By Jennifer Maloney
When the apocalypse came, Americans bought Bud Light.
Big beer brands had been losing ground for years before the
coronavirus struck. Now drinkers are turning back to mainstream
beers as the crisis shifts sales from tap rooms to grocery store
aisles, giving a boost to giant beer companies while putting small
craft breweries in peril.
The crisis has reversed the trajectory of long-declining beers
such as Bud Light, Miller Lite and Coors Light, but it isn't clear
how long the effect will last. The biggest U.S. brewers are hoping
some of the people who have returned to these American lagers will
stick with them after the lockdowns lift.
The more permanent impact may be on small craft brewers, some of
whom already have gone out of business because of the pandemic.
The coronavirus crisis has shut restaurants, bars, tap rooms and
other out-of-home venues that together make up about 18% of U.S.
beer sales. A jump in retail-store beer sales hasn't entirely made
up for those losses, but it has given new life to flagging
mainstream beer brands.
Beer drinkers have turned to box stores and grocery stores, and
they are buying beer in 24- and 30-packs so they can make fewer
trips. Shoppers are experimenting less, gravitating to brands they
trust and looking for healthier, lower-calorie beers. Some people,
out of work or watching their budgets, are trading down to cheaper
options. And distributors and retailers, looking to simplify their
supply chain, are trimming the number of products they carry.
All of those factors are hurting small craft brewers, which make
most of their sales in their own tap rooms. Many craft beer brands
aren't distributed in retail stores. For most craft breweries,
on-site sales were down by more than 70% in early April, and sales
of craft beer to bars and restaurants had evaporated, according to
a survey by the Brewers Association, an industry group
The shift in buying behavior has been a boon for megabrewers
such as Budweiser maker Anheuser-Busch InBev SA, which said its net
sales grew in the U.S. by 1.9% in the first quarter despite the
global crisis.
Sales of mainstream beers like Bud Light and Coors Light in U.S.
retail stores fell 3.1% in 2019. Since coronavirus pantry-loading
began in early March, sales in that category have jumped 10.7% from
the same period a year ago, according to an analysis of Nielsen
data by beer-industry consultant Bump Williams.
Coronavirus shopping patterns are benefiting big beer brands
across the price spectrum, from budget beers like Keystone Light
and Natural Light to pricier brews like Michelob Ultra and the
biggest craft beer brands like Sierra Nevada and Blue Moon, a
craft-style beer owned by Molson Coors Brewing Co. The trend has
also fueled the continuing craze for hard seltzer, pushing sales of
White Claw to new heights.
Joel Jackson was a Bud Light fan in college and a few years ago
got interested in craft beers. Since the coronavirus lockdown
began, the 28-year-old lead-paint inspector in Buffalo, N.Y., has
driven around each Friday night to buy a four- or six-pack from tap
rooms offering curbside pickup. But he also has found himself
drinking more Bud Light. He and his girlfriend bought a 30-pack
recently to play a virtual round of beer Olympics with friends.
"It was definitely nostalgic," Mr. Jackson said.
And he drank Bud Light to celebrate his brother's 21st birthday
on Saturday in their father's garage, where the family had set up a
bar. His brother had to buy drinks with monopoly money.
"Consumers are behaving very differently to how they were even
four months ago," said Nigel Tordoff, chief customer officer at
Molson Coors, which swung to a loss in the first quarter but
reported relatively strong sales of its mainstream and budget
brands including Miller Lite, Coors Light, Keystone Light and
Miller High Life.
Even as state lockdowns lift, some people might not return to
their previous habits for a while, Mr. Tordoff said. Over time, he
said, people will shift from drinking at home with family or
sharing a beer with a friend to gathering in small groups and
eventually larger celebrations.
Brendan Whitworth, chief sales officer for AB InBev's U.S.
business, said he expects consumers to go back to bars -- and to
craft beer. But some coronavirus-era habits may stick, he said,
such as ordering booze online or doing curbside pickup. And many
consumers might be looking for more affordable options.
"When people needed to make meaningful decisions, they chose Bud
Light," he said.
Industry leaders agreed that the craft-beer market was
oversaturated before the pandemic hit. There were more than 8,000
craft breweries in the U.S. as of April, the Brewers Association
said, and the churn rate was high. Because of the steep competition
and the challenges of operating a small business, the Brewers
Association before the pandemic projected that 400 breweries would
close this year.
But now more are considering going out of business. In early
April, a Brewers Association survey found 60% of craft brewers said
they wouldn't be able to stay in business if social-distancing
measures continued for three months. Smaller craft brewers often
have high overhead costs, heavy debt loads, minimal cash reserves
and little or no distribution in retail stores, said Bart Watson,
economist for the Brewers Association.
Davis Tucker, who more than two decades ago founded North By
Northwest Brewing Co. in Austin, Texas, made the decision in April
to close his brewery for good.
Last year, he produced roughly 1,300 barrels. About 90% was sold
at his brew pub. He had a staff of 65, rent to pay and debt service
on capital improvements including a renovated pavilion and a new
air-conditioning system.
"We just didn't have the cash backup," he said. "We decided to
make the call earlier rather than hang on a couple of months."
Write to Jennifer Maloney at jennifer.maloney@wsj.com
(END) Dow Jones Newswires
May 18, 2020 07:11 ET (11:11 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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