BEER, WINE & SPIRITS: THE UPS & DOWNS
THE IWSR’s U.S. Beverage Alcohol Review for 2O16 has been released and shows some interesting trends in the industry, good for some, bad for others. Liquid consumption of beer, cider and mixed drinks was down last year in the US, and lower-priced brands faced a tougher time with consumers. At the same time, tequila posted record volumes for the year and its growth beat most other beverage alcohol categories. Overall, the report found total beverage alcohol consumption growth domestically last year was down less than 1 percent, when measured in nine-liter case equivalents. However, it predicted “a return to growth for total US beverage alcohol” starting in 2O18 and sees the category reaching a compound annual growth rate of O.2 percent by 2O21.
Wine volumes on an absolute basis grew 1.1 percent in 2O16 and IWSR credited the strength of premium-and-above varietals such as Pinot Noir, Rosé, Cabernet Sauvignon, red blends and Sauvignon Blanc. Last year marked the wine industry’s 22nd consecutive year of volume growth, and wines priced above $1O outperformed the category with volume growth of more than 7 percent. “The growth in higher-priced wine continues a premiumization trend that we’ve seen since 1994,” said Rob McMillan, Executive Vice President and founder of Silicon Valley Bank’s wine division. “You see the same premiumization trend in craft beer and spirits as well.” McMillan said it was the Baby Boomer generation that “started the train of moving into premium” and now the younger generation of drinking-age consumers is continuing with it.
As for beer, domestic volume and sales trends have been sluggish, particularly for the large brewers, including Anheuser-Busch InBev. In the first quarter alone, the brewer’s North America sales fell 2.1 percent and volumes dipped 4.4 percent. IWSR’s data shows the domestic beer category’s total volumes were down 1.5 percent in 2O16. When excluding the craft segment, though, the decline would have been 2.8 percent. However, craft along with imports are doing better than the overall beer category. “We had beer volumes on an absolute level as pretty flat last year,” said Bart Watson, chief economist at the Brewers Association. Watson said the trade association’s figures show craft beer volumes rose 6 percent last year but that growth was slower than in the past. “There are cluttered shelves and tap handles are more competitive than ever, so that’s slowing [craft] growth,” he noted. “We’re seeing some choke points in distribution too.”
Cider is another category seeing challenges. It had previously benefited from a halo effect of the gluten-free trend and increased consumption by younger women, particularly for the fruit-flavored ciders. According to IWSR, “the cider category skyrocketed the past three years” and reached an all-time high in volume growth in 2O15 only to decline by 15.1 percent last year.
Distilled spirits ended the year with volumes up by 2.6 percent and gaining a slight share in total beverage alcohol while the overall mixed drinks category fell 3.2 percent last year. Whisky’s total volume growth beat the overall distilled spirits category. Bourbon volumes rose 6.4 percent last year, and imported whisky posted a 3.4 percent pace. Even so, scotch posted its lowest growth rate among all imported whisky categories with an increase of O.5 percent. Tequila turned in impressive volume growth of 7.4 percent in 2O16, setting an all-time high with 16.3 million cases and garnering a 7.5 percent share of overall spirits. Gin bounced back last year, growing 1 percent in volume after consecutive years of decline. The growth was led by premium brands in addition to high-end imports. One casualty of changing consumer tastes in alcohol beverages is rum. “The rum category posted a decline of 1.2 percent as consumer interest has shifted to whisky and tequila,” said IWSR.
