Distributors noticed stronger beer trends this summer versus last summer, “despite headline concerns over the slowing category and ongoing Bud Light pressures,” Goldman Sachs analysts reported in the company’s latest Bev Bytes Beer Distributor Survey.
Goldman Sachs surveyed 62 distributors, representing about 41% of total U.S. outlets that sell alcohol.
Fifty-four percent of respondents said beer sales trends were in-line or stronger this summer than they were in 2022, with one-fifth saying trends were “much stronger.” Nearly two-thirds (61%) said trends over Labor Day weekend were stronger than the holiday weekend in 2022.
Distributors credited growth to Molson Coors’ Coors Light and Miller Lite, Constellation Brands’ Modelo Especial and Corona Extra and Boston Beer Company’s Twisted Tea.
Nearly two-fifths of respondents (39%) said summer trends were weak: 23% said “somewhat weaker” and 16% said “much weaker.” Slightly more respondents (43%) said Labor Day trends were weaker, with 23% characterizing trends as “much weaker.”
A key topic for industry members continues to be the “depth and persistence” of declines for Bud Light and other Anheuser-Busch InBev (A-B) brands following the conservative-led boycott that began in April.
The majority of respondents (89%) said they are not seeing Bud Light trends improve, an increase versus the 65% who reported weaker Bud Light trends in Goldman Sachs’ May survey.
Most distributors have seen declines stabilize between -20% and -30% year-over-year (YoY). Nearly one-fifth of respondents said trends are getting worse.
The 11% of respondents who said Bud Light trends are improving noted that those improvements are “very modest.” Analysts backed up these claims, noting that while sales were down an average of -35% YoY over the summer, recent week trends have been “only single digits” despite “lapping a price increase build from last year.”
Distributors did show some optimism for the brand, with 71% believing Bud Light could gain back 1-2 points of its lost market share, up from 30% in May. Thirteen percent believe Bud Light will regain some share this year, while 59% said it will happen at some point next year. Thirty percent believe some share recovery will happen in the spring of 2024.
Nearly one-third of respondents (29%) believe Bud Light will never recover the market share it’s lost.
The greatest benefactors of Bud Lights’ declines continue to be Miller Lite and Coors Light, “albeit at moderating levels,” distributors shared. More than half of respondents (56%) said share gains are moderating for both brands, while 44% said trends continue to accelerate.
The majority of respondents (92%) said they believe Molson Coors’ brands can hold onto some of the share gains it achieved over the summer, while 40% said the brands will hold “a lot of the share gains.”
Some did express “disappointment” in Molson Coors over the company’s “lack of response to take advantage of the situation,” as well as out-of-stock (OOS) issues for some of the brands’ “major packages.” The comments contradict CEO Gavin Hattersley’s previous statements that Molson Coors’ production and supply chain have outperformed, over-delivering on shipments in the past quarter, and that the company built up inventories enough to keep up with the summer demand.
Promotional Activity Stabilizing
Two-fifths of respondents said promotional activity has been elevated, consistent with May’s survey results. Nearly half (49%) said activity is stable/normal, down from 55% in May. Five percent said there is no promotional activity right now, while 5% said activity has declined.
Over Labor Day weekend, 45% of beer volume was promoted, “in-line with the amount that was promoted over the holiday weekend last year,” analysts wrote. The majority of distributors (89%) said A-B had the most promotional activity for the holiday, with the other 11% highlighting Molson Coors, Boston Beer and Constellation.
Nearly two-fifths of respondents (37%) expect promotional activity to increase over the remainder of the year, while 40% expect it to stay the same and 23% expect activity to be lower.
Distributors were also asked about price expectations, which were mixed across respondents.
Molson Coors and A-B are most likely to enact further price increases this year, followed by Constellation, “to a lesser degree,” respondents said. “Several” respondents expect there to be discount reductions and “the removal of deeper level discounts soon,” rather than straightforward price increases.
Still, “many” distributors have not heard of any immediate price increases from brewers, with several not expecting any increases to come until “maybe the end of the year or early 2024.” Of note, one distributor noted that Reyes, the largest beer distributor in the U.S., is allegedly planning to increase beer prices this year “regardless of individual brewery activity.”
Shelf Space to ‘Move Among Brewers and Brands’ This Fall
Leadership from several large beer companies have noted that fall reset activities have been higher this year than historical trends. Distributors seemed to back up these claims, with 68% stating they do not expect retailers to change the amount of shelf/cooler space allotted for beer this fall, but many believing space will “move among brewers and brands.”
Constellation is expected to be the biggest shelf space gainer this fall, while A-B will be the biggest loser, according to respondents. In terms of segments, ready-to-drink canned cocktails (RTDs) are expected to gain more space, while hard seltzer and craft will lose space.
The majority of respondents (87%) expect Molson Coors to gain more space in shelf resets, while 84% share the same expectations for Constellation. One respondent noted that Molson Coors is a “big winner” because the company could “have easily lost shelf space had the Bud Light controversy not happened.”
Even more respondents (89%) expect A-B brands to lose shelf space this fall, with one noting that “Bud Light was over-spaced before the boycott and will now pay the price during resets.” Another said retailers “have faith that A-B will be back” and may not take “too much space away from them.”
More than half of respondents (52%) said Boston Beer will see less shelf/cooler space this fall, with one noting that Boston Beer “has gone all in with Twisted [Tea] and isn’t focusing on anything else.” A few respondents also predicted that Boston Beer will “lose more space on Truly, especially when the true numbers come out, as it and Truly + Vodka [Truly Vodka Soda] haven’t recaptured volume.”
About a third of respondents (34%) said Heineken will see less space this fall, while 54% said the company’s space will remain the same. One noted that Heineken has “missed out on everything this year and doesn’t seem to have much momentum behind its brands, specifically Dos Equis.”
Company Performance Breakdown
Goldman Sach analysts also dove into specific performance and inventory notes for the largest beer companies.
Constellation: 64% of respondents said inventory levels for Constellation’s beer brands were up YoY, an increase from the 58% who said so in May. However, one noted “logistic issues (damaged products)” and “draft supply issues” this summer, as well as a -15% to -20% decline in tap handles.
The majority of respondents (87%) said Constellation volumes were strong in June, July and August versus the same three months in 2022. Those positive trends seem to be accelerating, as 75% of respondents said Q1 trends were stronger this year than Q1 2022.
One respondent said Constellation is “hitting critical mass in their markets” and “commanding as much or more attention than it has in the past.”
A-B: 60% of respondents said A-B’s inventories increased, a decline from 84% in May.
One noted that inventories are up as much as +40% YoY, while another said “ABI is building up inventory despite distributor pushback.”
Molson Coors: 57% of respondents said the company’s inventories were up, an increase from 42% in May. One distributor said “they were impressed with how well TAP [Molson Coors] has kept up their inventory levels despite increased demand, having previously anticipated more OOS than have transpired.”
Another distributor said their Molson Coors inventory is “running very tight” but there are no OOS issues yet. Another said Molson Coors “can’t seem to get the right brand packages to distributors” and are facing OOS issues, leading to a “missed opportunity” given Bud Light’s continued declines.
Boston Beer: Distributors had varying responses in regards to their inventory levels of Boston Beer brands. Nearly half (45%) said inventories were elevated, up from 36% in May. One said inventories were up significantly “to support the strength of Twisted Tea,” while another said Truly inventory is “significantly down.”
One distributor said Boston Beer “has disappointed on the supply front for years.”
The majority of respondents (87%) were positive about Twisted Tea trends and have seen no slowdown, in-line with May survey results (88%). The same percentage of respondents said they saw no improvements in Truly’s declines, despite new packaging and ad campaigns, up from 84% in May.
Several respondents suggested a lack of focus or attention on Truly due to Boston Beer’s focus on Twisted Tea, with one noting that Truly volume is down more than -30 year-to-date, and others noting declines of -40% to -50%.
Meanwhile, 44% said they expect Twisted Tea’s growth to accelerate through the rest of the year, up from 40% in May. Many pointed to the “solid media/advertising plans” Boston Beer has for the hard tea brand that will help accelerate sales. However, some were “less optimistic” and expect a seasonal slowdown, with one distributor noting that “momentum can’t stay this strong forever.”
Distributors acknowledged that Twisted Tea is seeing increased competition from brands such as Anheuser-Busch’s Hoop Tea and Monster’s Nasty Beast Hardcore Iced Tea. However, one noted “how entrenched Twisted Tea is and how they’ve successfully fought off most new entrants thus far.”