AB InBev, Molson Coors dent US craft beer competition with cheaper six-packs

Endovia Health Sciences

12/06/2023 11:00

By Ananya Mariam Rajesh
       June 12 (Reuters) - Anheuser-Busch InBev  ABI.BR  and
Molson Coors Beverage  TAP.N  are set to gain market share from
craft beer makers in the United States this year as
cost-conscious consumers are opting for cheaper six-packs,
according to analysts and industry experts.
    With inflation making goods more expensive nationwide,
consumers are trading down to more affordable beers, boosting
sales and protecting margins for major beverage players. Beer is
often touted as recession-proof, so large companies may continue
to earn solid profits even as economic activity slows. 
    "Most cost-conscious consumers are still buying the same
volume of beer, but in the less expensive category of beer,"
said Neil Reid, professor of geography at the University of
Toledo, who has researched the beer industry.
    Analysts polled by Refinitiv expect annual revenue to grow
about 6% for Molson Coors and 7.5% for AB InBev in 2023, while
craft beer maker Boston Beer Co  SAM.N  is expected to post a
near 3% fall in revenue, compared with last year's 1.6% rise.   
        Overall U.S. beer sales grew 1.8% in the 12 weeks ended
May 20, according to data from research firms NielsenIQ and TD
Cowen.
    
    
    Craft beers are more expensive and made from higher-quality
ingredients, and have a consumer base that rarely shifts to
cheaper brews. However, those brands have suffered a drop-off in
demand since the pandemic as premium brews rely heavily on
in-store shopping.
    "The craft beer category has suffered from a couple of
headwinds. One is kind of just the legacy issues from the
pandemic, but also from a trade-down because craft tends to be
priced at a premium," TD Cowen analyst Vivien Azer said. 
    Sam Adams maker Boston Beer, the largest craft beer maker,
saw its market share slip last year. 
        The company's market share was 1% in the overall U.S.
beer industry, down from 1.1% last year for the first four
months of 2023, according to data firm Numerator. 
    Sales growth in Molson's Blue Moon, its craft brand,
declined 8.6% in the 12 weeks ended May 20 on a year-over-year
basis, according to data from NielsenIQ and TD Cowen. 
        Meanwhile, AB InBev's market share in dollar terms rose
to 40.4% in the first four months of 2023 in overall U.S. beer
sales, up from 38.3% at the same time last year.
    Molson Coors' market share was second at 25.3% and
Constellation Brands  STZ.N , maker of Corona and Modelo, was at
9.4%, compared with 23% and 8.8% a year earlier, respectively. 
    
        
  
    While AB InBev and Molson Coors bought brewers to expand
into the craft brewing segment starting in 2011, the companies
have seen little success and have lost market share in the
category.
        As a result, Constellation Brands' Funky Buddha and AB
InBev's Appalachian Mountain Brewery were sold back to the
founders in May.
    The larger brewers are less likely to buy additional craft
brewers and instead invest in their best-selling products like
Miller Lite, Coors Light, Bud Light and Beyond Beer products,
said Jon Reynolds, certified instructor in the business of craft
beer at the University of Vermont.
        Giants such as Molson Coors and AB InBev are insulated
somewhat from economic downturns by their diversified portfolio
that allows them to sell not just premium brews but also cheaper
varieties with low alcohol content like Bud Light and Miller
Lite, Reid said.
    AB InBev executives said the company is tripling its
investment in Bud Light for the summer, even though sales have
been hit after a social media promotion on April 1 with
transgender influencer Dylan Mulvaney resulted in a backlash
from U.S. conservatives. 
    A 16-ounce six-pack of AB InBev's Natural Light and Molson's
Keystone Light averages about $4.99 in the United States, making
them lower-priced beers.
    Bud Light and Coors Light, popular premium light beers,
average about $7.40 for a 12-ounce six-pack, while Boston Beer's
Sam Adams costs between $10 to $12.
        AB InBev CEO Michel Doukeris said the beer industry in
the United States remains resilient, with industry volume trends
improving sequentially and sales on a dollar basis up 3%.
  
    "The American consumer likes light beer," Molson Coors CEO
Gavin Hattersley said at a conference in early June. "I think
dynamics within the subsegment might change, but the overall
consumption of light beer is not going to change materially."   
 
    

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YTD market share data of major beer companies in the U.S.    https://tmsnrt.rs/3MgDyRE
YTD market share data of major beer brands in the U.S.    https://tmsnrt.rs/3MidVzL
Y-o-y volume growth of different types of beer in the U.S. Y-o-y
volume growth of different types of beer in the U.S.    https://tmsnrt.rs/3pr3otj
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 (Reporting by Ananya Mariam Rajesh in Bengaluru; Editing by
Anil D'Silva)
 ((AnanyaMariam.Rajesh@thomsonreuters.com ; Twitter: https://twitter.com/AnanyaMariam))