The beer industry’s 2023 performance was dragged down by two anchors: The continued decline of the once-meteoric hard seltzer segment and Bud Light’s calamitous losses in the face of a conservative-led boycott, Beer Marketer’s Insights senior editor Christopher Shepard said in his keynote address to the California Craft Beer Summit.
Domestic shipments of Bud Light – the largest brand in the portfolio of Anheuser-Busch InBev (A-B), the country’s largest beer manufacturer – declined -26%, about 5.8 million barrels.
Malt- and sugar-based hard seltzers also recorded a sizable decline in domestic shipments (-22%), a loss of 2.9 million barrels.
The Bud Light boycott reached its first anniversary this week, so scan date year-ago comparisons in the coming weeks will reveal more about the brand’s outlook. The conservative-led backlash began in April 2023, when transgender content creator Dylan Mulvaney posted a video on social media of a single can Bud Light gifted to her by the company. Influential right-wing voices, such as Kid Rock (who has since made an about-face and has urged drinkers to support A-B again) and other influencers, called on their supporters to boycott the brand.
“Anyone who was close to the transgender community or actually had a half an eye on Fox News at this time last year knew just how hot a topic trans visibility was a year ago,” Shepard said. “Meanwhile, what didn’t help this brand is that it sort of disappeared afterwards. It sort of left social media. Execs were quiet. The CEO Brendan Whitworth didn’t comment for weeks and weeks and weeks. Sales, of course, sort of disappeared like through quicksand. And that created these declines of unusual size. It started immediately, down 20-30%.”
As Bud Light limped through the spring and summer, other beer brands recorded growth, but for the most part, the volume Bud Light lost evaporated from the category.
“That sharp decline for Bud Light was not matched by equally sharp upticks for other brands, and that’s really, crucially what happened here,” Shepard said. “Bud Light declined 6 million barrels, and some other A-B brands declined as well, but the brands that grew didn’t come close to picking up all of the barrels that Bud Light dropped.”
With 1.9 million barrels produced in 2023, A-B remains the largest producer of craft beer in the country, “but barely,” as New Belgium is nipping at its heels with 1.828 million barrels, Shepard noted on a slide.
Of the top 20 craft suppliers, only four recorded volume growth in 2023:
- New Belgium/Bell’s, +9.3%, to 1.828 million barrels;
- Artisanal Brewing Ventures (Victory, Southern Tier, Sixpoint, Bold Rock), +0.8%, to 390,000 barrels;
- Brooklyn Brewery, +19.6%, to 330,000 barrels;
- Athletic Brewing, +47.1%, to 250,000 barrels.
Due to craft’s ongoing contraction, the blockbuster acquisitions that marked the last decade are unlikely to be seen again, Shepard said, recounting how the biggest craft deal of 2023 was Tilray’s acquisition of a collection of brands from A-B, which the mega brewer had picked up in various deals over the years.
“Tilray spent about $85 million – that’s less than $160 per barrel,” Shepard said. “A decade ago, a really good deal was $1,000 a barrel and the Ballast Point valuation – the wild, wild Ballast Point valuation was $3,500 a barrel, which was always sort of bonkers. But the valuations have come way, way down for craft barrels or craft businesses.
The craft industry shed 1.5 million barrels in 2023, a decline of about -6%, according to BMI estimates. At off-premise retailers, this has translated to a volume decline of -4.4% and a -0.9% drop in dollar sales. Craft has lost -0.4 sharepoints of the beer category, according to Circana data cited by Shepard.
“After that 1.5 million barrel decline, craft is back to about where it was, as we measure it, in 2016,” he said. “2016 was the land of flavored IPA and the growth of hard soda – remember all those hard root beers? That was 2016 and interestingly enough, those hard sodas bled right into hard seltzer. Hard seltzer went from nothing to about 15 million barrels in three or four years and has tapered off quite considerably.”
Hard seltzer volume had surpassed craft volume during the pandemic but has since receded to below craft volume levels, Shepard said.
In the category-blurring, ready-to-drink cocktail space, malt- and sugar-based hard seltzers still account for the bulk of sales (35.7%) but lost -8.1% of share in 2023, Shepard said. That share loss was split among other substyles in the segment:
- Spirits-based hard seltzers gained +2.3%, to 6.1% share of sales;
- Hard tea and lemonade gained +2.3%, to 17%;
- Other flavored malt beverages (FMBs) gained +1.9%, to 26.7%;
- And single-serve, spirits-based RTDs gained +2.4%, to 9.4%.
Spirits-based seltzers, led by Gallo’s High Noon, increased dollar sales +69%, but could not make up for malt- and sugar-based hard seltzers’ -13.5% decline, according to Circana data Shepard cited.
Like the fruited IPAs that immediately preceded it, hard seltzer – and the rest of the RTD space – is plagued by an innovation treadmill largely of its own creation that has exhausted wholesalers and retailers and created unsustainable expectations among consumers.
“The problem with those flavor cycles – the problem with flavored IPA in a lot of ways – is that you’ve always got to give them another, another, another, another, another,” Shepard said. “You get lost in that flavor cycle, but you’ve got to give them something else because they’re tired of yesterday’s flavor and you’ve got to give them today’s flavor to make up for the volume lost from yesterday. And that’s a tough cycle to get out of.”
Non-seltzer FMBs recorded the second-highest dollar sales gains (+18.6%) in the category during the 52-week period ending February 25, behind only non-alcoholic beers (+29.1), which are a much smaller segment, according to Circana.
In the past 15 years, most of the growth in the beer category has come from segments other than traditional beer. When FMBs and cider are subtracted, the category has lost 40 million barrels in volume since 2008, Shepard said. Without imports and craft beer, the loss grows to 65 million barrels.
As beer loses volume, spirits companies’ revenue surpassed brewers’ for the first time in 2022, after a two-decade march to parity, according to data from the Distilled Spirits Council of the United States (DISCUS) Shepard shared. In 2002, distillers’ revenue was about half of brewers’ revenue. Spirits have been helped along the way but claiming a larger share of legal-drinking-age (LDA) adults who consume alcohol, about 80%, compared to beer’s 60%, he said.
“Spirits, as you saw, has been winning for a long time, partly because there are more spirit drinkers than there are beer drinkers,” Shepard said. “More beer is sold, but while somewhere around 60% of adults say, ‘Yeah, I drink beer,’ about 80% say they drink spirits.”
For beer, the potential to reclaim lost volume may lie within drinker groups that under-index with beer compared to spirits. Among LDA female drinkers, 81.4% drink spirits, while 48.1% drink beer, according to Mediamark data Shepard shared. That delta is even larger among women younger than 35; 46.5% drink beer, while 89.6% drink spirits.
Fewer LDA Black adults consume alcohol than the population at-large, and the Black community has a similarly broad disparity between beer drinkers and spirits drinkers. Nearly 47% of Black drinkers consume beer, while 83.% drink spirits.
The LGBTQ+ community also drinks spirits at a larger ratio than beer, with 83.5% of LDA adults drinking spirits, compared to 54.3% drinking beer.
But, as Crowns & Hops co-founder and CEO Beny Ashburn pointed out during the summit’s closing Tap Talk featuring leaders of the National Black Brewers Association, the drive to diversify craft beer’s consumer base has floundered for years.
“Every single conference for the last I don’t know how many years always has a whole session about diversifying your customers, yet no one seems to be taking any additional action to change that,” she said. “If we think about the number of diverse customers that don’t know about craft beer, but do drink beer, it could literally change the trajectory of our entire industry. Everybody in this room will make money.”