The beer industry continues to transform every day. And, when we look back on 2015 and analyze some of these changes, we quickly see more change is on its way in 2016.
According to data from the Alcohol and Tobacco Tax and Trade Bureau (TTB), there are more than 48,000 permitted alcohol beverage operations in the U.S. That number includes more than 20,000 permitted alcohol wholesalers; 6,100 permitted breweries; 10,300 permitted wineries; 1,900 liquor producers; and 10,000 alcohol importers. In addition, the Nielsen Company’s TDLinx account tracker reports there are more than 600,000 alcohol beverage retailers across the country. These businesses serve more than 150 million adults that “find an occasion” to consume alcohol beverages, according to the most recent Gallup polls. That is an impressive number of market players in an increasing complex marketplace.
With so much activity across the entire industry, it’s no surprise that our industry volumes were up only slightly in 2015. Preliminary data from the Department of Commerce and TTB suggest that total case volume, including all domestic and imported malt beverages and ciders, was barely positive on a year over year basis, adding about 3 million cases or 0.1 percent - now that is cutting it close!
In fact, the industry looks very much like a zero sum game when it comes to the fight for share of stomach. The data in the table below show that the growth in domestic small brewer volumes and beer imports only slightly compensated for the significant decline in domestic large brewer volumes. Meanwhile, the cider business slowed dramatically in 2015, growing only 10 percent after posting a 50 percent increase in 2014. The growth in 2015 came all from imports, while domestic cider remained flat.
Population and Per Capita
While the industry only managed a slight gain in volumes, the U.S. population continues to expand and grow older. Over the past 10 years, the U.S. total population has grown at a 0.7 percent annual average rate, while the legal drinking age population has grown at a 1.0 percent annual average rate. The basic math works out that the share of legal drinking age population relative to the total population has increased from 71 percent in 2006 to more than 73 percent in 2015. Moreover, more than 80 percent of the millennial population cohort is now 21 years and older. With total volumes relatively constant over time and a growing population, per capita consumption has fallen from 30.4 gallons per person in 2006 to 27.5 in 2015.
It is a brave new world for the beer industry with so many new brewers and brands, but it also is a brave new world for consumers. Since the end of the recession, according to data from the Bureau of Labor Statistics, the economy has added more than 13 million jobs and we now are well above the 2008 pre-recession peak in employment. Job gains have been steady, and the country now has more than 143 million people working. However, the composition of the labor market is fundamentally different today, with service sector employment accounting for more than 80 percent of the job gains since 2009 and almost nine out of every 10 jobs in the U.S economy now in the service sector. Real gains in employee wages have only recently begun to appear, and household balance sheets are slowly recovering. In addition, labor force participation has continued to decline among key demographics. The rise of the “gig” economy through online platforms such as Uber, Task Rabbit and Airbnb is beginning to show small but measurable impacts in both temporary and part-time employment figures.
Fragmentation and the “Long Tail” in the industry has dramatically increased the economic role that beer distributors play in the alcohol beverage marketplace and in the economy as a whole. The economic efficiency, logistical expertise and local marketplace knowledge of an independent distributor ensures that retailers and consumers continue to experience the widest choice and value possible in their beer aisle. Recently released data from the 2015 Distributor Productivity Report demonstrate that, since 2006, the average number of SKUs carried by distributors has increased fivefold, while the average inventory turns has fallen from 17 times per year to 13 times per year. Managing a broader array of products and significantly more retail accounts in a growing economy makes beer distributors’ work more complex and challenging.
The beer industry has faced many challenges and changes over the decades. The five and a half years of economic recovery following the Great Recession has transformed the industry, changed the brands that distributors carry and introduced a new consumer unlike previous generations.
For additional information, please contact NBWA Chief Economist Lester Jones at email@example.com.