Are Millennials Bad for the Beer Industry?

Hard to believe that Millennials might be a problem for the beer industry. After all, it’s their curious palates that kick started the craft movement that began with microbrews and then expanded into all other beverage categories.

Or maybe that’s just it.

Goldman Sachs recently downgraded both Boston Beer Company and Constellation Brands based on data that Millennials are more than just brand disloyal — they’re increasingly disloyal to categories. Driven by curious palates, they’re switching out beer for wine and spirits. (Boston Beer was down 5% earlier this week, while Constellation slipped 1%.)

“We view the shift in penetration and consumption trends as driven by a shift in preferences in the younger cohorts,” wrote Goldman Sachs chief analyst Freda Zhuo in a memo this Monday. He added, “younger groups [are] shifting away from beer.”

Perhaps as a result (plus the effects of corporate forces), growth in craft beer has recently slowed. Meanwhile, brown spirits are booming. The spirits category overall increased its market share versus beer for the seventh consecutive year. And more than one third of wine drinkers (and growing) are Millennials.

What’s this mean for beer? It’s obviously no longer the only category that appeals to Millennials for its craft qualities. Wine and spirits have long caught on to that trend, and continue to inch into craft beer’s territory.

Sales declines are still just minor for beer. The category remains in growth, albeit a slowed ascension. And of course other factors are in play: market saturation, corporate interference, etc.

But beer — like all categories — will have to think hard on how it plans to capture and maintain the ever-flighty attention of Millennials.

Kyle Swartz is managing editor of Beverage Dynamics magazine. Reach him at kswartz@epgmediallc.com or on Twitter @kswatzz. Read his recent piece, Should Retailers Fear Amazon’s Whole Foods Purchase?

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