What Does the Decline in Beer Sales Say About Who is Hurting Most During the Recession?

I was digging around for some beer sales data this morning, when one bit of information struck me.  Now this is mostly speculation on my part, but I thought it was interesting enough to share.

According to the Beverage Information Group sales of domestic beers were down around 2.3% last year, and most analysts chalk this up to unemployment and the effects of the Great Recession on some people’s disposable income.  I didn’t attend the Wharton School of Business – the tap selection at the local bars sucked, so I refused their scholarship  😉 – but I think this cause and effect is pretty obvious.  What makes this information interesting to me is looking at where in the beer spectrum the sales decline is happening. 

Last year’s 2.3% decline in sales was entirely at the expense of the big beer companies InBev, SABMiller, etc.  Even as the economy has been in the dumps, sales of craft beer have been rising at a very healthy rate. So macro sales are down sharply and craft sales are up sharply.

What might this information say about which consumers are hurting most? Looking at these facts side by side, I have three guesses:

  1. The Working Class. My first guess is that folks with blue collars and limited disposable incomes are suffering hard during the recession. These folks are the traditional macro beer drinker (at least to my biased East Coast mind) and the dip in sales might reflect a dip in their ability to afford industrial lagers (thanks again for the term, Evan).
  2. Young Men. Another group who isn’t doing well are young people between the ages of 16 to 24, who have an unemployment rate roughly double that of the national average.  Young men in the upper end of this age group represent a big chunk of the macro beer buyers, and if they aren’t making money, their beer funds are limited.
  3. Everybody.  I know this is painting with a pretty broad brush, but I’m being realistic.  Beer is America’s drink, and macro brews make up 95.1% of sales in this country. If mainstream America is hurting, beer sales are hurting.  Sales of macro-lagers are very price sensitive, and last year’s price increases probably didn’t help here.

We’ve talked before about the craft beer bubble in terms of the industry’s growth being an unsustainable trend that will see a market correction, like the tech bubble or the housing bubble.  But maybe we should see it differently, as a happy kind of bubble, one which insulates its occupants from the harsh realities of the world.  A bubble-boy bubble.  Fa-la-la-la-la.

While I’d like to think that the growth in the craft beer market is due to people from all walks of life discovering the wonders of good beer, it’s more likely driven by college-educated folks who still manage to generate disposable income in these hard economic times, and younger folks who have been lucky enough to find decent jobs.  Again that’s speculation.

What I know for sure is that even though we can all talk about how we’ve personally suffered from the crappy economy, we should consider ourselves lucky to have such a wonderful selection of craft brews available and enough cash to scrape together to afford a taste.

Note: I updated the figures in this post after Zach Goldstein rightly pointed out in the comments below that I’m a moron.

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Categories: Beer

Author:Jim

Craft beer nerd, frequent beer blogger and occasional home brewer.

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16 Comments on “What Does the Decline in Beer Sales Say About Who is Hurting Most During the Recession?”

  1. September 22, 2011 at 12:27 pm #

    I feel that people are starting to wake up more to craft beer and dumping the bland boring macro beers. Due to the economy and overall higher cost of craft beers, people are choosing to buy more craft beer over macro beer but they just aren’t buying as much dollar wise. It doesn’t bother me to see the decline in Corporate brews. I’m sure they will ride out the bad times better than most. Normally when times get tough people continue to buy alcohol, but as the recession lingers on money gets tighter, thus everything we buy tends to drop.

    • September 22, 2011 at 12:56 pm #

      I agree that the decline of corporate brews is to be expected as consumer preferences change, as will the way the big boys approach the market place. At some point they’ll start buying up the little guys, muddling our view of what craft beer is.

  2. September 22, 2011 at 1:27 pm #

    “I didn’t attend the Wharton School of Business – the tap selection at the local bars sucked, so I refused their scholarship ;)”

    as a former Philly resident I have to disagree with you! (unless it was years and years ago that you are referencing, then I cannot comment… how old are you?). Yes, you would have had to walk across the river, but Philly is the city that introduced me to craft beers, and they now have a great selection of brews at most local bars!

    and for me, beer is not bought with disposable income. it is budgeted into my monthly expenses as an important necessity.

    • September 22, 2011 at 1:40 pm #

      I’m 40 and the incident I’m referring to never happened, so let’s say it was 1954.

  3. Zach Goldstein
    September 22, 2011 at 2:14 pm #

    Interesting article but I have to disagree. It is projected that beer industry revenue will grow at an annual rate of 1.6% over the next five years, reaching almost $28.16 billion in 2015. I believe this increase can be attributed to the craft beer that has been able offset the decrease in sales by the larger brewers (I’m paraphrasing IBISWorld’s Beer Production report).

    Also, the US beer sales only declined 1% over the last year (2010) whereas the craft segment grew by 11% (statistics from the Brewers Association website). I think it would be unfair to simply look at the macro brewers statistics.

    I do agree that the craft beer segment is due for a market correction at some point but it still only makes up 5% of the entire beer market with large brewers still dominating. Furthermore, large brewers have already started buying up smaller craft brewers (most notably Goose Island being bought out by Anheuser-Busch).

    The recession has hit everyone hard but I believe we are noticing a market shift and a change of consumer preference.

    • September 22, 2011 at 2:58 pm #

      Is that 1% decline volume or revenue, Zach? Because the statistics above were based on sales volume. I know prices have risen, which might close the gap on revenue.

  4. September 22, 2011 at 3:03 pm #

    Dang it, Zach. You talked about Goose Island before I could. While I do not know the market percentage of craft beers I do know that Anheuser bought Goose Island purposely to get into the craft beer market. The other thing I know is that my husband purposely buys Leinkugel or Rolling Rock or Sam Adams when he is buying beer. However, due to our latest financial crunch, he has moved over to drinking Merlot. He can get a big bottle cheap. I think he is also hoping for the heart healthy effects.

    • September 22, 2011 at 3:06 pm #

      Yikes! A beer defector!!

      Quick – get him a bottle of Arrogant Bastard! It’s $5 for 22oz and tastes plenty good!

      • September 22, 2011 at 3:18 pm #

        I am hoping he goes back to beer soon. I hate Merlot.

        • September 22, 2011 at 3:30 pm #

          I remember it as being my favorite style of wine (along with Shirazz) but that’s a long, long time ago.

          I didn’t know they still made it. 🙂

  5. September 22, 2011 at 3:04 pm #

    I think you hit the nail on the head with this post, it’s exactly the point I was making in my comment on your article about beer ass-kicking 🙂 People who could marginally afford to buy beer in the best of times, even cheap macro beers, are really not able to afford it now.

    • September 22, 2011 at 3:07 pm #

      Yeah, and apparently those folks used to buy the light stuff, as that’s what has slipped the most.

  6. Zach Goldstein
    September 22, 2011 at 3:09 pm #

    Hey Jim,

    It’s 1% decline by volume. Here’s the Brewers Association link if you want to take a look.

    http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/facts

    • September 22, 2011 at 3:29 pm #

      Good catch, Zach. I had a wire crossed in my date. I think I wrote 1.1% as 11.1% and then cut and pasted it while I wrote the post. Double oops!

      Anyway, I went back to check my data and saw that sales of domestic beers were down 2.3% last year, so I went with that figure because it nicely illustrates what’s happening to the big American brewers (plus it’s a more dramatic decline, which is always sexier!).

      Anyway, as I always like to reward people for pointing out the fact that I’m an Idiot, I threw a link to your blog into the piece crediting you for calling me out.

      Well done!

  7. Zach Goldstein
    September 22, 2011 at 3:35 pm #

    Jim,

    It happens to the best of us! Glad I could help. With either stat it’s an interesting piece and a great site. Thanks for the link.

    The 2.3% definitely does illustrate the point. I also like that even though numbers are down for the entire industry craft was still able to grow 11%, which is quite remarkable.

    Cheers!

Trackbacks/Pingbacks

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    […] true for craft beer, with a great example coming from the Great Recession. While overall beer sales declined, craft beer continued to […]

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