Beer Sales: Nothing to Toast About
June 08, 2017
People around the world are hung-over—more from the global economic outlook than from drinking.
Historically, alcohol sales are positively correlated with global growth rates—drinking goes up when the economy goes up. But, last year and so far this year, alcohol sales and global growth rates have diverged--apparently the latest fallout from a troubling political and economic world and a red flag for leadership in other sectors.
According to new figures from London-based industry group International Wine & Spirits, the global market for alcohol drinks declined 1.3 percent in 2016, despite the growing global population of consumers of legal drinking age. Conversely, the World Bank puts the 2016 global growth rate at 2.4 percent. Put another way, drinking is declining even while the economy is seemingly growing. Analysts say it may be tied to everything from geopolitical uncertainty to a low-wage market.
Nowhere is this divergence more pronounced than in beer sales. Overall beer sales fell 1.8 percent last year, compared to a five-year average decline of 0.6 percent, driven in part by weakness in the U.S. and China, the world’s two largest beer markets, as well as Russia and Brazil. Yet, economically, the World Bank projects growth in all four of those countries this year.
But a closer look at the World Bank’s numbers reveals some sobering data points. Economic growth in China, for instance, is decelerating, and Brazil’s growth is just a paltry 0.3 percent as it emerges from a recession. Meanwhile, as scrutiny of the relationship between the U.S. and Russia intensifies, the unstable political climate and financial market volatility is creating stress and anxiety for workers in those countries. In the United States, for example, despite a record number of job openings in April and the lowest unemployment rate in 16 years, confidence in the American economy is low; wage-growth is barely ahead of the rate of inflation, only 45 percent of people have work that involved more than 30 hours per week and a steady paycheck, and two-thirds of American workers say they are disengaged at work.
In the face of such figures, some analysts believe declining beers sales are a reflection of economic uncertainty. That, combined with industry-specific issues such as a migration to legal marijuana, spirits, and premium brewers, is forcing beer makers to innovate, consolidate or die. In this regard, they are not unlike most companies in most industries.
Anheuser-Busch, for instance, last month bought craft beer maker Wicked Weed Brewing, its tenth acquisition of a premium brewer in recent years. Other beer makers are also turning to technology, leveraging data to better understand consumer behavior and preferences in order to fuel growth.
While Bart Watson, Chief Economist at the Brewers Association, agrees that beers sales are down on a per capita basis, he said that dollar sales have been stronger than volume trends in recent years. Watson said that though economic concerns factors into sales, historically beer “isn’t recession proof, but it is recession resistant.”
Based on current global economic growth trends, we may find out soon enough whether Watson is right or not.