What beer sales tell us about the recession

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Sales of craft beer are increasing in stores, but craft breweries are still struggling. Cheap beer is booming, but it continues to lose market share. This is because the economy of the beer industry is complicated. (And that’s before you start drinking). But the beer industry can tell us a lot about the last two recessions.

Take Natty Light (Seriously, take it, we don’t want it). Natty Light belongs to a category that the beer industry calls “sub-premium” – a category filled mainly with beer that closely resembles water. After more than a decade of decline, the pandemic has increased sales of premium beer. According to data from IRI, a market research company, store sales increased by more than 11% compared to the same period last year (early March to late June). This outbreak occurred * despite * the closure of colleges, fraternal evenings and Beer Pong.

Lower quality beer tends to be lower in calories and sold in bulk, which probably helps in the COVID era. But when we first read about the spike in cheap beer, we thought it was mainly a sign that consumers were tightening their belts in the face of economic collapse. Economists use the term “inferior goods” to describe the products that sell well when people lose their income. During recessions, cash-strapped consumers flock to inexpensive products like instant ramen noodles, used cars or Netflix instead of going to the movies. This has also been, to some extent, historically the case for low-priced beer, wine and spirits, says Patrick Livingston, an analyst at IRI. “But what’s interesting in this period is that we really haven’t seen this effect happen,” he said.

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Previous reports – for example, the article “Consumers switch to cheaper, lighter beer during COVID-19“- have missed this while sales of cheap beer are up, overall beer sales are up even more. There has been a 27.5% increase in beer sales in stores compared to the same period last year, in fact losing market share, IRI data show: Lower quality beer lags behind imports, up 15%, and craft beer, up by almost 23%. Inexpensive beer is also lagging behind the hard seltzer, like White Claw, which is relatively expensive and rose 246.7% over the same period last year. All of these spurts in buying more expensive drinks are part of a trend that beer people call “premiumization.”

“In fact, the premiumization trends we have seen in the beer market have gotten stronger in recent months,” said Bart Watson, chief economist at the Brewers Association, a national non-profit trade association for small and independent craft breweries. (Yes, the Brewers Association has a chief economist, and Watson recognizes that his job is cool as hell).

Beer tends to be fairly resistant to the recession. In fact, according to IRI data, the trend towards premiumization started during the last recession and has continued to be the main driver of beer sales ever since. Watson says craft beers and other expensive beers tend to be somewhat isolated from economic downturns because of who tends to buy it: young professionals with good jobs and money to burn. “You know, we haven’t really seen the craft or the imports or the super premium lose market share in the last recession,” he said. This is because, he says, the recession has not done as much harm to the class of people who tend to drink IPA Session, artisan carriers, Belgian Lambics and Pale Ales Season. Likewise, in this recession, craft beer drinkers are more likely to have the luxury of working remotely, keeping their jobs and spending a few extra dollars on tasty drinks.

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However, craft breweries are still in difficulty. The sharp increase in beer sales in stores is due to the closure of bars, restaurants, clubs and sports venues. And although craft beer may still work well in stores, craft breweries, Watson says, get about 40% of their draft beer sales – and with bars, restaurants and their breweries closed, the kegs haven’t sunk. Corporate breweries, on the other hand, “derive more than 10% of their income from draft beer” and only about 20% from alcohol consumption in bars, restaurants and other public places, says Watson. “So the shutdown hit the smallest beers the hardest.”

If the recession continues, job losses become permanent and unemployment benefits expire, Watson says, we may see more craft beer drinkers opting for cheaper options at the store. The artisanal beverage was already seeing signs of slowing down before COVID hit. But, he says, given the type of consumer who tends to drink craft beer, he has a hard time seeing a huge change in drinking habits. “I mean, it’s hard to imagine someone who likes to drink IPA suddenly say,” I’m going to save money by going to Busch Light. “” But, since the craft breweries depend largely on the people who visit the city, this only helps so much during the pandemic.

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Source: NPR

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