The loss of higher-margin on-premise consumption cost the beer industry more than $20 billion in 2020, National Beer Wholesalers Association chief economist Lester Jones reported yesterday during a webinar.
“Volumes went up a little bit, maybe 0.5-1% up, but spending shifted dramatically,” Jones said. “When we look at the spending — the dollar spending, the consumer spending — in on- and off-premise, we saw a tremendous shift; over $20 billion in retail spending was actually lost in 2020.”
The combination of stay-at-home orders and nationwide shutdowns of bars, restaurants, venues and other on-premise establishments due to the COVID-19 pandemic pushed consumers into spending far more in the off-premise channel. But, with vaccinations on the rise and on-premise restrictions rolling back, the pendulum is about to swing back, Jones said.
“Here we are in 2021, the on-premise is reopening, and just by definition, we’re going to see dollars move out of the off-premise and move into the on-premise,” he said. “That is the consumer spending shift that we are experiencing in this first quarter of the year.”
Sharing sales data through Week 15, which ended April 18, Jones and Fintech director of distributor initiatives Jim Kallies offered an overview of beer industry performance thus far in 2021 and outlined what suppliers, wholesalers and retailers can expect in the upcoming summer selling season.
Absent the off-premise sales spike of Week 12 in 2020, when shutdowns began and consumers stocked up pantries and fridges and “where almost 40% more beer on average was sold in that week than ever before,” 2021 appears to be setting into the industry’s predictable patterns of off-premise sales.
Kallies predicted beer sales will remain strong into summer and its key beer-selling holidays, noting that Independence Day falling on a Sunday will corral beer buying into one weekend rather than spreading it over two, as it does when the holiday falls midweek.
“The beer industry is going to come back extremely strong this summer,” he said. “You’ve got so much going on with new brand introductions, you’ve got labor shortages, you’ve got out-of-stocks.
“It’s easy to get distracted, but the real focus needs to be on the summer and how you’re going to execute,” he continued.
On-Premise Business Continues to Recover
On-premise depletions (sales to retailers) have risen fairly steadily since the beginning of the year, save for a sharp decline in late February when a winter storm froze much of the south. Through April 18, on-premise volumes are about 20% below — or nearly 80% recovered — where they were at the same time in 2019, which Jones deemed “pretty darn good.”
That on-premise establishments have been able to reach this level of recovery under current conditions is encouraging, Kallies said.
“We know there still are some markets that are closed or capacity restrained, we know that there are other on-premise accounts that just have not opened,” he said. “So, doing 80% of the volume through less accounts, which shows how important it is that a distributor analyzes their on-premise and places the right bets in the right places to really hit their on-premise volume.”
Package and Segment Shifts
About half of the beer sold into the on-premise has been in kegs thus far in 2021. Keg volume was nearly at parity with 2019 levels in Week 15 and is trending up. Draft volume dropped to zero in Week 15 of 2020, but reached 6% of total beer volume in Week 15 of 2021, stealing share from cans, which accounted for 68% of beer sales in the same week last year and 62% in Week 15 of 2021. Bottles held share at 32% in both years.
The only beer category segment to make significant share gains in 2021 is flavored malt beverages (including hard seltzers), which increased share 2.7%, to 12% of sales year-to-date. Most of that share came from premium plus lights, which declined 1.9%, to 35%.
Other segments saw smaller shifts or no change:
- Imports — +1.1%, to 17%;
- Craft — +0.2%, to 10%;
- Below premium lights — -0.5%, to 9%;
- Premium plus — -0.1%, to 8%;
- Below premium — -1.4%, to 8%;
- Cider — no change at 1%;
- Malt liquor — -0.3%, to 0.8%.
- Non-alcoholic beer — +0.2%, to 0.6%.
Craft (196 on-premise index) and cider (176 on-premise index) show far stronger on-premise returns than most other segments; however, both under-indexed in the off-premise channel more than all other segments at 90 off-premise index (craft) and 92 off-premise index (cider).
“Coming out of this, the craft industry, as a whole, realized how important off-premise is,” Kallies said. “If they solely focus on their brewpubs and the on-premise, then when there’s a bump in the road, it affects them adversely.”
Other segments to under-index in off-premise share include premium plus lights (98 off-premise index) and imports (97 off-premise index), both of which over-index in the on-premise at 123 (premium plus lights) and 129 (imports).
Notably, the FMB/hard seltzer segment is the third-most under-indexed segment in on-premise channels (28 on-premise index), behind malt liquor (8 on-premise index) and below premium lights (20 on-premise index).
Most of the beer category’s top 10 suppliers maintained healthy off-premise indexes. Only Guinness-maker Diageo (80 off-premise index) drastically under-indexed in off-premise retail, but far outpaced other suppliers in its on-premise reading (303 on-premise index). Conversely, FIFCO USA (Seagram’s Escapes, Genesee, Labatt, Magic Hat) had the highest off-premise index reading (107 off-premise index) and the lowest on-premise index reading (34 on-premise index).
Most of Top 15 Craft Brands Gained Share in On-Premise Compared to 2020, but Lost Share Compared to 2019
Almost all of the top 15 craft brands have gained share in the on-premise year-to-date through April 18, compared to 2020.
Molson Coors’ Blue Moon, the top-selling craft beer brand, increased share 9%, to 30%, compared to 2020. Anheuser-Busch InBev’s Goose Island was the second-biggest share gainer, increasing share 6%, to 23%. Only Founders’ share was flat at 4% compared to 2020.
However, when compared to on-premise share in 2019, all 15 brands lost share. In fact, the top 15 craft brands accounted for 28% of on-premise share in 2019, but make up just 18% of on-premise sales in 2021.
A-B’s Kona Brewing and Molson Coors’ Leinenkugel saw the smallest share losses at 3%, which dropped their on-premise shares to 12% and 9%, respectively. At 22%, A-B’s Goose Island had the steepest decline between 2019 and 2021.
“Everyone here needs to look at these brands and figure out which ones are really coming back into the on-premise to help rebuild those inventories,” Jones said.
Hard Seltzer Segment Leader White Claw Loses Share
The top three brands in the hard seltzer segment — currently Mark Anthony Brands’ White Claw, Boston Beer Company’s Truly Hard Seltzer and A-B’s Bud Light Seltzer — account for about 81.5% of the segment’s sales, a decline from their 2019 high of 89%.
Thus far in 2021, the hard seltzer segment has mostly outpaced 2020 sales, except for in Week 3 and Week 12, but appear to be stabilizing. Hard seltzer sales were flat between Weeks 14 and 15; however, seltzer sales in both were stronger than those weeks in 2020.
“I think we’ve got volatility here,” Jones said. “I don’t see a definitive path on how this is going to play out.”
Year-to-date through April 18, White Claw’s share has declined nearly 6%, to 40.5%, compared to 2020, but it remains the segment leader. Its closest competitor, Truly, has increased share 3.4% compared to 2020, to 30.7%. Bud Light Seltzer, a new entrant early last year, has increased share 0.3%, to 10.4%.
Bud Light Seltzer’s entrance knocked Diageo’s Smirnoff Spiked Sparkling Seltzer out of its former No. 3 spot. Smirnoff’s share has steadily declined from its high of 15.3% in 2017 to 2% year-to-date in 2021. A-B’s Bon & Viv, which the company acquired from segment pioneer Spiked Seltzer in 2016, has also declined from its high of 9.5% in 2017, to 0.3% in 2021.
2020 brought several hard seltzer entrants from major brewers, including Constellation Brands’ Corona Hard Seltzer, currently the No. 4 hard seltzer brand; and Molson Coors’ Vizzy Hard Seltzer and Coors Seltzer. Corona Hard Seltzer’s share has declined 0.7%, to 3.3%. Both Vizzy (+0.7%, to 3.1%) and Coors (+0.6%, to 1%) have seen small increases in share.
Hard seltzer innovation has continued in 2021, particularly from Molson Coors and A-B. In early January, A-B rolled out Michelob Ultra Organic Seltzer, which has grown share to 2.3% year-to-date. The company collaborated with musician Travis Scott to launch Cacti in mid-March, which has reached 0.2% in share. Molson Coors partnered with Coca-Cola to create Topo Chico Hard Seltzer, which reached stores late last month and has already reached 0.7% share.
“It’ll be very interesting by the time we get to the middle of June or July to see where that Topo Chico sits amongst its peers in the seltzer category,” Jones said.