along with ripple effects of change in the months ahead.”
Because of the stressed environment, Williams focused BWC’s August report on the package, style and flavor trends driving growth in beer, rather than specific brand performance, to help industry members make “smart business decisions” and not “knee-jerk decisions predicated on emotions or false information.”
“Not everyone can or even should try to swim in every lane, but it is always important to keep a finger on the pulse of the category so that there are never any surprises,” Williams added.
Those growth areas include the following:
Packaging: 12-Pack and Single-Serve Cans
Year-to-date (YTD) through July 15, 12-pack cans are the No. 1 selling format for beer “by a wide margin” in NIQ-tracked off-premise channels, Williams wrote. However, single-serve cans are “vastly outpacing” 12-packs cans in terms of incremental dollar sales gains YTD, “by a factor of well over 3x,” he wrote.
Single-serve cans contributed $392.8 million in incremental dollars YTD, while 12-packs cans added $115.5 million. Combined, the two formats account for more than $500 million in incremental dollar sales for beer versus 2022, “more than offsetting” the year-over-year (YoY) declines recorded by 12-pack and 6-pack bottles (collectively down $140 million).
The majority of gains for single-serve cans YoY came from 24/15 oz. cans, which are “hot on the heels of 12-pack 12 oz. bottles” to take the No. 2 sport of all beer formats, behind 12-pack 12 oz. cans.
“Given current trends, it wouldn’t be a stretch to assume that these rankings will likely flip by year-end, barring any unforeseen hiccup in performance,” Williams wrote.
New Belgium Brewing’s Voodoo Ranger brand family, packaged in 19.2 oz. cans, is the No. 1 contributor to incremental dollar sales gains for single-serve cans so far in 2023. However, 24/25 oz. dollar sales gains from Heineken, Constellation Brands’ Modelo, A-B’s Michelob Ultra and Boston Beer’s Twisted Tea have “propelled” the package above 19.2 oz. cans in terms of growth, contributing a collective $240 million more than 2022.
Other package formats to record “substantial collective growth” include 24-packs of cans and bottles (+$95 million YoY), single-serve bottles (+$59 million) and 18-pack cans (+$45 million). Six-pack 16 oz. cans are also up (+$20 million), driven by domestic premium and below premium brands.
Style: Lagers, Lagers, Lagers
Lights lagers and American lagers “continue to dominate” the off-premise, collectively accounting for nearly two-thirds of all beer dollar sales YTD. Lagers have maintained a “massive gap” in terms of dollar sales over other core beers styles, including flavored malt beverages (FMBs), hard seltzers and IPAs.
Lagers are also contributing the most incremental growth, with American lagers up +$373 million YoY and light lagers up +$88 million. The majority of the “American” lager growth is credited to imports, particularly from Constellation’s Modelo Especial and Corona, and Heineken. Honorable mentions include Molson Coors’ Coors Banquet and Miller High Life, and Pabst Blue Ribbon.
When excluding light lagers, FMBs outpaced American lagers as the No. 1 dollar sales gainer, increasing dollar sales +$417.1 million YoY. A “massive amount of this growth” was driven by Twisted Tea, with additional boosts from Simply Spiked, The Beast Unleashed, Cayman Jack and Mike’s Hard Lemonade.
“Unfortunately, gains in one avenue of the flavor world (FMBs) are almost wiped out by losses in another (seltzer),” Williams wrote. “But, nonetheless, the sheer size of the incremental [dollars] flowing through the FMB-style brands only further emphasizes the consumer’s thirst for flavor.”
Flavor: ‘Unflavored’ Brands Contributing 80% of Sales
Despite the previous quote, Williams admitted that the majority of beer growth in terms of flavor has come from “unflavored” brands.
Unflavored brands account for about 80% of total beer dollar sales YTD. “That dominance is unlikely to falter,” as long as large brands such as Michelob Ultra, Modelo, Corona and Heineken “continue to occupy the top spots in the data,” Williams wrote.
Unflavored brands also lead beer’s incremental dollar gains, recording a +$620 million increase in dollar sales YoY.
Within flavor-forward brands, there are “lots of ups and downs.” Williams wrote.
“While flavors may be in …the choice in flavor can make a difference,” he added.
“Herbs/spices” were the No. 1 flavor subsegment, contributing an additional $123.4 million YoY. The growth is primarily due to cheladas, as well as Sazarac’s malt-based version of Fireball that “has been expanding its retail presence,” Williams wrote.
Peach has been the “It” flavor in beer innovation this year, driving gains for the stone fruit subsegment, along with cherry flavors. Stone fruit brands increased dollar sales +$50 million YoY. Stand out brands playing in the space include White Claw, Busch Light, Twisted Tea, Simply Spiked and Angry Orchard.
Flavor subsegments struggling in the first half of 2023 include lemonade, “fruit combinations,” apple and tropical.
“That is not to suggest that these flavors can’t work, only that consumer preference may be shifting elsewhere when it comes to seeking out certain flavor profiles at retail,” Williams wrote.