NBWA 2015 Mid-Year Review | NBWA: America's Beer and Beverage Distributors

Total Industry Volumes

The beer industry continues into 2015 as a mature industry with great beers, wide distribution and unprecedented variety and choice for consumers. On the surface, total industry volumes look very stable and predictable, and that will not change this year as long as the current economic expansion continues on track.

I started the year with a forecast of 0.5 percent  total volume growth and, despite the first half downturn, I continue to stand behind the fundamental forecast based on employment and marketplace demand variables that are expected to drive demand slightly higher compared to 2014.

We all know the first half of 2015 fell short of expectations for many reasons. The weather was wetter and colder than normal; gas prices actually rose through the first half of 2015; wage growth and employment failed to deliver the extra lift the industry needed to grow demand.

However, with six months left to go in the year, there is still time and plenty of beer drinking occasions to make up for lost volumes. Gas prices are expected to decline for the second half of 2015. The analysts at GasBuddy are forecasting prices in about 20 states to fall to $1.99 or less by December. Employment and wage growth reported by Bureau of Labor Statistics for July came in slightly below expectations, but revisions to prior months added more jobs to this year’s gains.  June and July weather has already been hotter and drier in 2015 compared to 2014. If August and September continue above normal trends, we can easily expect to see an increase in volumes.

The July employment and wage data released in August by the Bureau of Labor Statistics offer some more optimistic data for growth in the second half. While the total unemployment remained at 5.3 percent, the broad increase in employment across a variety of industries indicates that companies are reaching deeper into the labor pool to meet the demands of an improving economy. A key demand measure for the beer industry is the number of young males not working. It is the opposite of employment, but useful when measuring the potential for demand. The measure of “not working” is a combination of unemployed young males and young males who are not participating in the labor force. After reaching almost 9 million men in 2010, this number has declined to 6.8 million for the first time since 2008. This demographic group has a long way to go to get back to pre-recession levels of 5 million. Needless to say, an extra 2 million employed young male beer drinkers will go a long way to lifting industry volumes over the next year.

Keep in mind, even a 1 percent growth in volumes will not be enough to lift total industry per capita consumption. Total 21+ legal drinking age population is expected to grow by more than 1 percent in 2015. When population growth outpaces volume growth, per capita consumption falls. Beer continues to face strong competitive pressure from wine and liquor. When wine and liquor outperform the beer industry, the full positive impacts of economic and demographic are in fact diminished. The entire $253 billion beer industry is at stake and that is for all three tiers and the suppliers to all three tiers as well. This is not just a craft or import beer story; pallets, boxes, cans, bottles, glassware and draft equipment carry every make and style of beer. A healthy and diversified industry across all tiers is what makes the industry successful.

The First Six Months of 2015  (These figures were revised on 8/12/2015)

The first six months of 2015 saw much of the same pattern as in 2014. The Brewers Association reported that craft volumes grew by 16 percent in the first half and imported volumes grew by almost 8 percent. That leaves the balance of the industry down by roughly 4.1 percent (revised). On the packaging side of the industry, glass continues to lose share to cans. Glass packaged volumes declined by -1.9 percent (revised), while cans grew slightly at 0.6 percent (revised). Domestic alcohol beverage can shipments in the second quarter rose by 1.5 percent according to Can Manufacturers institute. There also was a slight increase in draft volumes primarily from the import side of the industry; however, domestic draft volumes have also seen marginal improvement in trend over last year.

There is plenty changing in the industry, and the share shift to high-end craft and imports combined with the growth in can packages have combined to keep the industry healthy and competitive.