I was thinking about the old adage, “The more things change, the more they remain the same,” and how I used to think that sentiment was true. In fact, it probably still is when it comes to human behavior and personality, which for me is applicable primarily for my night job as an unpaid amateur psychologist for my family and crackpot friends and doesn’t concern us here. In thinking about events that do concern us here — the beverage alcohol industry — I believe that changing conditions call for new responses. Obviously, I’m not the first person to come up with that bright idea; in fact, it is particularly relevant to top brewing executives, who have been grappling with ways to counter some discouraging trends over the past few years.
It’s no secret that the beer industry overall has been basically flat for several years now, and indeed was down 0.4% overall last year. Objectively speaking, that decline is not something to be quaking in our boots about, especially when we’re talking about an $82 billion industry. On the other hand, the wine and spirits segments of the business have been growing for years and chipping away at beer’s share of the U.S. market. Even more troubling for brewers is that wine and spirits — make that cocktails — are rapidly becoming the first choice of the upscale, professional consumer in his or her twenties. Simply put, wine and spirits are now cool, while beer, while it’ll never be square, is trying to regain, or create, a cooler image.
Still, that is a far from simple diagnosis, for the beer industry is anything but monolithic. Imported beers, for example, continue to flourish, with the segment gaining 6.5% in 2005; imports now comprise almost 13% of the total U.S. beer market. And though their collective volume is relatively small, craft and microbrews have surged recently, reminding some of the emerging energy they showed in the early and mid-1990s. Indeed, as our writer Julie Johnson Bradford rightly points out in our cover story, “Beer Fights Back,” the problem lies more with so-called Big Beer, the major domestic brewers who dominate the industry. Not that they haven’t been trying to make changes, and that’s a big part of what the story addresses.
Even as brewers contemplate new tactics and strategies, we shouldn’t forget that mainstream light beer continues to grow (up 1.7% last year), and amazingly now comprises about half of all the domestic beer consumed in the U.S. The concern there, however, is that its growth rate has slowed. The majors have responded with several moves: They have introduced energy-enhancing brews and flavored beers and branched out into an impressive series of smaller craft-brew initiatives, all of which might eventually have an impact. In addition, an ongoing effort to create an appealing image for beer is gaining momentum.
If nothing else, it’s going to be interesting to see how the industry develops in the next few years. From this perspective, it’s just a matter of time before things begin turning positive again for the majors.