Where Will the Industry End the Year? | NBWA: America's Beer Distributors
 

When it comes to total volume gains, the fourth quarter can make or break the numbers for the industry. So far in 2014, we have seen progressively improving quarterly volume trends from 2014 Q1 through 2014 Q3. However, a tough 2013 Q4 comp will be a challenge in this last quarter of 2014.

There are a host of external variables that may push the industry into positive territory and beat the 2013 Q4 comp. A slew of positive economic news has been reported over the past few months, and the odds are looking good for 2014.

Aside from internal factors that can drive industry volumes – such as promotions and inventory build – market and economic forces also can be significant. Here is a rundown of some recent economic changes that may help the industry end on a positive fourth quarter:

Unemployment: The unemployment rate has finally fallen to 5.9 percent for all people and 5.7 percent for males ages 25 to 34. It has taken a long time to get to this point since the end of the “Great Recession,” and the country has a way to go to get back to pre-recession levels of 4.5 percent. Initial claims for unemployment also have fallen significantly to the lowest level since April 2000. For beer, simply put, more employment means more consumers with pay checks. We are still above the long-run natural rate of unemployment around 5 percent, and that means we have more opportunity for employment gains.

Wages: Along with employment comes wages. As measured by average weekly earnings, wages are stagnant and barely keeping up with inflation. That is bad for existing workers, but not a surprise, as unemployment is not low enough where employers need to compete for new employees with higher wages. In other words, as businesses expand, employers can continue to add workers from the ranks of the unemployed and do not have to increase wages to attract them. However, once the economy gets closer to the natural rate of unemployment, wages must rise in order for employers to attract and retain employees. 

Gas Prices: Oil prices have taken an unexpected dip in the second half of 2014. The benchmark price of Brent crude is roughly 25 percent lower than it was at the start of 2014 – clearly a boost in real disposable income for beleaguered consumers. The average pump price for regular gas has now fallen to $3.07 per gallon according to the U.S. Energy Information Administration.

 

Craft Beer: Craft has continued to add volume in 2014 and consistently posts double digit increases week after week. Like wine and spirits, craft volumes over index in the fourth quarter of the year; typically around 11 to 12 percent higher than total beer according to Nielsen data.  If we combine continued craft growth and fourth quarter over indexing, the total industry can count on a solid fourth quarter “craft lift.”

 

Housing: Housing continues to improve with September 2014 permits, start and sales of posting positive numbers. Data from the U.S. Census Bureau that includes building permits, housing starts and completion all show positive trends for August to September and year-year to 2013.

All in all, there are signs in the economy that the beer industry can end 2014 Q4 on a positive note.

The Beer Purchasers’ Index for October was released to participating distributors last week. The inaugural index set the total beer at an index of 55, indicating expanding purchasing activity for the beer industry in November.

If you would like to have your organization participate in this new analytical service from NBWA and get access to insights to more detailed data, please send your primary beer purchasers’ name, email and contact information to BPI@nbwa.org.

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