U.S. drinkers, particularly young ones, are having relationship problems with the national beverage, beer as for the first time, Americans reaching for a drink more often chose a glass of wine or a cocktail.
According to the Beer Institute, a trade group, drinkers chose beer just 49.7 percent of the time last year, down from 60.8 percent in the mid-90s. Among 21 to 27-year olds, the decline has been sharper.
Anheuser-Busch InBev SA, Budweiser’s owner, found that in 2016, just 43 percent of alcohol consumed by young drinkers was beer. In 2006, it was 65 percent.
Specifically, per-capita beer consumption in the U.S. fell to 73.4 liters last year, from 80.2 in 2010 and 83.2 liters in 2000, according to IWSR, a drinks market research firm. Germany, by comparison, consumed 103 liters a person last year.
John Saputo, who owns beer distributorships in Florida and Ohio, according to Wall Street Journal (WSJ) report, realized the industry had a problem a few years ago when he went out with a team of young radio-ad sales people who wanted him to advertise Budweiser and Bud Light on a local station.
When it came to their own drinks, some of them ordered wine—and “even a liquor drink with a freaking umbrella in it,” he recalls. “These kids, they don’t even drink our product.”
According to the WSJ report, big brewers are facing the same seismic shifts in taste as other large consumer goods and packaged-food giants. Consumers, especially younger ones, are gravitating toward smaller brands marketed as healthier, more natural or made closer to home. Brands such as Kellogg’s cereal, Campbell’s soup and Aunt Jemima pancake mix are all feeling the pinch.
Mass-market beer makers are losing drinkers to an explosion of spirits brands, such as Tito’s vodka, owned by Fifth Generation Inc. Craft beer brewers rode that wave, too, but their volumes haven’t come close to making up for declines in mainstream beer. More recently, craft-beer sales also have slowed.
Miller Lite, Coors Light, Bud and Bud Light have all lost share to upstart labels. “The big things are declining. The smaller things are growing,” AB InBev Chief Executive Carlos Brito told investors in March.
Demographics also are at work. Industry research has shown young white males still prefer beer, but their numbers are declining as a percentage of the population. African-Americans favor spirits, and the percentage of liquor consumers that are Hispanic is rising, the research shows.
Women’s per-capita alcohol consumption has risen, but they prefer wine and cocktails. Millennials drink less than older generations, hitting alcohol volumes more broadly.
The beer industry has tried to make up for declining volume by increasing prices. That has helped make whiskey and wine relatively more affordable. Beer prices rose 42 percent between 2000 and 2017, compared with 11 percent for wine and 19 percent for spirits, according to a Brewers Association analysis of data from the Bureau of Labor Statistics.
As sales slide, a sense of crisis has taken hold of the industry. On Wednesday, Molson Coors Brewing Co. reported a 3.1 percent drop in U.S. second-quarter sales driven by lower volumes of its light beers. Last week, AB InBev—which swallowed SABMiller PLC in 2016 to solidify its title as world’s biggest brewer— also reported U.S. revenue fell 3.1 percent in the second quarter on lower volumes.
On Monday, Dutch brewer Heineken NV reported its U.S. beer volumes declined in the first half, blaming the consumer shift from lager to craft beer and spirits.
“Every consumer today drinks on average one bottle of beer less a week than they did 20 years ago,” Heineken’s U.S. CEO, Ronald den Elzen, told an industry conference last year. “If this is not a wake-up call that we have to do something, I don’t know what is.”
America has long been a nation of beer drinkers. Through the 1600s, the “ordinary,” akin to the local pub, flourished across New England. The Dutch West India Co. built America’s first large brewer in 1632.
Today’s big beer brands trace their ancestry to German-style lagers that made their way to the U.S. in the mid-1800s, along with waves of German immigrants. Adolphus Busch was one of them. He married the daughter of Eberhard Anheuser, another local brewer, and eventually went to work for his father-in-law. In 1876, he rolled out America’s first Budweiser.
Busch was the first U.S. brewer to pasteurize beer to prevent spoilage. He built a network of ice houses near railroad lines, allowing him to distribute his brew widely. Anheuser-Busch, having survived Prohibition by using its refrigerated trucks to sell ice cream, eventually surpassed Schlitz as America’s biggest brewer.