CHICAGO —To retailer Adam Musa, packaged beer operates in a state that might just resemble a hazy IPA: flat and a bit murky.
This drag on volume comes despite Musa’s regular activation of enticing discounts—select beer brands selling at cost or below—at his two Fuelco/Foodsmart stores in White Plains and Yonkers, N.Y.
The fact that beer sales aren’t growing despite the inducement is indicative of what packaged beer is up against these days, as demonstrated by stiff competition from flavored malt beverages, hard seltzers, canned wines and canned cocktails.
For the 26-week period ending Oct. 31, 2021, packaged beer sales totaled $12.8 billion in convenience stores, even as the category lost 1.2% in dollar sales and 5.8% in cases, according to data from Chicago-based IRI.
“If not for our competitive pricing, plus some other techniques, I’d hate to see where packaged beer sales would be,” said Musa, president of Miami-based American Petroleum Inc.
Gen Z, Millennials Control the Narrative
The struggles for beer as a whole is a narrative largely controlled by generation Z and millennials. Several retailers said that, if not for seltzer brands White Claw and Truly, many age-legal younger consumers would reach for a beer brand instead.
Musa cites three speed bumps that hold beer volume down with this younger crowd. “Beer makes you feel heavy, bloated. Brands lack a vibe, a mystique. And beer can’t match the exotic flavor mashups of hard cocktails and seltzers,” said Musa, who, at 22 years old, can speak firsthand to the desires of the Gen Z demographic.
Musa offers a case in point about what ails packaged beer: one new-arriving brand, Happy Dad Hard Seltzer.
“Happy Dad was born from a YouTube personality group with more than 100 million followers,” said Musa. “It appeals to people known for partying, and it’s the hottest thing in the market now. The big beer companies lack the ability to establish the same connection with younger consumers. The alcohol beverage industry is changing to where you see more celebrity-endorsed brands, which helps too.”
Compelling—and not “me-too”—innovation is sorely needed to motivate younger consumers to give beer trial and repeat sales, Musa said.
Beer’s Overwhelming Competition
The time-honored expression, “beer me,” is under duress. It’s due to the overwhelming competition from flavored malt beverages (FMBs) and other ready-to-drink alcohol options, retails said.
Craft and imported beers are helping salvage beer category fortunes, and many retailers continue to expect strong growth from these two segmentations, said Chris Long, category manager, age verified for Des Moises, Iowa-based Kum & Go.
Detailing tactics retailers should consider to boost sales, Long said one challenge is “not to set consumer expectations [that they will] always purchase a beer product at a discounted price.”
“Sometimes I think we’re in a hurry to pull the price lever too quickly,” Long said. “With the ascension of digital, social media, mobile ordering, delivery and more, retailers have many more tools available to bring attention to a beer product” [than to activate a reduced cost or price promotion].
“Old-school fundamentals—displays, signage and features—still work. And if you can execute it, sampling remains one of the most effective promotional activities,” said Long, who cites supply-chain challenges (out-of-stocks, labor shortages) as concerns that continue to “cause tension at the store level.”
In New York, Musa said beer will continue to face an uphill battle.
“Hard seltzers are changing the game. I just graduated from the University of Miami, so I’m a good person to talk to [about the desires of Gen Z]. I lived both sides of it, and it has influenced the way I merchandise beer in our stores,” said Musa.
As a counter-strike to the beer competition, retailers “need to make sure their assortment and space align with the growth opportunities, and should ensure they have the right offerings, pack sizes and clear pricing to drive consistent sales—plus relevant POS and great displays during key occasions to drive bigger packs,” said Jenny Odom, vice president of national accounts for Victor, N.Y.-based Constellation Brands. “They also need to stock single-serve [packages] to fulfill trip missions and drive trial of new flavorings and offerings. Lastly, make sure there’s enough cold box space for high velocity SKUs.”