Beer is 27% of Total Cost of Summer BBQ
Friday (6/4) is International Beer Day, and brewers should be celebrating. Beer is currently the most expensive item on the BBQ menu – making up 27% of the total cost – and consumers have endured 14 consecutive years of price hikes, which ought to make brewers feel better despite the fact the volume growth of beer has declined by 3.1% year-over-year in 2022 as ready-to-drink cocktails gained popularity.
Jim Watson, senior beverage analyst at Rabobank, says consumers may soon find some relief as a changing competitive landscape and the decline of classic American beers have created a new paradigm that may put an end to a prolonged streak of price hikes.
Watson says that with the "robust growth of Michelob Ultra and Modelo Especial, and the steady declines of classic light beers in America, we are witnessing real change in the beer industry." Today there are 9,000 breweries across the country and the three brands that controlled the beer market 25 years ago are struggling to stay in the top ranks of beers as they fend off new products, from hard seltzers to ready-to-drink cocktails.
These new drinks bring beer's natural attributes of being sessionable, lightweight and portable to the party along with flavor and packaging innovation – and a vastly different marketing approach. In 2022, Watson says, ready-to-drink cocktails were up 37% from the year before and high-end cocktails soars 102% in volume growth. And beer? Well, it declined 3.1% in 2022.
Watson says spirits has done a much better job of being aspirational with marketing focused on premium and luxury. The beer brands that are doing well – such as Michelob Ultra – have broken from the sports-related and silly humor that characterize traditional beer advertising.
As for pricing, Watson notes that wine and spirits have been getting cheaper year after year. Meanwhile, in 2008, Anheuser-Busch InBev put in a new pricing scheme to stick much closer to the consumer price index. Beer is coming off 14 consecutive years of price hikes while simultaneously losing market share.
Compared to 2008, whiskey pricing is up 12%, wine up 9% and beer up 38%.