The Changing US Beer Market - Dr. Bart Watson, Brew ers - PowerPoint PPT Presentation

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

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 0 1894 1897 1900 1903 1906 1909 1912 1915 1918 1932 1935 Breweries, Last 125 Years 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 1890 1893 1896 1899 1902 1905 1908 1911 1914 1917 1920 Breweries Per 100,000 Population (US) 1923 1926 1929 1932 1935 1938 1941 1944 1947 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019

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

9,000 8,000 7,000 6,000 Changes to Bonding Provision 5,000 4,000 3,000 2,000 1,000 0 2016-Q2 2016-Q3 2016-Q4 2017-Q1 2017-Q2 2017-Q3 TTB Permits BA Active

Breweries and Brewery Permits , 1995-2019 (est) 12,000 10,000 8,000 6,000 4,000 2,000 0

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

2017 US Brew eries 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.

Total U.S. Ethanol Per Capita 2010 to 2018 2.5 0.87 0.79 0.83 0.86 0.84 0.84 0.90 0.81 0.90 2.0 Gallons Per LDA 0.37 1.5 0.38 0.38 0.38 0.38 0.38 0.39 0.39 0.39 1.0 1.34 1.31 1.31 1.30 1.30 1.30 1.29 1.26 1.25 0.5 0.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Beer Wine Spirits Source: Compiled by NBWA from TTB, Discus and BIG, 2019 (2018 wine volumes estimated by NBWA)

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

U.S. Beer Shipments, 12 Month Rolling Total, Dec. 94-Aug. 19 220,000,000 215,000,000 210,000,000 205,000,000 200,000,000 195,000,000 190,000,000 185,000,000 180,000,000 175,000,000 170,000,000 Dec-94 Nov-95 Oct-96 Sep-97 Aug-98 Jul-99 Jun-00 May-01 Apr-02 Mar-03 Feb-04 Jan-05 Dec-05 Nov-06 Oct-07 Sep-08 Aug-09 Jul-10 Jun-11 May-12 Apr-13 Mar-14 Feb-15 Jan-16 Dec-16 Nov-17 Oct-18

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

100 105 110 80 85 90 95 Dec-94 Apr-95 Aug-95 Dec-95 Apr-96 Aug-96 Dec-96 Apr-97 Prices Another Primary Driver Aug-97 Dec-97 Apr-98 Aug-98 Dec-98 Apr-99 Aug-99 Dec-99 Apr-00 Aug-00 Dec-00 Apr-01 Aug-01 Dec-01 Apr-02 Aug-02 Dec-02 Apr-03 Aug-03 Dec-03 Beer, Wine, Spirits, Real Price Indices Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Beer Dec-05 Apr-06 Aug-06 Dec-06 Wine Apr-07 Aug-07 Dec-07 Apr-08 Spirits Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15 Apr-16 Aug-16 Dec-16 Apr-17 Aug-17 Dec-17 Apr-18 Aug-18 Dec-18 Apr-19 Aug-19

Beer's Premiumization Trends 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 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)

Craft Volume and Dollar Share over Time 25.3 24.1 25 21.0 20 15 13.9 13.2 12.2 11.9 10 6.5 5 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Volume $ Share

Craft Production Grow th Rate 20 18 Why? 16 Big Numbers 14 Distribution 12 Competition 10 8 6 4 2 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 (MY)

Craft Grow th, 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 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Growth Growth per brewer

Beer, High End Growth, 2013-2019 (est) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 2013 2014 2015 2016 2017 2018 2019 -1,000 Craft/Specialty Superpremium FMB/Cider Import

So far in Production Survey… • Slightly stronger than last year • Micros and (but not much) brewpubs up • 12M+ barrels reported, up ~20% in early 6.3%. results • Same group was up 6.2% in • Will drop, but lots 2018, so expect some decline of growth there in overall (4% overall last year) • 4% current projection.

Scan Data by Size Source: IRI MULO+C, (Rolling 52 wks through 12-29-19) BA Craft Definition Total US US Size Growth % % Volume (CEs), YA (52w vs YA) (52w) 1,000,000+ 0.3% 63.0% 100k to 1M -0.5% 18.0% 10K to 100K 8.0% 15.5% Median growth = 0% Less than 31.8% 3.5% Median growth = negative 10K

One Implication, Weaker Pricing 6 Pack Avg CE Price 6 Pack Price Year CE Avg Price Price Growth Growth 2015 $36.43 $9.31 2016 $37.59 $9.59 3.2% 3.0% 2017 $38.27 $9.82 1.8% 2.4% 2018 $38.90 $10.02 1.6% 2.0% 2019 $39.33 $10.16 1.1% 1.4% Source: IRI Group, Total US, MULO+C, BA Analysis

Styles/Hop Specific Issues

Top Grow th Styles 2019 (share terms) Total US - Multi Outlet + Conv • Similar trends to 2018 American IPA Imperial IPA • Much harder to tell a simple style story these days Pilsner • Trends and classics American Lager Other IPA • Hoppy and sessionable Blonde Ale Sour Ale • How to stand out?

IPA’s Rise IPA Share by Channel 40% 36.3% 32.7% 35% 29.6% 30% 26.6% 22.4% 25% 17.9% 20% 14.3% 15% 10% 4.2% 4.0% 3.6% 3.1% 2.6% 5% 2.0% 1.5% 0% 2013 2014 2015 2016 2017 2018 2019 Craft Scan Total Beer Scan Total Beer (Est.)

Overall Beer and IPA Markets by Brew er Size Share of IPA Size (2018 Overall Overall Share of IPA IPA Growth Change 18 CEs) Share Growth to 19 100M+ 80.2% 16.1% 0.4% 9.7% -0.4% 10M to 100M 13.4% 3.7% 13.5% -15.3% -1.2% 1M to 10M 3.4% 47.2% 4.8% 15.9% 1.3% 100K to 1M 1.6% 15.9% 1.2% 7.9% -0.7% 10K to 100K 1.1% 13.9% 9.5% 15.6% 0.3% <10K 0.3% 3.3% 49.9% 47.8% 3.3%

Hop Industry Model, 2008-2020 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000 0 Exports-Imports Domestic Usage Production

Export Value Booming Real Export Value (Customs Data), 1992-2019 $450,000,000 $400,000,000 $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

WA State, Real Avg Price vs Acres, 2004-2019 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

CHEERS! bart@ brew ersassociation.org @ brew ersstats