Across the massive U.S. beer market, growth in recent years has been largely the result of an up-an-coming craft sub-category. Notably, off-premise dollar sales growth in the craft realm ranged between just over 15% to just over 18% from 2013 through early 2016. With overall beer consumption across the U.S. relatively flat, however, the craft engine slowed significantly in the most recent year. That doesn’t mean, however, that all opportunity for retailers and manufacturers is gone.
Even though the craft machine pumped the brakes over the past year, with off-premise sales growth of just under 3% for the year ended Jan. 28, 2017, the “above premium” beer grouping, which includes craft, is dramatically outperforming the “below premium” and “domestic premium” groups.
Across the three “premium” tiers (Below Premium, Domestic Premium, Above Premium), Domestic Premium has historically been the category workhorse, as it includes the biggest and most well-known beer brands in the business. The Domestic Premium tier is still the biggest, but sales therein have been sliding in recent years. And with sales of just under $14 billion in the most recent year, the Above Premium tier is making a steady play to take over the lead.
Imports are performing particularly well, posting much more growth in the recent year than craft offerings. In the import space, the U.S. sees the biggest volume from Mexico ($4.4 billion in the most recent year) by a landslide, and Americans continue to increase their consumption of brands from this country, with sales jumping 14%, 15.4% and 13.7% over the past three years. Holland comes in at No. 2, and sales of Dutch beers fall just short of $1 billion per year. Americans are also increasing their consumption of beers from Belgium, Costa Rica and France, with sales growth increases of 10.1%, 21.8% and 13.2%, respectively, albeit at far less volumes than those from other markets.
In addition to craving above-premium brands, consumers are eager to try new offerings. Among on-premise channels (bars, restaurants, etc.), mature craft brands (those with more than 1% market share) have seen almost a 2% dip in sales growth since January 2015. Comparatively, brands with less than 0.1% market share have posted on-premise sales growth of nearly 12%. Trends in off-premise channels are similar, with the newbies (those with less than 0.1% market share) posting slightly less sales growth than those in the on-premise arena.
When it comes to popular craft beers, two styles have been vying for the top spot over the past three years: India Pale Ales (IPAs) and seasonal offerings. While seasonal beers held the top spot in 2014 and 2015, IPAs racked up more than $1 billion in sales for the year ended Jan. 28, 2017, to claim the title of most popular craft style, while seasonal offerings experienced somewhat of a drastic decline in the last year.
When it comes to food and beverage, few categories measure up to beer. Not even salty snacks (almost a $28 billion category) can beat beer. That’s not to say, however, that it’s all froth. In fact, the overall beer category has some work to do in order to keep from losing more ground to wine and spirits—particularly among Millennials.
So the keys to success going forward will certainly involve knowing where the growth is—even when the opportunity is smaller than you’d like it to be. Imports, flavors and select craft styles will continue to outperform the overall market. In fact, eight of the top 25 fastest growing brands in the overall category are Mexican imports. Another 12 are flavored adult beverage brands.
For additional insights, download The State of the U.S. Beer Market report.