Wine and marijuana are cutting into craft beer’s buzz, as growth in each of those segments took some use occasions away from a craft category that slowed to single-digit growth in 2016.
That was one takeaway from Thursday afternoon’s Power Hour, which was hosted by the Brewers Association and featured Dan Wandel of market research firm IRI Worldwide. Wandel dove into IRI’s exhaustive data for a year-end review of the beer industry in 2016, which wasn’t always pretty, and gave a look into the future.
Here are six key takeaways from his presentation.
Wine is giving beer fits
Wine is taking share from beer. Beer’s dollar share declined 0.3 percent to 49.2 percent last year. Wine claimed the difference and now owns 32.9 percent of the dollar share, Wandel shared.
Wine is increasingly becoming a competitive threat to beer, as more states are passing laws to permit sales of wine outside of liquor stores and channels where beer used to dominate, Wandel said. For the second year in a row, wine and spirits outpaced beer sales in multi-outlet channels (excluding convenience stores), he added.
Another problem for beer: Wine companies are finding ways to reach millennial consumers, Wandel said, by introducing canned wine (IRI counted 30 packaged products, including FlipFlop and Barefoot Refresh, that accounted for about $3.8 million in sales in grocery stores) and launching beer products (Yellowtail has a trio of releases coming).
Marijuana is also a ‘threat’
Reefer madness is coming for beer. A joint survey between IRI and CannaBiz Consumer Group found that legal recreational marijuana could steal 7.1 percent of revenue from the beer industry, Wandel said. The survey also found that 40 percent of adults would buy marijuana if it was legal in their state — and 27 percent said they’d decrease their alcohol consumption if cannabis was legalized.
Even worse for beer: 18 percent of respondents said they’d cut back on drinking beer bought from a store — and 82 percent of them said they’d stop drinking beer altogether.
Take out the hypotheticals; marijuana’s effect is already being felt. “We’re seeing an impact on beer sales, make no mistake,” Wandel said.
If marijuana is decriminalized nationally, the beer industry could lose more than $2 billion, Wandel said, and a fully mature marijuana market could create a $50 billion industry.
‘Innovation’ is driving the growth
2016 saw a record number of new brands — 1,385 — enter the market. Craft and FMBs accounted for 13 of the top 15 new brands, with MillerCoors’ Henry’s Hard Soda (orange and ginger ale) and New Belgium Citradelic Tangerine IPA claiming the top three spots, Wandel said.
The top 15 new brands accounted for $97 million in sales, about half of all new brand dollar sales, Wandel said. Thirteen of those brands were considered infused or flavored beverages.
In supermarkets, infused beers claimed a 10.3 share, totaling $235.7 million in sales. Meanwhile, hard soda sales in multi-outlet and convenience stores nearly doubled to $290.1 million last year, and hard seltzer sales were $26.6 million, Wandel said.
Craft beer’s long tail continued growing with 1,911 craft vendors selling products in grocery stores last year. Still, the top 45 accounted for 80 percent of craft dollar sales.
Last year, total craft dollar sales in grocery stores totaled $388.9 million. New craft dollar sales totaled $143.1 million. Take the new stuff out of the equation, Wandel said, and the category would be in a slight decline.
And what happens when the newness wears off? It isn’t pretty. Wandel looked back at 2013’s top 15 new brands and found that four of them had already been discontinued (two were made by Boston Beer Company) and one was converted into a seasonal. Only two of the brands posted positive dollar sales growth last year.
New craft and flavored malt beverage products accounted for 81.5 percent of total new beer product dollar sales in 2016. Total new beer product sales in grocery stores increased to $272.8 million last year (sales in 2015 were $258.6 million). That’s despite the number of new product cases declining slightly, from 7.7 million to 7.65 million.
IPAs are still king, and seasonals are still struggling
IPA remains the undisputed king of craft beer styles with 28.2 percent of craft dollar share in grocery stores. The style grew dollar sales by 19.2 percent last year.
Dollar sales of fruit/veggie/spiced IPAs increased nearly 400 percent (398.7 percent to be specific) over 2015 and gained 5.2 percent share of the IPA category. Five of the top 15 new craft IPA brands driving the growth in 2016 were categorized as fruit/veggie/spiced, Wandel said. Leading the way: New Belgium Citradelic Tangerine IPA and Samuel Adams Rebel Grapefruit IPA.
Seasonals lost 6.3 percent of dollars sales year over year, however, and the declines were so bad that seasonals lost 2.3 share points (16.7 percent share of the craft category).
Newer craft players making headway
The number of IRI-defined craft vendors selling beer in supermarkets increased last year to 1,194. That’s 230 more than in 2015 and double the number in 2012.
Leading the top 10 new craft vendors, as defined by the Brewers Association, was Indianapolis’ Sun King Brewery, which generated about $1 million in grocery store sales. Rounding out the top three: Del Valle, Texas-based Live Oak Brewing Company and Houston’s 8th Wonder Brewery.
Other notables: Wyoming’s Melvin Brewing, Asheville’s Wicked Weed and New York’s Empire Brewing Company.
Craft sales are still slowing
The slowdown continued during the first four weeks of 2017, Wandel said, as craft beer dollar sales further decelerated in multi-outlet channels. Sales of craft beer were up just 2.7 percent to start the year, down from 7.5 percent growth over the 52-week period ending January 1, 2017.