A Look Ahead Into 2015 | NBWA: America's Beer and Beverage Distributors

With 2015 well underway, the beer industry is set for an exciting year as a rebounding job market and lower gas prices help consumers feel more comfortable and confident. There are a list of economic and demographic trends that point to a solid 2015 year for the industry, including more opportunity in the job market, rising wages, lower gas prices and an improving housing market.

The rebound for the beer industry is not over, and we still have room to grow.

While the young male unemployment rates are lower according to the U.S. Bureau of Labor Statistics - 5.8 percent in January 2015 vs. 6.9 percent in January 2014 - the underlying labor force participation rate for young males is still well below 90 percent. This simply translates to millions of people not working. Long run trends for young male labor force participation suggest that the rate should be in the low- to mid-90s. The U.S. economy’s ability to bring the core beer drinker back into the labor market will be pivotal to the success of the beer industry in 2015.

Putting the labor market aside, another statistic that we will watch closely this year will be household formation. Household formation will be the basis for a fundamental shift in the U.S. beer business over the next few years.

Everyone has read or heard the stories of the young adults returning to live at home with their parents. Unable to find a job and burdened with student debt, young adults have not formed households at the same rate as in years past. Census data report that approximately 14 percent of young adults live at home with their parents. In addition, the share of home ownership among young adults is the lowest it has been in 20 years – around 13 percent in 2014. This is poised to change in 2015.

Data from the Current Population Survey in the chart show a significant jump in the number of households at the end of 2014, with almost two million new households formed in 2014. Changes to the demographic and economic landscape are bound to change the beer market over the next few years. As young adults begin their careers, pay off student loans and move into their own homes, their purchasing behavior and buying habits will change and the beer business will change along with them.

Thursday’s economic release for January retail sales from the U.S. Department of Commerce may echo some of the growth in the number of households. Both December 2014 and January 2015 retail sales fell by almost 1 percent.  Perhaps, as new households are formed, the new mortgage or rent becomes a new and additional expense that takes away from other expenditures.

The NBWA Beer Purchasers’ Index

We are in the fifth month of NBWA’s Beer Purchasers’ Index. The BPI is a regular monthly statistical release giving participating distributors a timely and reliable indicator of industry beer purchasing activity. The Beer Purchasers’ Index is a net rising index giving participating NBWA members the first and only advance notice of expectations for increasing or decreasing sales by segment. The index is a survey-based composite diffusion index where readings above 50 indicate expanding purchasing activity and readings below 50 indicate contracting purchases.

The February survey is currently in the field. If you would like your company to receive these insights on a regular basis, please opt-in to our survey by emailing BPI@NBWA.org.

To receive additional information, please contact NBWA Chief Economist Lester Jones at ljones@nbwa.org.