The market for alcoholic beverages is changing. A few decades ago, beer used to be a mainstay. People would crack open a six pack once they got home, or relax over bottles of beer at a bar. But today, beer sales keep slipping.
We’re not here to say that this market is going away — but the beer industry definitely isn’t the powerhouse it once was. The customer base it once targeted is going in a different direction. Millennials and the newly legal-to-drink Gen Z are making different choices altogether.
Here’s what you need to know.
Beer: a (Formerly) Recession Proof Investment
Investors concern themselves with beer because beer is considered to be a major, recession proof investment. People drink. People drink during good times, and people drink more during bad times. Drinking is cheap entertainment. During a recession or depression, alcohol sales actually increase rather than decrease. Consequently, beer is something that many investors use specifically to round out their investment accounts.
But that could be changing, due to decreases in beer sales in recent years. And that means that investors may need to start balancing out their portfolios.
Beer Volume Declining for Five Years Straight
Over the last half-decade, beer sales have been steadily declining. Meanwhile, spirits have been rising. What’s going on? It turns out that it’s a few different factors. First, it’s health and diet.
Drinking beer means drinking a whole lot of carbs, and carbs are something that younger drinkers are trying to avoid. People aren’t necessarily moving to other areas of the alcohol market: some people are drinking less in general.
Light beers, in particular, are dropping fast, and craft beers are actually increasing. But because most of the largest beer distributors are light beers (Miller, Budweiser, and so forth), the entirety of beer sales is going down.
Millennials and Gen-Z are more likely to make “health conscious” drinking choices, which include light-colored spirits (fewer carbs) and hard seltzers (fewer calories). Pounding back a six pack no longer aligns with the choices that are being made within the consumer market.
Apart from health and diet, it’s also about the proliferation of new types of alcohol. There are now canned wines, pre-mixed cocktails, and hard seltzers to compete with. The cannabis market may also be impacting the drinking market, and some have plans to try to introduce cannabis-infused drinks to widespread markets as well.
So: There are both better alternatives and healthier alternatives. What are the big beer companies going to do?
The Future of the Big Beer Companies
The big beer companies are all trying to differentiate themselves from the standard “light beer,” many of them taking on a “craft beer” vibe or otherwise exploring new types of product. The future of big beer companies aren’t necessarily bleak, but they’re likely to experience a down turn for at least a few years as they try to figure out how they need to pivot.
In the meantime, they’re closing some of their production facilities, and pulling back on the production levels in the past. Beer stocks are trending downwards, and this is something investors should be aware of.
Canned Wine, Pre-Made Cocktails, and Seltzer: Are They Good Investments?
Since consumers are craving more diversity within the market, the beer alternatives can be seen as good investments. But that’s not necessarily true. It could also be a trend. While it does appear as though the market is pulling away from beer and towards other drinks, those other drinks could all individually be supplanted by others within the next few years.
An example of this is hard seltzer: Hard seltzer emerged on the scene just a few years ago and became a huge hit, but that doesn’t mean that they are going to remain a huge hit. Today, the major player is White Claw, but this could also change. Thus, it’s hard to anticipate where the market is going to go, apart from away from traditional beers.
Is now the time to invest in alcohol? It’s possible to scoop up some classic beer stocks for cheap while they’re down, if investors have confidence that they’ll figure the new market out. But that does come with a lot of caveats. The traditional market is changing, customers are no longer drinking beer, and they are looking towards cocktails, spirits, and seltzers.
