April 7, 2008

Declining U.S. Economy is Good For The Macros

And thus bad for the craft beers. That's the finding from an MSN news article citing a "Beer Institute" study.

This brings us to beer, America's alcoholic beverage of choice. Shunned for years by a public crazed by fancy wines, imported beers, and micro-brews, plain domestic beer looks ready for a renaissance as consumers retrench and get back to basics. Instead of $45 pinot noirs with accents of spice, berries, and rose petals, budget-conscious shoppers will opt for the cheap 12-pack. This bodes well for Anheuser-Busch , the largest brewer in the United States and the fourth-largest worldwide.

Lester Jones, chief economists of the Beer Institute, an industry group, sheds some light on this trend in his latest industry update. Using data from a survey of consumer expenditures by the Bureau of Labor Statistics, he found that while U.S. households spend about $426 on alcoholic beverages per year on average, there is a definite shift towards beer as income falls. For households with more than $50,000 in income, 41% of their "alcohol budget" is spent on beer. In comparison, this share is nearly 60% for lower income households. So, as consumers continue to feel poorer through declines in real income and home equity, look for beer sales to grow at the expense of fancier grape-based avenues to inebriation.
In other words: wine down (good), micros down (bad), everything but beer down, boring domestic superbrands up (bad). Hopefully the industry can successfully navigate these temporarily stormy seas.

Aside: Beer Institute? That makes me think of the movie Thank You For Smoking.

(Image: mindexpansion, MorgueFile.com)

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