Beer Industry Conference Recap: Key Takes from 2022 Beer Marketer's Insights

November 15, 2022



Yesterday, we attended the Beer Marketer's Insights seminar alongside executives from Boston Beer, Molson Coors, Constellation Brands, and Anheuser-Busch. Several key distributors and other industry observers were also in attendance. Here are our key takeaways:

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Beer outlook skews positive: The tone in the room was positive. Volumes are close to 2019 levels and may end the year higher. Hard seltzer declines continue but underlying growth is viewed as "healthy" given it is being driven by beer - Modelo, Michelob Ultra, and Corona are the top 3 growth contributors in the sector. Our view: Dollars spent last year in a rush to innovate behind seltzer have shifted to beer. We expect this to continue.

Focus on volume, not price: We get the sense that distributors are preparing for volume growth. There is a general view that additional price increases will be difficult to achieve. Our view: After two years of dealing with pandemic volatility, the industry appears focused on driving innovation, expanding occasions, and appealing to a growing Gen Z customer base. 2023 is likely to be a big year for new releases and marketing campaigns.

Light beer to lead the way.: Once limited to the Bud/Miller/Coors franchises, a broader definition now includes brands like Modelo, Michelob Ultra, and Kona which are all seeing solid growth. Companies with those exposures are reinvesting as a result. Our view: Within "light lagers", high-end is growing faster than mainstream. Constellation's Modelo Oro and Heineken Silver are new proof points. We think growth from these brands can be sustained.

and sub-premium should not be ignored: Brands such as Busch Light and Keystone have seen growth accelerate this year. Sub-premiums are doing better and this may not be because consumers are trading down. Our view: Absolute consumption is higher. A tight labor market is supporting higher income for the core sub-premium customer.

Diminished threat from spirits: After gaining 13pp of share over 20 years, spirits' share gains from beer appear to have moderated. 2022 volume is flat or down 3pp when excluding RTDs (SipSource data). This may suggest generational share shifting is underway with beer dominating 1980-2000 and spirits from 2000-2022. Our view: Too early to tell. The pace of innovation within spirits has typically been faster and marketing efforts have resonated more across different customers. Spirits players are unlikely to go away quietly.

Constellation in a position to benefit: With Mexico capacity increasing ~1.5x over the next 3+ years, growing volumes is critical. Sustained interest in high-end light beer (Modelo/Corona), growing brand awareness, easing supply chain difficulties, and a packed innovation calendar put Constellation in a good position to maintain momentum, in our view.

Uncertain outlook for revitalized Molson Coors: Several trade conversations confirm that the underlying business is better today. However, growth this year has been mostly price/mix driven. The industry's focus on growing light beer volumes may disproportionately favor Modelo, Michelob Ultra, and Kona, creating a challenge for Molson Coors.

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