Good Beer Hunting

Three’s Company, or a Crowd? Pt. 1 — Beer’s Ongoing Battle with Wine and Spirits

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In so many aspects of our lives, we’ve become trained to react swiftly and harshly to information, a modern-age muscle memory for our emotions. The beer world has been most susceptible to this through mergers and acquisitions, but in June 2017, many enthusiasts went for a flex when a video response to the release of the Brewers Association’s seal of independence started making the rounds online.

Brewers and brewery owners in Anheuser-Busch InBev’s High End portfolio, no longer considered at the helm of “craft” breweries, lobbed a variety of opinions about the seal and its broader meaning, concluding that it would only divide the industry more when it should be working together. Walt Dickinson, co-founder of Wicked Weed Brewing, pleaded that beer shouldn’t be combating beer, and teamwork was needed across the industry for all of the category to grow.

“We are fighting this bigger battle, which is wine and spirits and we are losing margin every year to them, and so they have to be looking at us and just laughing, thinking this is just—why are you throwing us a bone right now?” Dickinson says in the video. “You guys are literally in-fighting, this is just a civil war. Meanwhile, this armada of boats is coming across the Atlantic to crush us and we are shooting each other with, you know, muskets and slingshots.”

Beer lovers laughed. Across social and digital media, the quote was mocked as misdirection.

“BREAKING: An armada of wine & spirits boogeymen are crossing the Atlantic to attack beer! We must band together to destroy them!” BeerAdvocate founder and publisher Todd Alstrom tweeted.

“These are dramatics worthy of a Shakespearean adaptation,” Nick Hines wrote for VinePair last summer. “It’s not even justified drama. Most craft beer drinkers aren’t suddenly going to stop drinking good beer because of wine and spirits.”

It was something of a forest-for-the-trees moment. Dickinson’s comments were meant to cast a wide net, looking at beer as a whole. The category has been flattening in recent years, and despite it’s massive growth, Brewers Association-defined craft beer is just a touch under 13% of total volume sold in the country.

Dickinson’s comments weren’t meant to be some shot across the bow, but the threat of some “armada” isn’t necessarily a joke, either. According to industry analysis by the International Wines and Spirits Record, U.S. alcohol sales are expected to drop by almost 40 million cases through 2021—and that analysis predicts the tumble will be led by beer, losing 63.2 million cases over the timespan while the likes of sparkling wine, whiskey, and tequila pick up the slack.

For all the talk among craft brewers and fans about ABI and MillerCoors expanding their reach into “craft,” other competitors of beer are making gains among drinkers. We can focus on a fight over beer dollars, yet few point out the fact that multiple alcohol categories are vying for attention.

Reflecting back on the column for VinePair, Hines—who now works as a staff writer at Supercall, covering bars, cocktails and spirits—says that it was likely inevitable for a shift in drinking preferences, though not solely because Americans were trading their IPA for bourbon.

“The fact that spirits are increasing faster than they were before reflects how many more good options people have that they didn’t have in the past,” Hines tells GBH. “Beer doesn’t have a monopoly on locally-produced alcohol and drinks anymore with all the new distilleries and innovative cocktail bars.”

It's also shown up in pricing. According to government data analyzed by the Beer Institute, the inflation-adjusted off-premise price of spirits (-8%) and wine (-9.9%) decreased between 2006 and 2016, while beer increased about 5%. According to reporting by Peter Frost for the MillerCoors blog, that's resulted in off-premise sales going up for the two alcohols. Spirits were up 33.3% and wine rose 27% while beer lost just more than 10 share points.

This kind of behavior is shown in data around drinker choice, too. According to research by Beverage Marketing Corporation, between 2011 and 2016, beer was down in consumption, servings and share to other alcohol options:

 Source: Gallup

Source: Gallup

For more than 20 years, Gallup has tracked beer as the most-cited alcoholic beverage choice among Americans. For the most part, the percentage breakdown among the three options has stayed fairly static over the years, meaning an exponentially growing number of American breweries are fighting over what is essentially a preset percentage of drinkers. This is true broadly as well. Going back about 80 years, the percentage of Americans who drink alcohol, as estimated by Gallup, has increased by just 4%, from 58% pre-World War II to 62% in 2017.

Over the last 20 years, beer has dipped 7% as Gallup’s alcoholic drink of choice. That reality is made worse when considering a 2004 study published in the journal Addiction, in which researchers found that beer became less preferred as study participants got older. Cross-drinking habits being established now might make things worse for beer in the future.

These trends are compounded when looking at Millennials, the most important demographic for all three areas of alcohol choice. Those born between 1982 and 2004 represent 35% of spirits consumers, 42% of wine consumers and 41% of weekly beer drinkers, and they’re known for casually swapping between the three. According to Nielsen studies:

  • Half of Millennial drinkers choose from two alcohol categories during a night out and nearly one-in-five pick all three.

  • 29% of consumers don’t choose what kind of alcohol they’ll have at a business until walking through the door.

  • For on-premise sales, beer volume declined 1.9% between February 2016 and 2017, while wine (+1.2%) and spirits (+1.4%) increased.

The situation could be even worse for companies angling for Generation Z. According to data compiled by MillerCoors, about 40% of beer’s volume losses are because of drinkers between 21 and 24. The company also found that 14% of drinkers between 22 and 24 said beer is “meant for them,” with 9% of females in that age range echoing that ideal.

“Beer consumption among these consumers has declined at an annualized rate of 3% over the last 15 years,” Peter Frost writes on the MillerCoors blog. “And if that trend continues unabated, the industry could lose another 33.8 million barrels of volume by 2040, according to consumption patterns modeled with U.S. Census data.”

Craft beer continues to easily outpace the category as a whole, even if its annual growth has slowed to around 5 or 6%. IPA is the main reason, but small and independent breweries also see “easy drinking” styles long dominated by Big Beer as a viable alternative for their own future.

Still, beer has to work for its customers just like wine and spirits have, and as we’ll see in part two of this series, there’s quite a bit of work to be done.

—Bryan Roth

Three’s Company, or a Crowd? Pt. 1 — Beer’s Ongoing Battle with Wine and Spirits
Three’s Company, or a Crowd? Pt. 2 — Can Beer Reclaim Its Share?