U.S. demand for beer fell at the end of last year after a strong run of defying inflation
THE WALL STREET JOURNAL // JAN. 6, 2023
Brewers are beginning to feel inflation’s pinch.
For much of last year, U.S. beer sales seemed largely unaffected as rising prices squeezed shoppers’ pocketbooks. Some beer drinkers traded up to fancier brands as an affordable indulgence; others switched to cheaper suds.
That changed after price hikes took effect across the industry in October. In the 12 weeks before Christmas, beer prices rose an average of 7% higher than the year-earlier period, according to an analysis of Nielsen data by the Bump Williams Consulting Co., an industry consulting firm. And in some beer categories—including American lagers like Bud Light and Coors Light—prices soared 10% or more. U.S. demand for beer fell as consumers reacted with sticker shock. Corona brewer Constellation Brands Inc. STZ 1.74%increase; green up pointing triangle now says it plans to make “more muted” price increases in the coming fiscal year, because higher-than-usual price increases in October slowed its sales growth.
“The consumer is overly sensitive to pricing actions,” Constellation Chief Executive Bill Newlands told analysts Thursday when the company lowered its earnings forecast, sending shares down nearly 10%. “We need to be careful in balancing our growth profile and our pricing profile.”
Overall, U.S. beer sales volumes have been falling for years as people switch to wine and spirits. That decline accelerated in the last quarter of 2022. Sales volume dropped even in well-performing beer categories for which demand had been growing.
U.S. retail-store sales volume of imported beers such as Modelo Especial grew 4.2% in 2022, but fell 0.5% in the four weeks before Christmas, according to Bump Williams Consulting. Superpremium domestic beer brands such as Michelob Ultra grew 0.8% in 2022, but fell 2.3% in the same December period.
The October price increases offset these declines, and kept dollar-sales growth at around 5% in the last quarter of 2022. In December, however, the dollar-sales gains shrank and the sales-volume decline accelerated, said Dave Williams, vice president of analytics and insights at Bump Williams Consulting.
Another troubling figure for the beer industry: Beer imports to the U.S. dropped more than 10% in November from the same month a year earlier, according to an analysis of U.S. Department of Commerce data released this week by the Beer Institute, a national trade association.
“The sharp drop in volume trends is concerning, and a concerning sign for the true health of the category moving forward,” Mr. Williams said. “Price sensitivity can only be stretched so far, even for beer.”
Beer has often been touted as recession-proof. In October, Budweiser brewer Anheuser-Busch InBev BUD -0.05%decrease; red down pointing triangle NV said beer drinkers would continue to buy beer because it was a treat they could afford as other indulgences moved out of reach. But the brewing giant also said it was introducing cheaper packages for consumers whose finances were especially tight.
A spokeswoman for AB InBev said Thursday the beer industry isn’t immune to the pressures other industries are facing, and added that the company’s brands and package offerings put it in a good position to weather the current inflationary environment.
Constellation Thursday said that higher costs for raw materials, packaging, fuel and freight costs had hurt its operating margins in the quarter ended Nov. 30. The company said that in its 2024 fiscal year, it will stay within its traditional price-increase range of 1% to 2%.
Beer, wine and spirits shoppers have been switching from small, local convenience and grocery stores to big-box and club stores where they can find discounts and promotions, alcohol-industry executives said. And prosecco sales soared over the holiday season as people chose the cheaper Italian bubbly over French Champagne.
Write to Jennifer Maloney at Jennifer.Maloney@wsj.com