Beer Category Up Against Declining Consumption

NORWALK, Conn. -- Times are tough for the beer category as increased competition from other alcohol segments and economic struggles continue to take their toll on the beer industry. According to the Beverage Information Group's 2012 Beer Handbook, the overall beer industry lost 35.6 million 2.25-gallon cases in 2011 -- a 1.3-percent decline -- to end the year at 2.787 billion cases.

A major factor in beer's continued decline is that adult consumers' tastes are shifting to wine and spirits where there are new product offerings such as flavored vodkas, category-crossing whiskey liquors, sweet reds and high-end blends grabbing their attention.

With the largest beer segment, light beer, losing 39.2 million 2.25-gallon cases, the other beer segments could not make up for the loss. However, the craft and imported beer segments' continued success did help to offset some of the overall industry's declines.

According to the Beer Handbook, imported beer saw an increase of 1.3 percent in 2011, and is projected to climb. In addition, the growth in the craft and imported beer segments seen over the years is expected to continue, with imports projected to grow at a slightly slower rate.

"We are looking to the craft segment to continue to spur growth in the beer industry," said Adam Rogers, senior analyst for the Beverage Information Group, based in Norwalk, Conn. "Consumer interest is at its peak and there is unlimited potential for growth as more craft brewers enter the marketplace."

Despite its challenges, though, beer remains the largest segment of the U.S. adult beverage industry, accounting for more than four-fifths of total alcohol volume, according to Technomic's newly released 2012 BeerTAB (Trends in Adult Beverage) report.

"The beer consumer is really at the heart of the trends shaping the beer market," said Donna Hood Crecca, senior director, Adult Beverage Resource Group at Chicago-based Technomic. "The core consumers for the major domestic brands were among those most impacted by the recession, so their spending habits changed. At the same time, taste preferences evolved, especially among younger consumers, and we saw beer drinkers increasingly seeking different styles and more complex or varied flavor profiles. Both trends affected the powerhouse categories and brands, which resulted in the overall decline."

Domestic light beer, for example, accounted for more than half of total beer volume, so its 2.6-percent volume decline contributed to the industry's contraction. Regular domestic beer generated one-fifth of total volume; it declined 3.2 percent. These segments are populated by large-volume, mature brands. The ice beer and malt liquor categories also contracted, the research firm said.

Gains were made in several evolving segments, including imported, craft and cider, which emerged as a bright spot. According to Technomic, the smallest category within the beer industry, cider, tapped into many of the same consumer trends driving craft beer and posted the largest gain of 31.3 percent.

In addition, super-premium domestic beer saw an 11.8-percent increase and flavored malt beverage experienced a 3.3-percent increase resulting from seasonal flavors and new drink introductions.

"These pockets of growth indicate the consumer palate is changing, which represents new opportunities for the beer industry," Crecca noted.