13/07/2023

Key trends for the US beer market in 2023

The long-term volume decline of beer in the US is set to continue in the coming years – but there exist emerging growth opportunities for premium-and-above products including no/low, imports and ecommerce

IWSR data shows that beer volumes in the US declined at a compound annual growth rate (CAGR) of -2% between 2017 and 2022 (falling by -3% in 2022 alone), and this pace of decline is expected to persist through to 2027.

The disruption sweeping the US light beer industry in the spring/summer of 2023 has led many to question whether the decline in beer is set to accelerate. Early reads suggest that the net effect has not been negative but that losses suffered by some brands have been entirely picked up elsewhere, resulting in a slightly more positive volume picture for beer. Trends are improving, as the beer category was down -3% for full year 2022 and is down less (-2%) halfway through 2023.

Competition persists, however: in 2023, spirits are poised to overtake beer in the US as the market leader in terms of share of servings for the first time in modern history. This means that more Americans are now consuming spirits than beer on a drink-by-drink basis.

“In 2022, beer in the US continued the long-term trend of volume decline, with gains in the on-premise remaining below pre-pandemic levels and unable to offset off-premise losses,” says Marten Lodewijks, Director of Consulting – Americas, IWSR. “Competition for shelf and cooler space continues to intensify, with a slew of spirit-based RTD innovations.”

However, pushback from RTD consumers – particularly in terms of ‘trial fatigue’ in hard seltzers – has driven some people back into the affordable light beer segment.

IWSR expects most segments of the US beer category to continue to decline, but higher price bands offer prospects for growth: while standard-and-below beer volumes are predicted to continue their decline at a CAGR of -5% between 2022 and 2027, premium-and-above price bands are expected to increase at a CAGR of +3%.

This continues a recent upward value trend for beer, which has traditionally underperformed when it comes to premiumisation. In 2018, according to IWSR data, premium-and-above products accounted for less than 30% of US beer volumes; in 2022, that figure rose to 35%.

“Consumers remain willing to trade up to higher-end offerings across all segments,” says Adam Rogers, Research Director, IWSR. “A consistent premiumisation trend is increasing demand for limited releases and/or allocated products. An increasing number of consumers will drive hours for limited-production products, and/or wait in long lines for the ability to purchase highly sought-after products.”

The beer category has a number of opportunities for growth among higher price points in the years ahead:

No- and low-alcohol beer

The dramatic recent growth of no-alcohol beer in the US has been spearheaded by higher price points. While no-alcohol beer as a whole grew at a volume CAGR of +23% between 2018 and 2022, the super-premium segment soared by a CAGR of +143% over the same timescale.

Robust growth is set to continue. Beer is capitalising on its established position in no/low (it accounted for 78% of all no-alcohol servings in the US in 2022), with no-alcohol beer volumes rising by 29% in 2022, and forecast to grow at a CAGR of +17% between 2022 and 2027.

Growth is even stronger at higher price points, with the average price per serve of no-alcohol beer 30% higher than that of regular beer. While standard-and-below no-alcohol beer is expected to grow at a CAGR of +8% between 2022 and 2027, for premium-plus products the predicted CAGR is +21%.

“Beer will achieve the largest portion of volume growth among no-alcohol products through to 2027,” says Lodewijks. “No-alcohol beer continues to expand in volume consumption and numbers of brands, both in imported and domestic products. More breweries are now offering a no-alcohol product.”

Ecommerce

Beer has traditionally underperformed in terms of online sales – hampered by being heavier (and therefore more expensive to ship) and having a lower value in terms of transaction size and margins, impacting viability.

While the combined beer, cider and RTD categories accounted for 45% of total beverage alcohol trade retail value in the US in 2022, for online sales the share figure was only 21%. Meanwhile, the total spirits category accounted for 34% of total beverage alcohol retail value in the US in 2022, and held a 35% share of online sales value. In wine, the figures are 22% and 43% respectively.

Online beer sales grew at a CAGR of +25% in value terms between 2018 and 2022. While the pace of growth for online beer sales is expected to moderate in the post-pandemic era, sales are predicted to post a value CAGR of +13% between 2021 and 2026, according to IWSR forecasts.

This growth will be aided by the increasing strength of the omnichannel and on-demand channels, both well-suited to the category. Larger basket sizes and click-and-collect in omnichannel encourage stocking up, while on-demand serves the impulse occasion. Availability remains an issue, with only 11 states allowing direct-to-consumer shipping of beer, but increasingly popular no-alcohol products can be delivered nationwide without restrictions.

“Ecommerce presents an opportunity for growth, as beer under-indexes online compared to categories that are better-established in the channel,” says Rogers. “Ecommerce sales skew significantly towards premium-and-above compared with the wider market, due to factors including the lesser relevance of lower-value beer in the channel and a more affluent consumer base.”

Imports

The continued success of imported beers – particularly those from Mexico and Italy – has been a welcome bright spot for the US beer market in recent years.

While local beer volumes were down by a CAGR of -3% between 2017 and 2022, imports rose at a CAGR of +2%. IWSR expects this trend to continue, with local beer forecast to decline at a volume CAGR of -5% between 2022 and 2027, while imports are predicted to rise at a CAGR of +5%.

“The lighter and more sessionable profile of Mexican imports is similar to domestic light beer, but with more flavour, attracting consumer trial,” says Rogers. “They also have an increasing number of core Hispanic consumers, which has increased demand.

“Meanwhile, Italian brands continue to gain traction as they have heritage and evoke a sense of place.”

Other pockets of growth

Other growth opportunities include the dynamic IPA segment, which offers a plethora of styles: east coast, west coast, high and low ABVs, fruit flavours and the up-and-coming cold IPA trend – an ale/lager crossover that uses a lager yeast in brewing. Fruit forward IPAs are also entering the market at an increasing rate from producers of all sizes, including New Belgium, SweetWater, Lagunitas and Boston Beer. These tropical flavoured products resemble category-crossing RTD products like fruit punch with multiple flavoured variations. In addition, the sour beer segment also continues to expand from a small base.

Premium-and-above flavoured beers (excluding radlers) are forecast to grow at a CAGR of +6% between 2022 and 2027, and premium-and-above lagers are expected to grow at a CAGR of +4% over the same timescale.

Meanwhile, brewers are innovating with larger packaging formats to compete with RTDs, says Lodewijks. “With competition in the convenience channel intensifying as spirit-based RTDs gain distribution, brewers have used beer packaging to entice customers.

“Larger 56.8cl cans are increasingly being used in convenience and grocery channels to capture the grab-and-go purchase occasion.”

You may also be interested in reading:

Global beverage alcohol shows subdued growth 2022-2027, whilst value outlook is more positive
Consumer confidence in the US remains broadly positive
The 8 drivers of change for beverage alcohol in 2023 and beyond