Bump Williams Consulting Pt. 1: Declines in Craft Distribution and Shelf Space Concerning

Off-premise trends are looking “challenging” for craft beer, Brian “BK” Krueger and Dave Williams of Bump Williams Consulting (BWC), shared during a Brewers Association (BA) Collab Hour last week.

Craft dollar sales are down -5.9% year-to-date through August 20 in multi-outlet plus convenience channels tracked by NielsenIQ. The segment recorded the second largest dollar sales decline in the period, behind hard seltzers (-10.2%).

Krueger and Williams traced the declines back to a combination of fewer craft SKUs and a decline in shelf presence and distribution.

BA-Defined and Overall Craft Performing Similarly, with a Few Outliers

Just over a quarter of NielsenIQ-tracked craft brands are up YTD through August 20 (about 4,000 of the 16,000 brands). Comparatively, about 28% of total beer brands have recorded growth YTD, so the segment is tracking “a bit behind” the overall beer category, Williams said.

“It’s hard to generate collective growth, when it’s really only a quarter of the landscape finding success,” Williams said. “Now that number sounds low … but knowing that beer at 28% means that it’s kind of top heavy when it comes to who’s growing and who might be scuffling a little bit in the off-premise arena through year-to-date 2022.”

BA-defined craft declined -7% YOY, while all other craft declined -3.9% YOY. While “on the surface” that discrepancy is alarming for smaller craft producers, the difference is mainly due to the success of some large brands in specific channels.

“If you start to look across the specific classes of trade, things are pretty even between those two splits if you look within grocery, hovering right around that 5% mark for both,” Williams said. “In fact, BA [craft] is actually performing a bit better than non-BA in grocery channels.

“The real diversion there comes in convenience store,” he continued. “That seems to be where BA-defined craft is slipping a bit more, whereas non-BA is getting a little bit above that breakeven threshold.”

A large contributor to that discrepancy in the convenience channel is Fort Collins, Colorado-based New Belgium Brewing, which has had significant growth in the channel with its 19.2 oz. offerings. New Belgium is the No. 1 contributor to 19.2 oz. dollar sales in off-premise outlets, with nearly $61 million in sales YTD in the package size, significantly above No. 2 Sierra Nevada ($20.5 million). New Belgium lost its BA-defined craft status in 2019, when it was acquired by Kirin-owned Lion Little World Beverages.

Other segments with YOY dollar sales declines include domestic premiums (-1.4%), below premiums (-1.4%) and cider (-5%). Flavored malt beverages (+11.4%), imports (+8.2%), domestic super premiums (+2.3%) and malt liquor (+0.1%) have each increased sales YOY.

Williams also gave a shout out to non-alcoholic beer, which recorded an +18.6% increase in off-premise dollar sales YOY, to $226.6 million, while alcoholic beer recorded a +0.2% increase.

Craft SKU Count, Distribution and Shelf Presence Tightening

The number of craft SKUs sold in total off-premise outlets declined -3.1% YTD compared to the same period in 2021, a difference of 663 SKUs. Should the trend continue, it will be the second consecutive year of SKU declines, after a -1.5% drop in 2021 compared to 2020. The decline in 2021 followed two consecutive years of growth in 2019 (+5.4%) and 2020 (+4%).

The decline may not be entirely bad, Williams said.

“If I see a decline in SKU count, that doesn’t necessarily mean a sign of doom, or things are going wrong,” Williams said. “Sometimes it can be about increasing efficiency or eliminating redundancies in a portfolio or on the shelf. That could be a good thing too.”

A decline in bottle SKUs account for the majority of the contraction, with 1,100 fewer bottle SKUs YTD in 2022 versus 2021. Can SKUs have increased by +400 in the year.

“Most of that [decline] is maybe the legacy bottle SKUs making their way out, because we are still seeing cans collectively increase their count versus a year ago,” Williams said.

What may be more of a concern is craft’s decline in distribution and shelf presence, Williams said.

Craft offerings are now sold in about 93.4% of total off-premise outlets that sell beer, a -0.6% decline vs. 2021 and -0.7% decline vs. 2020. Craft’s presence underperforms compared to all its competitors, with hard seltzers – the next lowest percentage after craft – recording a presence at 97.5% of beer-selling off-premise outlets.

“I see a gap there, and I see a trend going down,” Williams said. “That makes me raise an eyebrow about what’s going on with craft and the presence of craft at retail outlets across the U.S.”

Domestic premiums (100%), super premiums (99.7%) and imports (99.6%) have held steady since at least 2020. FMBs increased their presence from 98.8% in 2020 and 2021 to 99% so far in 2022, while below premiums (98.1%) and hard seltzers each recorded slight declines in the past year (-0.2% and -0.4% respectively).

Overall, total beer has lost an average of three items in outlets YOY, which Williams credited in-part to a growth in ready-to-drink canned cocktails (RTDs). Across all channels, retailers included increasing shelf space for either spirits- and malt-based RTDs in their top priorities for the year, in a survey conducted by BWC and the research firm Perksy.

RTDs increased dollar sales +58.1% in Nielsen-tracked off-premise channels YTD through August 20, led by growth of E. & J. Gallo’s High Noon Sun Sips, according to BWC’s September report. Comparatively, total beer dollar sales increased +0.3%

Craft, which accounted for about 60.9% of items YTD at outlets where craft is distributed, recorded the largest decline in shelf space, losing an average of 2.1 items YOY, indicating a loss of space to other segments.

Below premiums (-0.9 items), super premium (-0.7) and imports (-0.2) also recorded slight declines, while retailers added space in stores for FMBs (+2.7 items), hard seltzers (+0.6) and domestic premiums (+0.4).

Things aren’t entirely “gloom and doom” for craft, Williams said. BWC offered some opportunities for craft producers, including package size and styles. More to come on those opportunities tomorrow.