Hopscotch Through Hardships: A Look at the US Beer Distribution Landscape in 2023 and Beyond

2023: A Year of Cautious Optimism with Lingering Concerns

The American beer distribution industry, the lifeblood connecting breweries to thirsty consumers, has navigated a turbulent few years. From pandemic disruptions to evolving consumer preferences, distributors have faced a complex landscape.

This article delves into the key trends shaping the US beer distribution scene in 2023, along with a forecast for 2024, considering the latest news, challenges, and data-driven insights.

Market Overview and Trends

The United States beer market size reached US$ 104.4 Billion in 2023. Looking forward, The United States Beer Market Size is expected to reach 154.72 Billion by 2032, exhibiting a growth rate (CAGR) of 3.8% during 2022-2032 (Spherical Insights, 2023).

Revenue, at home (e.g., revenue generated in supermarkets and convenience stores) in the Beer market amounts to US$77.0bn in 2024. In the USA, the revenue is expected to grow annually by 1.98% (CAGR 2024-2028). In global comparison, most revenue is generated in the United States (US$77,040m in 2024). In relation to total population figures, the average revenue per capita, at home amounts to US$225.40 in 2024. In the Beer market, volume, at home is expected to amount to 18.8bn L by 2028. The average volume per person, at home in the Beer market is expected to amount to 55.60L in 2024.

This stability is driven by a shift in consumer preferences towards premium beers, including domestic craft beers and imported selections. However, IWSR expects most segments of the US beer category to continue to decline, but higher price bands offer prospects for growth: while standard-and-below beer volumes are predicted to continue their decline at a CAGR of -5% between 2022 and 2027, premium-and-above price bands are expected to increase at a CAGR of +3%.

The Beer market includes fermented alcoholic beverages based on malt. Non-alcoholic beers are also covered.

Structure:

The Beer market is divided into 2 markets:

·?????? Alcoholic Beer (minimum alcohol content: 0.5% ABV)

·?????? Non-Alcoholic Beer (maximum alcohol content: 0.5% ABV)

Key Players

Key players include Anheuser-Busch InBev (e.g., Corona, Bud Light, and Michelob), Heineken, China Resources Snow Breweries, Carlsberg, and Diageo (Guinness).

List of Key Companies

• Bells Brewery Inc.
• Carlsberg Breweries AS
• Constellation Brands Inc.
• D.G. Yuengling and Son Inc.
• Deschutes Brewery
• Duvel Moortgat NV
• FIFCO USA
• Molson Coors Beverage Co.
• New Belgium Brewing Co. Inc.
• Pabst Brewing
• SALT LAKE BREWING CO
• Sierra Nevada Brewing Co.

United States Beer Market, By Product Type

• Standard Lager
• Premium Lager
• Specialty Beer
• Others

The United States Beer Market is categorized into standard lager, premium lager, specialty beer, and others. Standard lager holds the largest revenue share due to its broad consumer appeal and consistent flavor profile. It caters to a diverse audience, from casual drinkers to those seeking a refreshing option. Major breweries dominate this segment with extensive distribution networks and robust marketing strategies, enhancing their market dominance.

Additionally, standard lagers often offer a price advantage over other beer types, making them more accessible to a wider consumer base. Despite concerns about monopolization, these breweries continue to leverage their brand recognition and advertising budgets to maintain their stronghold in the market, ensuring widespread availability and targeted marketing campaigns for standard lagers.

United States Beer Market, By Flavor Type

• Flavored,
• Unflavored

The United States Beer Market is categorized into flavored and unflavored beers. The unflavored segment is anticipated to dominate the market due to its historical significance and versatile drinking experience. Beers like lagers and ales, which fall under the unflavored category, have been enjoyed for generations, contributing to their enduring popularity. Their clean and balanced flavor profile allows customers to appreciate the natural qualities of malt, hops, and yeast without overwhelming flavors. This neutrality appeals to a broad range of beer enthusiasts seeking a simple and refreshing beverage. ?

Despite the emergence of flavored options, unflavored beers maintain their market dominance, reflecting consumers' preference for traditional and timeless brews with cultural significance.

United States Beer Market, By Packaging

• Glass
• PET Bottle
• Metal Can
• Others

In the United States Beer Market, packaging options include glass, PET bottles, metal cans, and others, with glass leading in revenue share. Glass packaging holds a strong association with beer, symbolizing tradition and quality. Its transparent nature allows consumers to appreciate the beer's color and clarity, crucial for certain beer styles. Moreover, glass acts as a reliable barrier against oxygen and moisture, preserving beer flavor and prolonging shelf life. Its recyclability meets consumer demands for sustainable packaging. The preference for glass is also driven by the belief among beer enthusiasts that it enhances flavor compared to other materials. ?

Despite alternative packaging options, glass remains favored for its perceived premium quality and authenticity. Its enduring popularity highlights consumer preferences for traditional and environmentally conscious packaging choices, emphasizing the significance of packaging materials in shaping consumer perceptions and experiences within the beer market.

United States Beer Market, By Distribution Channel

• Supermarkets & Hypermarkets
• On-Trades
• Specialty Stores
• Convenience Stores
• Others

In the United States Beer Market, distribution channels encompass supermarkets & hypermarkets, on-trades, specialty stores, convenience stores, and others, with supermarkets & hypermarkets projected to dominate. These retail giants boast widespread coverage and frequent foot traffic, servicing diverse consumer segments with convenience and accessibility. Leveraging their expansive physical footprint, supermarkets and hypermarkets forge partnerships with major breweries and distributors, securing advantageous terms, competitive pricing, and consistent brand availability. This strategic alliance empowers them to curate a diverse beer selection, catering to varied consumer preferences effectively.

Furthermore, supermarkets and hypermarkets typically dedicate sections or aisles to alcoholic beverages, showcasing an extensive array of beer varieties. This comprehensive approach not only enhances consumer convenience but also reinforces supermarkets & hypermarkets' position as primary destinations for beer enthusiasts, underscoring their pivotal role in shaping the United States Beer Market landscape.

Opportunities: Beer distributors can cater to the growing demand for premium beers by expanding their portfolios to include a wider variety of craft beers and imports. Partnering with local and regional craft breweries can be particularly beneficial.

Challenges: The sheer volume and variety of beer options, particularly craft beers, requires robust logistics networks, efficient inventory management systems, and cold storage facilities to ensure freshness and prevent spoilage.

Supply Chain Bottlenecks: A Persistent Challenge

The global supply chain disruptions that plagued 2022 continued to impact beer distributors in 2023. Shortages of aluminium cans, glass bottles, and even brewing ingredients like hops hindered production and distribution timelines.

According to a survey conducted by the Brewers Association in Q3 2023, a significant portion of both large and small brewers reported experiencing supply chain issues. These challenges are expected to persist in 2024, with potential economic slowdowns further straining the supply chain. ?

The Rise of E-commerce and Direct-to-Consumer (D2C) Sales

The pandemic accelerated the growth of e-commerce for alcoholic beverages, including beer. Consumers increasingly turned to online platforms for convenient ordering and home delivery.

According to 2022 Alcohol E-commerce Playbook - Rabobank, the online sales of alcohol in the US are now worth US$6.1 billion which has seen a rise of 131% since 2019. While this presents a potential growth opportunity for distributors who can adapt their online presence, it also introduces competition from D2C models where breweries bypass distributors and sell directly to consumers.

Challenges Faced by Beer Distributors in 2023: A Numbers Game

• Consolidation: The beer industry is witnessing consolidation among large brewers, with the top 3 brewers controlling over 80% of the market share in 2023 (Brewers Association, 2023). This consolidation can put pressure on distributor margins as large brewers wield greater negotiating power.
• Regulatory Hurdles: A complex web of state and federal regulations regarding alcohol sales and distribution creates additional complexities for distributors. Navigating these regulations is a major challenge for distributors across the country.
• Maintaining Profitability: Rising costs of transportation, fuel, labor, and even insurance are squeezing distributor margins. In 2023, the average profit margin for a US beer distributor hovered around 3% (NBWA, 2023), requiring them to find innovative ways to operate efficiently. ?

Finding a Way Forward in 2024: Strategies for Beer Distributors

• Embracing Technology: Integrating technology solutions can streamline operations for beer distributors. Utilizing inventory management software with real-time data on SKUs and expiration dates can help prevent spoilage and optimize storage space. Additionally, route optimization tools can minimize delivery times and fuel costs. A 2023 study by McKinsey & Company found that companies that embraced digital transformation solutions achieved an average of 10% to 30% increase in operational efficiency.

• Building Strong Relationships with Craft Brewers: Partnering with local craft breweries allows distributors to offer a diverse range of unique beers, catering to evolving consumer preferences. Additionally, fostering strong relationships with brewers can ensure collaboration and timely communication regarding production schedules and availability.

Embracing Technology for Efficiency and Growth

In a landscape characterized by tight margins, rising costs, and a need for agility, embracing technology presents a powerful opportunity for beer distributors. Here's how:

• Shared Services: Implementing shared services models can significantly improve operational efficiency and reduce costs. Shared services consolidate back-office functions like human resources, accounting, and IT across multiple locations, leveraging economies of scale and expertise. According to a study by Deloitte, companies that implement shared services can achieve cost savings of up to 30%. In the context of beer distribution, a shared services model could be established among a network of regional distributors, allowing them to pool resources for functions like finance or IT, freeing up resources to focus on core competencies like sales and marketing.
• Robotic Process Automation (RPA): RPA automates repetitive, manual tasks, freeing up human employees to focus on higher-value activities. In beer distribution, RPA can be used for tasks like order processing, invoice generation, and inventory management. A 2023 report by Grand View Research estimates that the global RPA market will reach a staggering $23.4 billion by 2028, highlighting the growing adoption of this technology. By automating routine tasks, distributors can improve accuracy, reduce errors, and streamline operations, leading to cost savings and improved customer service.
• Staff Augmentation: Distributors may not need to invest in building a robust in-house IT infrastructure. Outsourcing IT support and specific technological functions can be a cost-effective solution. Partnering with managed service providers (MSPs) can provide access to expert IT professionals and cutting-edge technology solutions without the burden of significant upfront investments. Additionally, outsourcing specific tasks like data analytics or marketing automation can free up internal resources and allow distributors to focus on core competencies.

Data and Statistics Highlighting the Benefits of Technology Adoption:

• A 2023 study by McKinsey & Company found that companies that embraced digital transformation solutions achieved an average of 10% to 30% increase in operational efficiency.
• According to a report by Accenture (2023), companies that leverage data analytics to optimize their supply chains can achieve cost reductions of up to 15%. This can be particularly beneficial for beer distributors in managing inventory levels and mitigating the impact of potential supply chain disruptions.
• A study by Aberdeen Group (2022) found that companies that implemented marketing automation solutions experienced a 53% increase in sales leads and a 74% increase in conversion rates. This highlights the potential of technology to enhance distributor marketing efforts and reach new customers.

Conclusion: A Tech-Enabled Future for Beer Distributors

The US beer distribution industry is at a crossroads. While challenges persist, the future holds immense potential for those who embrace innovation. By strategically utilizing shared services, RPA automation, and technological support, distributors can streamline operations, optimize costs, and create a competitive edge. As consumer preferences continue to evolve and technology advances, distributors who adapt and leverage these solutions will be best positioned to thrive in the years to come.

Cheers!! ??

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