USA: Beverage giants seek to brew sales growth beyond beer

Beverage giants are reshaping their playbook, blending alcoholic and non-alcoholic lines as consumer tastes shift away from traditional beer and wine. By stocking up their product portfolios with new offerings, manufacturers are blurring long-held category lines as traditional beer and wine fall out of favor, Fooddive.com reported on January 23.

The impetus to expand beyond alcohol for many companies is being further accelerated by the potential of higher tariffs from the Trump administration that could lead to higher costs for many of their signature offerings.

Spiros Malandrakis, lead alcohol researcher at Euromonitor, said product launches such as Coca-Cola’s canned cocktails and Molson Coors’ fruity spiked refreshers are omens of how beverage companies are planning their futures.

“The direction of travel is ... to become total beverage companies, from Coca-Cola’s aspirations to enter alcohol to AB InBev and Molson Coors and their aspirations of attracting the non-alcoholic segment, potentially further into soft drinks as well,” Malandrakis said.

The “beyond beer” category — which covers canned alcoholic beverages, such as cocktails and hard teas — posted a 6.3% increase in sales during the past year, according to Nielsen data cited in a note to investors from TD Cowen analyst Robert Moskow.

“The ability to innovate in order to remain competitive and capitalize on consumer trends will be an integral part of the long-term top line algorithm for traditional CPG beverage companies on a go-forward basis,” Moskow told investors. “Failure to innovate would result in a risk to revenue growth prospects.”

The evolution of the beer category reflects the changing nature of consumer tastes as new generations move on from staple brands that have dominated for decades.

Overall beer sales declined 0.5% during the past year as volumes dipped 2.5%, according to Nielsen data. More recently, industry giants AB InBev and Molson Coors have seen the declines in beer accelerate, with sales dropping 3.5% and 2.2% over the last 12 months, respectively.

Two of the strongest performers in the respective beer giants’ portfolios were AB InBev’s Kona Big Wave — which grew its sales 41% in 2023 after a brand refresh — and Molson’s light brew Coors Banquet, which was featured in shows such as “Yellowstone”.

Constellation Brands, with double-digit declines in its spirits and wine business, is leaning in on its slate of Mexican brews — Modelo, Corona and Pacifico — after seeing flat overall sales and a 2% decline in its operating income in its most recent quarter.

In 2024, craft beer saw a more significant decline in production than anticipated with volumes declining 2%, according to the Brewers Association, an industry trade group. Bart Watson, the organization’s CEO, said the craft category is “going through a painful period of rationalization as retailers and distributors look to simplify their offerings or add options for flavor and variety outside of the craft category.”

More than 9,700 craft breweries now operate in the U.S., with closures last year slightly outpacing new openings.

Malandrakis said the craft beer movement’s peak will likely remain in the 2010s when a large number of breweries were attracting a niche following. Several breweries, including Founders and Dogfish Head, found national success.

“Most of the people that used to queue up in the morning to catch the latest iteration of some obscure, apocryphal kind of IPA, that doesn’t really happen anymore and many of those people have grown older,” Malandrakis said.

The fervor behind craft beer also was tamed by M&A activity, with giants, such as AB InBev and Molson Coors buying up insurgent brands, he said.

While craft brews have plateaued in recent years, demand remains strong among loyal drinkers, and breweries that rose to popularity at the sector’s peak continue to reap the benefits. The overall global craft beer market is projected to be worth $242 billion by 2033, increasing at a compound annual growth rate of 9.5% according to Straits Research.

As beer makers grab market share in growing categories, energy drinks are emerging as an attractive target for large players.

The energy drink category continues to reach new heights as consumers seek caffeinated offerings, with brands from Red Bull to Celsius continuing to increase their consumer base. The category saw sales growth of 3.9% during the past year, according to Nielsen data.

Last week, Anheuser-Busch announced it will launch a new drink, Phorm Energy, next summer. The beverage is part of a collaboration between the Bud Light brewer and Dana White, an entertainment mogul and CEO of mixed martial arts league UFC.

The new beverage is aiming to attract consumers who are looking for fitness-adjacent drinks, which is where energy drinks have gained popularity. Phorm will compete with Zoa — a brand created by Dwayne “The Rock” Johnson — that Molson Coors purchased a majority stake in last fall.

Molson Coors also bought a large stake in beverage incubator L.A. Libations in 2019, which has gained a solid track record as an accelerator for brands like Zoa and Body Armor.

But not all investments for Big Beer producers have paid off. In 2023, AB InBev discontinued Babe wine and sold Hiball energy drinks to cannabis producer Tilray.

As many consumers cut back on their drinking, alcohol-free adult beverages continue to grow in awareness and sales.

Nonalcoholic beer is the biggest beneficiary thus far, leading the charge by bringing longtime beer drinkers into the fold. This sector is projected to be worth more than $30 billion by 2032, according to Market Research Future.

Athletic Brewing is the most prominent brand in the category, having closed a $50 million equity financing round last summer and emerging as one of the top 10 breweries in the country.

Nonalcoholic beers from Heineken and Diageo’s Guinness also are projected to continue growing their market share, as consumers seek the taste of their favorite beers but without the negative side effects of alcohol.

“This is not just a flash in the pan or something that happens for one or two years and then people move on. This is not specific to beer, we see similar undercurrents in nonalcoholic spirits and wine,” Malandrakis said. “It has a long way to go but will continue growing very strongly especially as accessibility improves and more brands enter the fray.”

23 January, 2025