Bud/Miller/Coors are facing irreversible decline. Both heavy and light versions. No brand has ever recovered from the trends these brands have suffered due to generational change. (Nobody wants to drink the beer their father drank. Ever.) Reference Schlitz, Stroh’s and Pabst. Expect continued low single digit declines forever.
Corona will finally top out. Nothing grows forever and there is never a clear reason.
It’s just time.
This all opens up about 5 million barrels of volume that is up for grabs. The top 50 craft brewers, who collectively produce more than half of all craft beer, stand to gain. But within the top 50 there are winners, losers and survivors. New, hot breweries will continue to emerge, while others wither.
Expect fewer breweries as we go forward. Closures are increasing. Eventually, running a taproom and making no money will get old for a lot of people. For the mid-sized breweries, say 10,000 to 50,000 barrels, the main driver is debt, which is choking cash flow and will force closures and liquidations.
Consolidation will re-accelerate. Expect the big strategic buyers to become more active (and selective) because their big brands are sinking and new products so far have had limited success. Craft breweries still represent an appetizing opportunity to do something – anything, to improve the picture.
Yuengling, Boston Beer and Sierra Nevada will continue to lead the pack. These companies are run brilliantly and their products are consistently excellent. Strong balance sheets have helped weather many storms. The cream rises to the top.
The youngest adult consumers are ready to place their mark on the beer industry with low and no alcohol beers. Light beer (which a few years ago was referred to as fizzy yellow lagers, but are now being produced by craft breweries) will be in favor, but not B/M/C (see above). These lighter beers are hard to make, so look to the largest and most sophisticated craft breweries to emerge with lighter and non-alcoholic beers, but not marketed as “light beer”.
Cannabis effect on beer – I have no idea. Neither does anybody else.
Half the predictions will be right.
The sages will lament the overall decline in beer volume. It is no one’s fault. It is generational preference. The baby boomers drank a lot of beer. Millennials drink comparatively less. How can people drink IPAs and expect overall volume to not decline? It will come back, just like brown liquors came back. Someday.
Beer wholesalers have had it their way for a long time. These very successful duopolies will have to manage declines in revenue and margins. Craft breweries are making gains on the lobbying front and now wholesalers have competition to legally buy the politicians’ favor. Expect more franchise law reform, more blurring of the 3 tier system and more ways around the middle tiers. With massive portfolios, beer distributors are increasingly serving only as logistics providers, filling orders but not selling. I see more consolidation as the strong family owned distributors look long term to provide for the next generation, while others cash out.
Wishing everyone a healthy, happy and prosperous 2019.
Brewers Advisory Group
January 1, 2019