Beer Distributors Address Loss of Market Share to Wine And Spirits

by Mark E. Lasbury for Indiana On Tap

At the National Beer Wholesalers Association (NBWA) 80th Annual Convention and Trade Show this week in Las Vegas, NV, the principal message seems to be, “Let’s not fight amongst ourselves, let’s fight them.” The “them” in question are the wine and spirits industries that have been eating away at beer’s share of the alcohol market.

In an article published Wednesday, Oct. 10, by Justin Kendall for Brewbound, several industry executives voiced concerns, explanations, and strategies concerning the imposition of wine and spirits into beer sales in their addresses to the convention. These echoed the recent comments of Miler Coors CEO Gavin Hattersley (see this article) who said that the loss of market share will only be thwarted through a concerted effort of all levels of the beer industry.

The beer distributors met in Vegas while GABF always meets in Denver. What happens in Vegas…… image credit: NBWA

In general sessions on Monday and Tuesday, the CEOs of Heineken USA and Anheuser-Busch, as well as the incoming NBWA president and a partner at CM Profit Group talked about the increasing sales of wine and spirits in relation to beer in the past twenty years and the possible reasons for this. They also provided a framework for combating this loss of market share.

The problem is that wine and spirits have increased in sales and percentage of the market compared to beer, while at the same time beer volume remained level despite a good economy (in presentations given by Tom Fox of CM Profit Group and chief economist of the NBWA, Lester Jones). Brand loyalty is not as deep or broad in emerging populations as in previous generations, based on increased choices across the alcohol market. These experts called for beer companies to work harder to convince new drinkers that beer is good.

These and the comments of the other executives were eerily similar in scope and detail. AB CEO Joao Castro Neves was emphatic in describing the loss of sales to wine and spirits over the last two decades, with Heineken USA CEO Ronald den Elzen claiming that 11 billion servings have been lost to hard liquor and wine during that period. Both stated that this was a wake up call for the beer industry and will require an effort from all three levels of the three tier system of beer production, distribution, and sales.

Beer has been losing share to spirits and wine for years now. Click for a larger image.  image credit: Craft Beverage Insights

Both den Elzen and Castro Neves stated that the reasons for this loss of share are several, including the better marketing by the spirits and wine companies and the capturing of the young legal drinkers population by that industry. Castro Neves suggested in his address that the beer industry must make the beer experience more sophisticated to recapture the younger market, including food/beer pairing and other events, and to increase the perception of beer health benefits in comparison to liquor or wine. den Elzen parroted this example by describing the Love Beer campaign begun in Europe several years ago via the combined efforts of that continent’s beer producers. The campaign was designed to combat the idea that beer is unhealthy as compared to wine and spirits in ads aimed at female drinkers. That effort needs to be mimicked in the US, according to den Elzen.

Predictions were made that if young legal drinkers keep starting with spirits, beer will not be the majority holder of the alcohol market by 2030. Incoming NBWA chairman Jim Matesich stated that to combat this problem, the industry needs to “recharge.” Both den Elzen and Castro Neves put forth a call for all beer companies to join together in pulling back market share. Matesich went further, suggesting that all entities in the beer industry, both large producers and small, must work together and concentrate their efforts on the rival products rather than fighting for share amongst themselves. Matesich said, “Instead of working against each other, we should work with trading partners to improve the beer category.”

 
 

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