Over the past decade, domestic beer companies have been slowly but steadily losing traction. More and more Americans are declining to drink mass-produced light beers, instead focusing on liquors, wines, and — of course — craft beer.
Budweiser, Bud Light, Miller Lite, and Coors Light are among the hardest hit, and shipments from US breweries are down 3.5% this year. At this point, it’s less a trend and more a changing of preferences, through which some unique opportunities could emerge.
Millennials Fail the Loyalty Test
Millennials are no longer as loyal to a certain type of domestic beer as prior generations were. There was a time in America’s history where a household could be a “Miller Lite” household, or a “Coors Light” household. Instead, millennials are more prone to try multiple types of craft beer — and less beer, in general.
Craft beers aren’t only seen as more flavorful, but also stronger. A single craft beer might be 6% to 10% in alcohol content, whereas a light, domestic beer will hover around 3%. Millennials aren’t just looking for variety; they’re also searching for more “bang for their buck.”
Moreover, millennials now have a tendency to choose their alcohol based on event and location, rather than reaching for the same thing every time. Where once an American might ask for a “Bud Light” with every dinner, they are now more likely to choose cocktails or liquors to suit the occasion and their meal. An interest in variety is one of the major driving forces behind this, as the millennial generation has shown to be a little fickle with its product selection. (As of 2018, there have been 55 different types of Oreo.)
Beer Falls to 46% Market Share
It isn’t just that craft beer is eating the market — the market itself is shrinking. In 2002, beer held 54% market share, compared to 30% spirits and 16% wine. As of 2017, beer has slipped to 46% market share, with spirits increasing to 37% and wine increasing to 17%. But, not all big beer is falling equally — there has been a shift towards the premium lines of even large beer producers. Consequently, the big beer companies have been introducing premium lines, such as the Corona Premier — and they have also been experimenting with different flavors and seasonal releases.
Raw Numbers Show New Trends
Year-over-year, the stock price for Anheuser-Busch (BUD) dropped from $110.42 in July 3, 2017 to $100.60 on July 2, 2018. Miller Coors (TAP) has seen a decline from $84.54 to $67.62 over this same time period. Meanwhile, the Craft Beer Alliance (BREW) saw their stock rise from $17.75 to $20.65 over the same amount of time.
None of this means that these stocks aren’t valued. BUD, in particular, tends to pay out solid dividends, with an annual dividend yield of 5%. However, it is an indication of the new market forces and trends.
The big beer companies aren’t going to go down without a fight, and they undoubtedly have new strategies that they can use to recapture their primary audience. Adding variety and improving upon their selection of premium beers may be able to improve upon their sales — but investing in the craft beer market isn’t a bad either, either.
Investing in the Craft Beer Market
In addition to BREW’s steady increases, Constellation Brands (STZ) has been purchasing craft beer brands in order to build out their portfolio. Boston Beer, the parent to Sam Adams (SAM) saw year-over-year stock price increase of $134.05 to $302.35 — though the stock had previously fallen from 2015 through 2017.
As larger companies begin to purchase into craft beer and build out their craft beer portfolios, there will be further opportunities to invest. If craft beer is a trend, it is one with remarkable staying power, as it has been impacting the domestic beer market for the better part of the last decade. Economically, the trend appears to be moving away from mass-produced products and more towards niche, smaller batch products that are tailored to the customer’s preference.
The likes of Budweiser and Miller aren’t going anywhere. However, they are being forced to try new things to be more competitive in the wake of new trends — and that is seldom a bad thing for anyone.
Regards,
Ethan Warrick
Editor
Wealth Authority
