Wells Fargo Securities attended Beer Business Daily’s Annual Beer Industry Summit.
Bonnie Herzog, senior analyst for Wells Fargo outlined the following takeaways from the Summit:
(1) Ongoing consolidation of the industry and retailers with a power transfer to retailers;
(2) Increased concern about the potential for a price war in the U.S. “We don’t think this is a high probability especially considering ABI’s priority to de-lever and focus on profits & cutting costs,” Herzog said.
(3) Continued pressure on beer dollar sales from wine & spirits;
(4) Continued deceleration of the craft beer segment – but emerging craft brands are still thriving; and
(5) Premiumization – one of the few bright spots for the industry especially for premium priced and high-end brands.
The craft beer segment represents around 11% of the total industry and while still growing mid-single digits, growth has been decelerating, Wells Fargo noted.
“The segment remains very fragmented and is bifurcated with the bulk of growth being driven by the long tail of smaller, emerging craft brands such as Ballast Point and Lagunitas,” Herzog said. She noted the top five emerging, craft brands are growing over 30% while the well-established brands (36% of the segment) have been dragging down the overall category. “While consumers don’t appear to be leaving craft, the concern (and challenge) is that there are fewer consumers entering the segment,” she said.
While sub premium priced beer dollar sales have declined 5.6% since 2015, premium priced beer sales have increased 10%. Based on an analysis from Nielsen, consumers have been trading up to premium brands, with key reasons including: (1) better taste; (2) perceived better quality; (3) consumers want to treat themselves; and (4) consumers want to try new things, Wells Fargo pointed out.
“Craft and high-end imports have been beneficiaries of this on-going trend. However, going forward, while we still expect the premiumization trend to continue, we anticipate this trend to slow slightly as higher gas prices and uncertainty pressure consumers,” Herzog said.