Why is Beer Losing Ground to Wine and Spirits?

Beer has long been the major alcoholic beverage category compared to wine and distilled spirits or liquor. However, in recent years, beer has been losing its market share to wine and spirits. This trend has negatively impacted beer producers such as Anheuser-Busch InBev (BUD) (ABI.BR) and MillerCoors.

The Consumer Staples Select Sector SPDR Fund (XLP) has 19.6% exposure to beverage companies, including Constellation Brands (STZ) and Molson Coors Brewing (TAP).

According to the Distilled Spirits Council of the United States, the beer market share in terms of supplier revenues has fallen from 56.0% in 1999 to 47.8% in 2014. The decline is more evident in the light beer category. In contrast, the spirits or liquor market share has been consistently rising. We’ll look at this trend in a later part of this series.

The iShares Russell 1000 Growth ETF (IWF) has about 10.4% of its fund allocated to the consumer staples sector.

A survey conducted by Gallup in 2012 revealed that the per capita consumption of beer came down by 20% compared to 1992. Beer’s lead over wine has slipped by 20% compared to the early 1990s.

The number of young drinkers who prefer beer was down from 71% in the early 1990s to 41% in 2012–2013. The survey also indicates a major decline in a preference for beer among nonwhite drinkers. This is alarming since both Millennials and ethnic groups such as Hispanics are considered key customer demographics in the consumer and retail sectors (XRT).

Beer consumption has been declining for several reasons that range from changes in consumer taste and preferences to a shift to healthier drinks. Health-conscious consumers are looking for better options such as ready-to-drink tea and bottled water.

The preference for wine, spirits, and premium drinks is increasing. Within the beer category, craft beer has been growing rapidly in contrast to light beers, which are seeing a falling demand.