While beer price increases have remained below national inflation, nearly two-thirds of consumers plan to cut back on alcohol spending due to inflation, according to a recent Harris Poll survey commissioned by the Beer Institute (BI) shared by BI VP of research Danelle Kosmal during a webinar Thursday.
The Consumer Price Index (CPI) for all items in the U.S. increased +0.9% in February compared to January, and +7.9% compared to February 2021, according to the BI. Although the CPI for beer increased +1.9% from January to February – due to many breweries taking price this year – the category’s CPI only increased +3.7% year-over-year.
Kosmal noted that total category increases can often be credited to premiumization. To account for this, she compared the average case price for the total beer category (+3.8% in the past 52 weeks through February) to the average price of the top 200 brands in the past two years (+2.6%).
“I don’t really see this as inflation, but rather standard price increases that we typically see for top brands in the category, along with innovation and higher-end brands and some of the long tail that are driving up that total category price,” she said.
In response to inflationary costs of essential items, such as food and gas, nearly two-thirds of consumers (65%) in the survey conducted from March 17-21 said they are spending less on alcohol.
Historically, beer volume falls as gas prices increase, according to Kosmal. Following past trends, as gas prices spiked in February and March, beer volume is expected to fall.
“This could be for a lot of reasons,” Kosmal said. “However, I think it’s also closely tied to the convenience channel, which is [beer’s] largest retail channel. As consumers are taking fewer trips to the gas station, not filling up their gas tank as often, they’re most likely taking fewer trips into that convenience store that is attached to that gas station and therefore not picking up that 6-pack of beer that they might on a regular basis.”
Asked to choose which bev-alc categories they are spending less on, more than one-third of consumers (35%) said spirits, followed by beer (31%) and wine (28%). More than one-in-five (22%) said they are spending less on seltzers/flavored malt beverages (FMBs), followed by ready-to-drink canned cocktails (RTDs) (20%) and cider (14%).
“While consumers are concerned about alcohol … when we compare it to staples like meat and dairy and produce we still should expect some shift in behavior, but we won’t see as big as a shift for something like these important food categories,” Kosmal said.
Asked how they are cutting back spending on beer, more than half of respondents said they are buying beer less often (53%) or buying and consuming less beer overall (51%). Two-in-five consumers (41%) said they are going out to bars and restaurants less, while more than two-thirds are buying less expensive beer (35%), buying smaller packages or quantities of beer (34%), or cutting back on social gatherings (34%). Less than a quarter of respondents (22%) said they are switching to a cheaper type of alcohol other than beer.
“One other note here is that drinkers aged 21 to 54 – essentially our core beer drinkers – were more likely than the average beer drinker to say they’re cutting back or buying smaller packages or quantities of beer,” Kosmal said. “So they’re perhaps walking into a store, they have a dollar amount in mind of what they would spend – maybe in the past they would have bought a 12-pack of beer – and they’re buying the same brand, they’re just trading down to a small pack size.”
Kosmal said consumer responses to inflation can also be split into two different consumer segments – those who can prioritize an indulgence such as bev-alc, and those who have to cut back based on outside financial strains.
“What we heard from consumers from that survey was that some segments, Hispanic drinkers, said that they’re more likely to trade down to lower price items,” Kosmal said. “But for the most part, I don’t see the trend of premiumization slowing down, even with inflation.”
For those who are not spending less on bev-alc, the majority – 40% of beer/malt drinkers and about 45% of alcohol drinkers – said they do not purchase enough bev-alc that changes in their buying habits would significantly impact their wallet.
One-in-five respondents said they are loyal to the bev-alc brands they buy, and “will continue to purchase them no matter the cost.”
“It ranked higher for beer drinkers compared to the average beverage alcohol drinker,” Kosmal said. “It’s also in line with what we know about the beer category that brands and brand loyalty play a bigger role in the beer category than the role that brands and brand loyalty play in wine and spirits.”
Nearly two-thirds of consumers (63%) said they are going to bars and restaurants less due to inflation. Nearly half (48%) have cut back on traveling for leisure, followed by driving (43%), attending music or sporting events (36%), making home improvements (34%), grocery shopping (31%) and entertaining at home (28%).
“Hispanic drinkers were more likely to say that they’re driving less, they’re grocery shopping less, and they’re entertaining less,” Kosmal said. “So the decline in those first two activities in particular, the grocery shopping less and the driving less, is definitely a watch-out point for us and perhaps a call to action to engage Hispanic drinkers in other ways.”
Part II Tomorrow: A dive into RTD trends, as well as a look back at 2021 and early 2022 beer category performance.