Market - Dr. Bart Watson, Brewers Association Beer's - PowerPoint PPT Presentation

The Changing US Beer Market - Dr. Bart Watson, Brewers Association

Beer's Premiumization Trends 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Tier 1 (Old Regionals + Value) Tier 2 (Premium) Tier 3 (Craft, Import, SuperPremium, FMB)

1000 2000 3000 4000 5000 6000 7000 8000 0 1873 1875 1877 1879 1881 1883 1885 1887 1889 1891 1893 1895 1897 1899 1901 1903 1905 1907 1909 Number of Breweries, 1873 - 2018 1911 1913 1915 1917 1919 1932 1934 1936 1938 1940 1942 1944 1946 1948 1950 1952 1954 1956 1958 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 and Beer Institute Brewers Assocication Sources: 2002 2004 2006 2008 2010 2012 2014 2016 2018

TTB Permits vs Dec Active, 2 years Later 8,000 7,000 * November 2018 6,000 5,000 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 Permit Year TTB Permits BA Database - 2 yr lag

12,000 Changes in bonding provisions 9,865 10,000 8,000 6,962 6,915 6,000 4,000 2,000 0 2016-Q2 2016-Q3 2016-Q4 2017-Q1 2017-Q2 2017-Q3 2017-Q4 2018-Q1 2018-Q2 2018-Q3 TTB BA Active

Opens/Closes as % Of Operating Breweries, 1986-2018 40% 35% Opens Closes 30% 25% 20% 15% 10% 5% 0%

2017 US Breweries by Size 90% 90% 84.4% 74.3% 60% 60% 30% 30% 24.3% 7.6% 7.3% 0.9% 0.4% 0.6% 0% 0% 1M+ 100K-1M 1K-100K 1K or less % of US Production % of Breweries

The Changing Craft/Beer Industry

Alcohol Consumption Over Time Do You Have Occasion to Drink Alcohol? 80 70 60 Percent who said “Yes” 50 40 30 20 10 0 Source: Gallup Poll, 2016.

Per Capita Consumption of Ethanol U.S. from 2000 to 2016 3 ABV for Beer 4.6%, Wine 11.5% Spirits 38% 2.5 0.7 0.9 2 Gallons Per LDA 0.3 1.5 0.4 1 1.43 1.24 0.5 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Beer Wine Spirits

US 21+ Beer Shipments 2000-2018 32.00 31.00 Gallons per 21+ Adult 30.00 29.00 28.00 27.00 26.00 25.00 24.00 23.00

30% Demographics ~30% demographics ~70% Other Stuff Per Cap Demo Index

Prices a Primary Driver 145.0 140.0 135.0 130.0 BLS-CPI, 2000-2017, 2000=100 125.0 120.0 115.0 110.0 105.0 100.0 2000 2005 2010 2015 Off-Spirits Off-Wine Off-Beer

Craft Production Growth Rate 20 18 18 17 16 15 14 13 12 12 12 10 8 7 6 6 6 5 4 4 2 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (est)

Craft Growth, Reframed 3,500,000 1,000 900 3,000,000 800 2,500,000 700 600 2,000,000 500 1,500,000 400 300 1,000,000 200 500,000 100 0 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Absolute Per Brewer

Beer, High End Growth, 2013-201 (est) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2013 2014 2015 2016 2017 2018 -1,000 Craft/Specialty Superpremium FMB/Cider Import

How Much Is Out There? 4.5 Million Barrels of “High End” Growth (Average) - 2 Million for Imports - 1 Million for Superpremium = 1.5 M for “Craft” - 250K for Large Brewer Craft - 250K for new breweries (~800 to 1,000* 250 to 300 barrels) A million barrels left… split between 7,000 breweries Micros (20% growth = 1.25M-.25 [new] = 1M) Regionals (?)

So far in Production Survey… • Micros and brewpubs collectively at 20%+ (couple thousand) • Not including new breweries • Rest of the group looking more like a zero sum game

Scan Data by Size Source: IRI MULO+C, (Rolling 52 weeks through 12-23- 18) BA Craft Definition Total US US Size Growth % % Volume (CEs), YA (52w vs YA) (52w) 1,000,000+ -0.0% 62.7% 100k to 1M -1.2% 19.0% 10K to 100K 11.2% 14.8% Less than 45.7% 3.6% 10K

Craft Headwinds/Tailwinds Headwinds Tailwinds Declining beer consumption Premiumization Competition Preference for local Rising costs Innovation Tariffs Supplier disruptions Shutdown CBMTRA ending?

Styles/Hop Specific Issues

Top Growth Styles 2018 (share terms) Total US - Multi Outlet + Conv • Much harder to tell a simple style story these days AMERICAN IPA AMERICAN LAGER • Trends and classics SESSION IPA BLONDE ALE • Hoppy and sessionable IMPERIAL IPA • How to stand out? KOLSCH SOUR ALE

IPA’s Rise 35.0% 32.7% 30.0% 29.6% 25.0% 26.6% 22.4% 20.0% 17.9% 15.0% 14.3% 10.0% 4.0% 3.6% 3.1% 5.0% 2.6% 2.0% 1.5% 2.5% 0.0% 2013 2014 2015 2016 2017 2018 Craft Scan All Beer Scan All Beer (est.)

Modeling the Hop Industry 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 2014 2015 2016 2017 2018 (est) 2019 (guess) Net Exports US Usage Production

WA State, Real Avg Price vs Acres, 2004-2018 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 Source: USDA-NASS, Brewers Association Analysis

Hop Acres vs Real Average Price 45,000 9,000 40,000 8,000 35,000 7,000 30,000 6,000 25,000 5,000 20,000 4,000 15,000 3,000 10,000 2,000 5,000 1,000 0 0 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 WA OR ID

CHEERS! bart@brewersassociation.org @brewersstats