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As consumer tastes shift away from traditional beer and wine, beverage giants are reshaping their playbooks with a mix of alcoholic and non-alcoholic lines. By stocking their product portfolios with new offerings, manufacturers are blurring long-standing category lines as traditional beer and wine fall out of favor.
The drive for many companies to expand beyond the mainstream is being accelerated by the Trump administration’s potential tariff hikes, which could increase costs for many companies’ signature products.
Spiros Malandrakis, senior alcohol researcher at Euromonitor, said product launches such as Coca-Cola’s canned cocktails and Molson Coors’ fruit-flavored soft drinks are signs of how beverage companies are planning for the future.
“The direction of travel is… full-service beverage companies, from Coca-Cola’s desire to enter the mainstream market, to AB InBev and Molson Coors, to their desire to attract the non-alcoholic sector, and potentially to the soft drinks sector as well. It will happen.” Malandrakis said.
The “beyond beer” category, which includes canned alcoholic beverages such as cocktails and soft teas, has seen a 6.3% increase in sales over the past year, according to Nielsen data cited by TD Cowen analyst Robert Moskow in a note to investors.
“The ability to innovate to remain competitive and capitalize on consumer trends will be an essential part of the long-term top-of-line algorithms of traditional CPG beverage companies going forward,” Moskow told investors. “Failure to innovate could jeopardize revenue growth prospects.”
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Coors banquet provided
Diversification of beer companies
The evolution of the beer category reflects the changing nature of consumer tastes as new generations move away from the major brands that have dominated for decades.
Overall beer sales fell 0.5% over the past year, with volume down 2.5%, according to Nielsen data. Recently, industry giants AB InBev and Molson Coors have seen their beer declines accelerate, with sales down 3.5% and 2.2% respectively over the past 12 months.
The two strongest performing brands in each beer giant’s portfolio are AB InBev’s Kona Big Wave, which saw 2023 sales increase 41% following a brand refresh, and Molson’s light brew Coors Banquet, which has been featured on shows like “Yellowstone.”
Constellation Brands, which has seen double-digit declines in its spirits and wine business, is leaning on its Mexican beers Modelo, Corona and Pacifico after overall sales were flat and operating profit fell 2% in the most recent quarter. .
Craft beer production will decline more than expected in 2024, with production down 2%, according to the Brewers Association, an industry trade group. “The craft category is going through a painful period of rationalization as retailers and distributors look to simplify their offerings or add options for flavor and variety outside of the craft category,” said Bart Watson, the organization’s CEO.
There are currently more than 9,700 craft breweries operating in the United States, with breweries closing last year slightly outnumbering new breweries opening.
Malandrakis said the peak of the craft beer movement would continue in the 2010s, when many breweries were attracting niche markets. Several breweries, including Founders and Dogfish Head, have achieved national success.
“Most of the people who used to line up in the morning for the latest edition of some obscure, apocryphal kind of IPA, that doesn’t really happen anymore, and a lot of those people are older,” Malandrakis said.
Passion for craft beer has been tamed by M&A activity, with giants like AB InBev and Molson Coors acquiring rebel brands, he said.
Although craft beer has stagnated in recent years, demand remains. It’s going strong among loyal drinkers, and breweries that gained popularity at the peak of their segment continue to reap the benefits. According to Straits Research, the overall global craft beer market is expected to grow at a compound annual growth rate of 9.5% to $242 billion by 2033.
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Provided by Molson Coors
Raising the stakes in a new category
Energy drinks are emerging as an attractive target for larger players as beer makers gain market share in the growing category.
The energy drinks category continues to reach new heights as consumers seek out caffeinated products, with brands from Red Bull to Chelsea continuing to grow their consumer base. The category has seen sales growth of 3.9% over the past year, according to Nielsen data.
Last week, Anheuser-Busch announced that it will launch a new beverage, Phorm Energy, next summer. The drink is part of a collaboration between the brewer of Bud Light and entertainment mogul Dana White, CEO of mixed martial arts league UFC.
This new product is aimed at attracting consumers looking for a drink focused on fitness, where energy drinks are gaining popularity. Phorm will compete with Zoa, the brand created by Dwayne “The Rock” Johnson, in which Molson Coors bought a majority stake last fall.
Molson Coors also bought a large stake in beverage incubator LA Libations in 2019, which has a solid track record as an accelerator for brands like Zoa and Body Armor.
But not all investments in Big Beer producers have paid off. In 2023, AB InBev discontinued Babe wine and sold its Hiball energy drink to cannabis producer Tilray.
A great investment in non-alcoholic beer
As many consumers reduce their drinking, awareness and sales of non-alcoholic adult beverages continue to grow.
Non-alcoholic beers have been the biggest beneficiaries by far and are driving the trend, attracting long-time beer drinkers. The sector is expected to be worth more than $30 billion by 2032, according to Market Research Future.
Athletic Brewing is the most prominent brand in the category, having closed a $50 million equity financing round last summer and emerged as one of the top 10 breweries in the United States.
Non-alcoholic beers from Heineken and Diageo Guinness are also expected to continue to gain market share as consumers seek the taste of their favorite beers without the side effects of alcohol.
“This isn’t just a blip or something that happened over a year or two and something that people continue to do. This is not limited to beer, we see similar undercurrents in non-alcoholic spirits and wine as well,” Malandrakis said. “We have a long way to go, but we will continue to see strong growth, especially as accessibility improves and more brands enter the competition.”
