The US Beverage Alcohol Market – September 2023

bw166 tracks the total beverage alcohol market in the US based on tax-paid shipments into the market, both domestic and imports, as well as various data from the Bureau of Economic Analysis, Census Bureau, The Bureau of Labor Statistics, and various state agencies.

The measurement of the market continues to be disrupted by the effects of the Pandemic, elevated inflation, increased interest rates, supply chain disruptions, and even the boom and then slowdown of Hard Seltzers.

bw166 has created serving indices to track total servings of Beverage Alcohol entering the market. The Basis of these indices are:

  • One serving of Beer is 12 ounces
  • One serving of Wine is 5 ounces with minor adjustments for Wine Coolers.
  • One serving of Spirits is 1 ½ ounces with adjustments for Cordials and RTDs.
  • The base year for the indices is 2003.
  • Since 1994, the growth in servings has generally grown in concert with the growth of Legal Drinking Age adults. This means that per capita consumption has been relatively flat. The Serving Index per LDA has hovered close to 100 from 1994 to 2019.

The following provides a few data points for the Serving Index

  • LDA Population Index – December 2019 – 120.4, July 2021 – 122.4, September 2023 – 124.9.
  • Serving Index per LDA – December 2019 – 99.7, July 2021 – 103.9, September 2023 – 95.9.
  • Serving Index Total Beverage Alcohol – December 2019 – 120.11, July 2021 – 127.14, September 2023 – 119.80.
  • Serving Index Beer – December 2019 – 100.6, July 2021 – 104.93, September 2023 – 96.06.
  • Serving Index Wine – December 2019 – 158.95, July 2021 – 169.46, September 2023 – 148.95.
  • Serving Index Spirits – December 2019 – 144.15, July 2021 – 155.32, September 2023 – 158.96.

Spirits servings have been bolstered by growth in RTDs and Cordials, while traditional spirits, such as Whiskey, Vodka, Tequila, etc., are showing recent slippage.

The general decline in the market can be explained as follows.

  • It is obvious that there was a pickup in shipments into the market through July 2021. This was due to the Pandemic as well as concerns about supply chain disruptions. The effect of this was a building of inventory at wholesalers, retailers, and even pantry loading by consumers.
  • Another factor during the pandemic was that consumers traded up in the Off-Premise as most of the On-Premise was shut down. This provided a signal to the market prices were moving up quickly. This was a false signal, and Off-Premise pricing has moderated. Unfortunately, more high-end products were brought into the market, which is causing an inventory overhang at high price points. A signal of this is the Census Bureau value of Beer/Wine/Spirits wholesale inventories growing from $18.7 Billion in September 2019 to $25.5 Billion in September 2023.
  • As the Pandemic moderated, the market has seen increases in inflation rates followed by higher interest rates.
    • Consumers have felt the impact and are likely drawing down pantry loading and moderating price points at which they purchase.
    • Retailers are watching consumer trends as well as looking at their balance sheets with higher carrying costs for inventories. They are carrying less inventory and refocusing their promotions at different price points.
    • Wholesalers typically carry a large amount of debt to carry their inventory. They are also reducing their inventory levels to reduce interest costs.

Historically, shipments into the market closely tracked apparent consumption. With the build-up of inventory during the pandemic, historical trends have not held. The implication is that as long as consumers maintain somewhat consistent consumption trends, the market will stabilize over the next twelve months and likely return to volume trends more like 2016 to 2019.

From a value standpoint, we believe that pricing will continue to slowly move up per unit as it has for the past few decades. It will not move up as quickly as it did during the pandemic.

Also, regarding consumer expenditures, a key source of data for bw166 is the Bureau of Economic Analysis. These are the economists that develop and report US GDP as well as the Consumer Price Index preferred by the Federal Reserve. With the September data, they have restated consumer expenditures from January 2013 to August 2023. The changes in the Compound Annual Growth Rates are shown below:

  • Beer Off-Premise: from 4.9% to 6.1%
  • Wine Off-Premise: from 4.9% to 6.5%
  • Spirits Off-Premise: from 5.1% to 7.2%
  • Total Beverage Alcohol On-Premise: from 6.7% to 6.2%

The implication of these changes is that for 12 Months ending September 2023, Consumers have spent $398 Billion on beverage alcohol. The US is a large and varied beverage alcohol market. While there is a short-term slowdown, as noted above, there are many opportunities if industry members focus on market share.