The times they are a-changin’ – that old cliché still rings true in 2016. A lot of angst has been created by short-term market trends in 2016. The timing of holiday sales in measured market data releases; new products in 2016 taking share from “old” products from 2015; and new suppliers taking share from old suppliers have all left the market with a sense of dismay. Throw into the mix a little bit of global consolidation with the ABI-SABMiller transaction, expansions for some craft players and cash-outs for other craft players, which all seem to add to the angst. But when we step back and look at what really matters, the battle for real beer drinking occasions is a very mature and surprisingly “stable” U.S. alcohol beverage market.
The total amount of alcohol we consume as a nation has consistently held steady around 2.5 gallons per legal drinking age adult from 2000 to 2015 – as shown in the chart on the left in the graphic below. The percentage of Americans who drink has remained remarkably stable at around 65 percent for more than 70 years. With a stable pool of drinkers, the intense competition for drinking occasions has resulted in a decline in beer consumption as wine and spirits have captured more occasions and share. From 2000 to 2015, beer’s share of total alcohol has declined from 58 percent to 49 percent.
On closer examination, there are business cycle influences to consumption patterns, but they are minimal. In the chart on the right, we zoom in on the vertical axis at the 2.5-gallon mark. In the economic expansion from 2001 to 2007, total alcohol consumption did, in fact, increase; however, the increase was only a small amount equivalent to 28 additional beer occasions over a seven-year period. Loosely translated as, “Times sure are good, guess I will have one or two extra drinks this year.” On the other hand, the weak economic expansion since 2010 has created only four extra beer occasions since 2010. In these examples, both scenarios assume beer captures all the increase in economic expansion against wine and spirits. However, all these additional drinking occasions actually went to wine and spirits from a volume perspective.
The recent Gallup poll reporting that beer remains the preferred beverage of choice for most Americans demonstrates that the beer industry is as relevant today as it was 10 years ago. Competition from wine and spirits has made beer stronger and healthier, not weaker. The beer market is in the midst of a transformation driven by economic and demographic changes that our country has never encountered before. Check back soon and we will cover some of the demographic shifts that are driving the marketplace.