Spring 2015 Economic and Industry Update | NBWA: America's Beer and Beverage Distributors

Jobs and Cases

Spring is well underway and the signals from the economic data suggest that the beer industry has the potential for another year of growth. Two out of the past three years have seen volume growth for the beer industry.

Despite a tough Q1 for domestic volumes – crafts, imports, ciders and other specialty beers have all enjoyed growth in volumes in Nielsen and IRI scans.

It is important to remember that beer is still the preferred choice for most consumers. According to the 2014 Gallup Poll, 41 percent of consumers prefer beer over other alcohol beverages. Also, the U.S. beer business is reflective of the overall economy and only broad-based economic growth will carry all segments into positive territory.

As the U.S suffered through its worst recession since the Great Depression, losing more than 8.6 million jobs, the beer industry also gave up more than 100 million cases (7.9 million barrels).

One thing is certain – the last recession clearly demonstrated that beer is not recession proof, and it takes jobs and wages to maintain consumption. Continued employment gains, wage growth and lower inflation in 2015 all point to the potential for modest volume gains this year as more people participate in the ecomony’s current expansion.

The Structure of the Industry

All industries undergo constant change, and the beer industry is no different. A changing economy along with changing demographics are slowly creating a new beer industry across all three tiers.

From a demographic standpoint, more than 50 percent of the millennial generation is now of legal drinking age – that’s 52.7 million consumers.  In a few years, one out of four of these new consumers will be of Hispanic origin.

The adult beverage market has responded with an incredible selection of brands, styles and packages. Within the beer industry alone, the Tax and Trade Bureau has approved more than 16,000 new labels since 2004 –and that is in addition to the thousands of brands that existed previously in the market.

More importantly, the average number of SKUs carried by distributors has tripled over the past 10 years, from 200 in 2003 to more than 650 in 2013. As a consequence, the business of distribution has become more complicated and distributors have responded by investing in equipment, technology, software and logistics capabilities to better serve the more than 600,000 retail accounts throughout the country. 

Where did all these brands come from? The number of permitted breweries has more than doubled since 2009 – from 2,132 to more than 4,500 at the end of CY 2014. In the past year alone, the total number of permits increased by more than 589. But brewery permits represent the very beginning of brewery operations, and many permitted breweries are only in planning, development and start-up stages. The actual reporting data tell us a more interesting story.

The table above shows the actual count of reporting breweries by production from the TTB for 2013 and 2014. This table illustrates three key points. First, more than 90 percent of all breweries produce less than 7,500 barrels per year. Second, 95 percent of the increase was in the less than 7,500 category; and third, there are only three new breweries in the 60,000-barrel category. The number of breweries making less than 7,500 barrels has grown from 1,864 in 2011 to 3,339 in 2014 – an increase of more than 1,500. Roughly one out of three of these small brewpubs operate as both brewer and retailer in their local communities.

The beer industry is competitive. Brewing quality beers, consistently meeting consumer demand and growing volumes will be a challenge with so many new brewers entering the marketplace.


Industry Outlook

Where do we go from here? 2015 offers a lot of potential and opportunity for the beer industry – if it can focus its efforts on its real competitors in the wine and liquor industry. The total share of ethanol for beer has fallen from 57 percent in 1993 to below 50 percent in 2014, and there are no signs of liquor or wine giving up the fight anytime soon.

Renewed consumer interest in beer, driven by innovations from brewers and importers of all sizes, has set the stage for the industry to regain lost share as new millennial consumers come of age in an expanding and growing economy. Retailers and consumers will all benefit from a developed and sophisticated distribution network offering beers from the smallest to the largest brewers and importers. Internal data collected through the Beer Purchasers' Index suggests the industry has been in an expansion mode since the fall of 2014. The stage is set and the industry is ready for 2015 to be another exciting year for beer.

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