#BBC18: Presentation by the National Beer Wholesalers Association: Changes in the Beer Market: Past, Present and Future

The beer industry has changed dramatically in just one year. Brewers, distributors and retailers continue to react to consumers’ demand for craft beer. Existing breweries are merging, setting up taprooms and, in some cases, selling to larger players. Distributors are diversifying ways to get beer to a rapidly changing retail market. Drawing on more than a dozen years of experience, National Beer Wholesalers Association Senior Vice President of Industry Affairs Paul Pisano will provide a long view of the American beer industry, examining where it has been and where it is headed. He will also help attendees understand the policy and regulatory history that shapes the growing craft marketplace. Pisano will present compelling data and insights to help beer writers better understand the policy, economic and demographic factors shaping winners and losers in the market today, as well as key industry issues to watch in 2018 and beyond.

Transcript

1. Changes in the Beer Market: Past, Present, & Future Beer Bloggers Conference Loudon County, Virginia August 10, 2018
2. So Much To Cover… •Changing Alcohol Industry •Demographics is Destiny! •Some Resource Ideas for Your blogs
3. Top Five vs. All Others Market Shares in U.S. Brewer 1977 Share Brewer\Importer 2017 Share AB (1852) 23% ABInbev (1366/2008) 41.6% Miller (1855) 15% SABMiller-Coors(2007) 24.3% Schlitz (1849) 14% Constellation (1940) 8.9% Pabst (1844) 10% HUSA (1864) 3.8% Coors (1873) 8% Pabst (1844/2014) 2.3% Top 5 70% Top 5 81% All Others - 44 30% All Others- 6,000+ 19% Total 100% Total 100% Domestic Brewer Counts* 49 Domestic Brewer Counts* 6,000+ Source: Beer Marketer's Insights, 2018. *Brewer counts do not include importers. In 2017, more than 50% of “Others” from past 5 years!
4. Beer Industry Segment Shares 2013 13.3 7.8 6.9 3.7 0.6 43.6 21.1 2.6 0.5 Imports Craft Superpremium FMB Cider Premium Subpremium Malt Liquor No-Alcohol Source: Beer Marketers Insights, 2018
5. Beer Industry Segment Shares 2017 16.5 11.8 7.5 4.2 0.8 37.7 18.7 2.2 0.4 Imports Craft Superpremium FMB Cider Premium Subpremium Malt Liquor No-Alcohol Source: Beer Marketers Insights, 2018
6. 1,964 2,343 9,482 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (June) Counts of Permits U.S. TTB Permitted Breweries 1990 to June 2018 Source: NBWA and TTB, August 2018.
7. TTB Permitted Brewery Count 9,482 Permits as of June 2018 Source: NBWA and TTB, August 2018. State Count State Count State Count Alabama 52 Kentucky 75 North Dakota 23 Alaska 50 Louisiana 47 Ohio 350 Arizona 135 Maine 148 Oklahoma 52 Arkansas 48 Maryland 128 Oregon 366 California 1,168 Massachusetts 213 Pennsylvania 439 Colorado 474 Michigan 484 Rhode Island 31 Connecticut 114 Minnesota 229 South Carolina 88 Delaware 36 Mississippi 18 South Dakota 32 DC 14 Missouri 157 Tennessee 129 Florida 364 Montana 104 Texas 356 Georgia 108 Nebraska 57 Utah 43 Hawaii 32 Nevada 48 Vermont 86 Idaho 80 New Hampshire 101 Virginia 311 Illinois 313 New Jersey 134 Washington 518 Indiana 220 New Mexico 118 West Virginia 31 Iowa 121 New York 504 Wisconsin 285 Kansas 55 North Carolina 352 Wyoming 41
8. TTB Permitted Brewery Count 619 Additional Permits Through June 2018 Source: NBWA and TTB, January 2018. Source: NBWA and TTB, August 2018. State Count State Count State Count Alabama 0 Kentucky 2 North Dakota 1 Alaska 5 Louisiana 4 Ohio 26 Arizona 5 Maine 17 Oklahoma 9 Arkansas 4 Maryland 12 Oregon 19 California 62 Massachusetts 24 Pennsylvania 28 Colorado 26 Michigan 32 Rhode Island 4 Connecticut 11 Minnesota 15 South Carolina 4 Delaware 3 Mississippi 2 South Dakota 4 DC 1 Missouri 12 Tennessee 9 Florida 26 Montana 6 Texas 23 Georgia 6 Nebraska 4 Utah 4 Hawaii 4 Nevada 2 Vermont 2 Idaho 4 New Hampshire 13 Virginia 24 Illinois 22 New Jersey 11 Washington 19 Indiana 7 New Mexico 8 West Virginia 4 Iowa 6 New York 33 Wisconsin 24 Kansas 2 North Carolina 22 Wyoming 2
9. Brewery Permits per 100,000 Residents 2018 LDA Pop (est) Source: NBWA and TTB, August 2018. US Average = 3.92 State Count State Count State Count Alabama 1.44 Kentucky 2.28 North Dakota 4.21 Alaska 9.48 Louisiana 1.38 Ohio 4.05 Arizona 2.59 Maine 14.2 Oklahoma 1.84 Arkansas 2.18 Maryland 2.84 Oregon 11.53 California 4 Massachusetts 4.07 Pennsylvania 4.54 Colorado 11.27 Michigan 6.51 Rhode Island 3.85 Connecticut 4.22 Minnesota 5.57 South Carolina 2.32 Delaware 4.93 Mississippi 0.83 South Dakota 5.11 DC 2.57 Missouri 3.47 Tennessee 2.57 Florida 2.22 Montana 13.11 Texas 1.77 Georgia 1.42 Nebraska 4.14 Utah 2.06 Hawaii 2.97 Nevada 2.11 Vermont 18.01 Idaho 6.47 New Hampshire 9.72 Virginia 4.92 Illinois 3.32 New Jersey 1.98 Washington 9.23 Indiana 4.53 New Mexico 7.74 West Virginia 2.25 Iowa 5.28 New York 3.36 Wisconsin 6.61 Kansas 2.63 North Carolina 4.59 Wyoming 9.8
10. Permits Grow Across All Segments Total U.S. 2010 to 2018 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 Brewery Permits 0 500 1,000 1,500 2,000 2,500 3,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 Distillery Permits 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 Winery Permits 0 5,000 10,000 15,000 20,000 25,000 30,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Permits Source: U.S. TTB, 2018
11. TTB Brewery Permits Issued Per Day 2010 to YTD June 2018 0.6 1.0 1.6 1.7 2.8 3.1 3.0 4.6 3.5 3.4 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2018 Q2 Permits Issued Per Day Source: www.ttb.gov/beer/beer-stats.shtm and NBWA Industry Affairs, 2018
12. Brewery Permit Growth Per Capita CY 2010 to YTD 2018 5X+ growth 3.0x to 4.9x growth < 2.9x growth Source: U.S. TTB and NBWA, 2018 US Per Capita in 2010 = 1.05 US Per Capita in 2018 = 3.92 Increase of 3.7x
13. 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 5,000,000 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 AGE Fewer new drinkers each year Source: U.S. Census and NBWA 2017. U.S. Population by Age 2017 3 out of 4 people are 21+ Two generations at formidable transition points in their lives 40 is the most irrelevant age?
14. Differences In Consumption By Age Across Age Groups / Drank Past 30 Days 0 20 40 60 80 100 120 140 160 180 Age 21-24 Age 25-34 Age 35-44 Age 45-54 Age 55-64 Age 65+ Index Base = 100 Spirits All Beer Craft Beer Wine Source: NBWA and Scarborough USA+ 2017 Release 2 Total (Jun 2016 - Nov 2017)
15. Differences Between Genders Past 30 Days 40 60 80 100 120 140 160 Craft Beer Import Beer Light Beer Liquor Cider Wine Index Base = 100 Male Female Source: NBWA and Scarborough USA+ 2017 Release 2 Total (Jun 2016 - Nov 2017)
16. People of all ages define the American Dream the same way (Bank of the West's 2018 Millennial Study) • All three generations define the American Dream the same way: owning a home, being debt-free, and retiring comfortably. • Most millennials, Gen Xers, and baby boomers believe the American Dream is still attainable, according to the Bank of the West's 2018 Millennial Study. Indulgence gap' could be a factor in the future of the wine industry (Rob McMillan, Silicon Valley Bank) • Millennials begin to make the opening moves of their careers. Buying homes and starting families. “Substituting diapers for wine.” • Baby boomers will begin to reach retirement age in about five years and living on a fixed income. That’s going to change the way they spend. • When coupled with the specter of less boomer spending and consumption, millennials’ inability to spend on wine, “changes the dynamics greatly”
17. Source: US Census, 2018 and NBWA Industry Affairs. Growing Pop < 1 year old ( > 1%) States Leading the Echo Baby Boom Declining Pop <1 year ( -0.1% to -0.5%) Declining Pop <1 year (-0.6% -1.9%) US population age less than 1 year old fell -0.5% in 2017 (16,000)
18. US Demographics Legal Drinking Age Adults (21+ / LDA) 210 215 220 225 230 235 240 245 2010 2011 2012 2013 2014 2015 2016 2017 Millions Total Legal Drinking Age Adults 70.5% 71.0% 71.5% 72.0% 72.5% 73.0% 73.5% 74.0% 2010 2011 2012 2013 2014 2015 2016 2017 LDA Share of Total Population Source: Compiled by NBWA from U.S. Census Bureau 2018 US Fertility Rates Have Plummeted Into Uncharted Territory. 60.2 babies were born in 2017 for every 1,000 women of 'childbearing' age (15-44) – a low not seen in the US since officials began charting.
19. Demographics Drive Our Industry “Bridging the Divide”
20. Access to Alcohol is Expanding! Fast Food Nordstrom's Bed, Bath and Beyond Barbers and Salons Taprooms Movie Theaters Whole Foods
21. Changing Retail Landscape
22. The Impact of Amazon
23. Total U.S. Retail Establishments Selling Beer 2008 to 2018 522,013 527,382 544,012 561,722 576,353 593,887 601,589 616,407 622,116 635,884 636,088 400,000 450,000 500,000 550,000 600,000 650,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Beer Retail Source: TDLinx Account Tracker Report: Beer, Wine or Spirit Selling Accounts, 2018.
24. Total U.S. Retail Establishments Selling Alcohol 2008 to 2018 531,705 536,807 553,458 571,290 585,690 602,757 610,299 625,276 631,699 644,647 644,939 400,000 450,000 500,000 550,000 600,000 650,000 700,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Alchohol Retail Source: TDLinx Account Tracker Report: Beer, Wine or Spirit Selling Accounts, 2018.
25. 10.0 11.0 12.0 13.0 14.0 15.0 16.0 17.0 18.0 1/1/2010 4/1/2010 7/1/2010 10/1/2010 1/1/2011 4/1/2011 7/1/2011 10/1/2011 1/1/2012 4/1/2012 7/1/2012 10/1/2012 1/1/2013 4/1/2013 7/1/2013 10/1/2013 1/1/2014 4/1/2014 7/1/2014 10/1/2014 1/1/2015 4/1/2015 7/1/2015 10/1/2015 1/1/2016 4/1/2016 7/1/2016 10/1/2016 1/1/2017 4/1/2017 7/1/2017 10/1/2017 1/1/2018 4/1/2018 Millions of Barrels Source: U.S. Tax and Trade Bureau and U.S Census, 2018. Total Beer Industry Supply (Domestic + Imports) 12 Month Moving Average 2010 to YTD 2018
26. LDA Per Capita Beer Consumption 2010 to 2017 20 21 22 23 24 25 26 27 28 29 30 2010 2011 2012 2013 2014 2015 2016 2017 Gallons Per LDA Source: NBWA, U.S. Tax and Trade Bureau and U.S Census, 2018.
27. 100.0 105.0 110.0 115.0 120.0 125.0 1/1/2008 4/1/2008 7/1/2008 10/1/2008 1/1/2009 4/1/2009 7/1/2009 10/1/2009 1/1/2010 4/1/2010 7/1/2010 10/1/2010 1/1/2011 4/1/2011 7/1/2011 10/1/2011 1/1/2012 4/1/2012 7/1/2012 10/1/2012 1/1/2013 4/1/2013 7/1/2013 10/1/2013 1/1/2014 4/1/2014 7/1/2014 10/1/2014 1/1/2015 4/1/2015 7/1/2015 10/1/2015 1/1/2016 4/1/2016 7/1/2016 10/1/2016 1/1/2017 4/1/2017 7/1/2017 10/1/2017 1/1/2018 4/1/2018 Index Base 100 at 2008 Alcohol Beverage Inflation BLS at Home (Off Premise) Consumer Price Index Jan 2008 to June 2018 Beer Liquor Wine
28. Average Weighted ABV for All Beer 2000 to 2017 4.51 4.51 4.60 4.66 4.69 4.00 4.10 4.20 4.30 4.40 4.50 4.60 4.70 4.80 2000 2005 2010 2015 2017 ABV • Average Weighted ABV = Sum of ethanol from each top 100 brands / total volume • Covers 90% of total industry volume the balance of 10% is weighted at 5% • All Craft Style = 5.4% weighted ABV vs All Light Beer = 4.2% weighted ABV Source: NBWA industry Affairs, 2018
29. ABV by Beer Segment 2017 6.5% 6.5% 5.4% 5.0% 5.0% 4.7% 4.2% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00% 6.00% 7.00% FMB Malt Craft Other Regular Import Light Source: NBWA industry Affairs, 2018
30. Total U.S. Ethanol Per Capita 2010 to 2017 1.34 1.31 1.31 1.30 1.30 1.30 1.29 1.27 0.37 0.38 0.38 0.38 0.38 0.38 0.39 0.39 0.79 0.81 0.83 0.84 0.84 0.86 0.87 0.89 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 2010 2011 2012 2013 2014 2015 2016 2017 Gallons Per LDA Beer Wine Spirits Source: Compiled by NBWA from TTB, Discus and BIG, 2018 (2017 wine volumes estimated by NBWA)
31. Total U.S. Ethanol Per Capita 2010 to 2017 0.0 0.5 1.0 1.5 2.0 2.5 2010 2011 2012 2013 2014 2015 2016 2017 Gallons Per LDA Beer Wine Spirits Source: Compiled by NBWA from TTB, Discus and BIG, 2018 (2017 wine volumes estimated by NBWA)
32. Lookback on U.S Ethanol Share 1960 – 2017 0% 10% 20% 30% 40% 50% 60% 70% 1960 1970 1980 1990 2000 2010 2017 Beer Spirits Wine
33. Additional Resources for Story Ideas • Mark Brown of Sazarec. Daily Industry News feed. Email him to be added mbrown@buffalotrace.com • WWW.NABCA.org • Center for Alcohol Policy • Brewers Association and Beer Institute websites • www.TTB.gov • Daily Beer Specific Media • Beer Business Daily (subscription) Harry Schumacher, Publisher • Beer Marketers Insight (subscription) Benj Steinman, Publisher • Brewbound (open) Chris Funari/Justin Kendall, Editors • Anywhere on the US Census website
34. DeliveringLocalJobs.com NBWA.org NBWA Resources
35. NBWA.org/BPI
36. @FollowYourBeer
37. What a decade will do… NBWA Distributor Market Profile DPR 2005 1.Territory = 400K prs 2.Square Miles = 3,200 3.Density = 125 prs/mile 4.SKUs = 196 5.Inventory Avg Age = 21 days 6.Routes Per Week = 38 7.# Miles/route/week = 300 8.Net Sales $13.71/case DPR 2016 1.Territory = 796K prs 2.Square Miles = 4,700 3.Density = 150 prs/mile 4.SKUs = 1,025 5.Inventory Avg Age = 27 days 6.Routes Per Week = 61 7.# Miles/route/week = 333 8.Net Sales $18.77/case
38. 0 200 400 600 800 1,000 1,200 1999 2003 2006 2008 2010 2012 2014 2016 Average Number of SKUs Count of SKUs 10.0 12.0 14.0 16.0 18.0 20.0 22.0 1999 2003 2006 2008 2010 2012 2014 2016 Inventory Turn # of Times Source: NBWA, Distributor Productivity Report. Beer’s SKU Proliferation and Inventory Turn NBWA DPR
39. 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Count of Establishments Wine and Spirits Beer Source: www.bls.gov/qcew Consolidation among larger wholesalers creates opportunity for small niche wholesalers to open. Beer vs. Wine and Spirits Wholesalers 2001 to 2017
40. NBWA Data and Reports
41. CY 2017 Weekly Beer Sales to Retailers Off Premise 0 20 40 60 80 100 120 140 160 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Index to Average Week for CY2017 Week of 2017 Memorial Day Fourth of July Labor Day Fall and Winter Holidays Dog Days of Summer Super Bowl InfoSource™ single source database of aggregated sales-to-retailer transactions for both the Off-Premise and On-Premise Channels. Covers over 100,000 chain and independent retail accounts with over $27 billion in alcohol purchase transactions annually. Cinco De Mayo
42. CY 2017 Weekly Beer Sales to Retailers On Premise 0 20 40 60 80 100 120 140 160 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Index to Average Week for CY2017 Week of 2017 Super Bowl St Patrick’s Day Cinco De Mayo Memorial Day Halloween Thanksgiving Labor Day InfoSource™ single source database of aggregated sales-to-retailer transactions for both the Off-Premise and On-Premise Channels. Covers over 100,000 chain and independent retail accounts with over $27 billion in alcohol purchase transactions annually.
43. www.alcohollawreview.com
44. Current Litigation Buckets Dormant Commerce Clause Antitrust First Amendment Equal Protection Challenges
45. Required Industry Reading
46. QUESTIONS? Paul Pisano Senior Vice President and General Counsel National Beer Wholesalers Association Alexandria, VA ppisano@nbwa.org @beerasonian