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Millennials Are Blamed For Falling Beer Sales In The U.S.

This article is more than 6 years old.

Goldman Sachs (GS) recently downgraded Boston Beer Company (Sam Adams, A & S Brewing) from “neutral” to “sell” and the conglomerate Constellation Brands (Corona, Modelo, Tsingtao, and more) from “buy” to “neutral”. The investment bank announcement lowered 12-month price targets by 20 percent for Boston Beer and 6 percent for Constellation. That's because GS expects a 0.7 percent drop in the U.S. beer market in 2017.

What's happening?

Blame it on millennials, who consume less alcohol than generations before and who, when they do drink, are more likely to choose a wine or spirit over beer. Millennials account for a striking 42% of all wines consumed in the U.S., to the tune of nearly 160 million cases.

Marketing certainly plays a role in the shift from beer to wine. Not only is there a great deal of affordable wine on the market, much of it is packaged for ease and fun. Wine comes in cans, in boxes, and in single serving packages, among other inventive offerings. It’s a long way from the old days of wine marketing as the adult, elite beverage alcohol. But that alone can't explain the move away from beer consumption.

Some believe the health consciousness of 35- to 44-year-olds might explain the switch to wine. Wine certainly is viewed as more healthful than either spirits or beer, and it likely takes less calories for eight ounces of wine to deliver the buzz that twenty-four ounces of beer delivers.

What may be worse for beer — and also bad for wine — is the habits of the generation behind millennials, mainly the 21-to-25 age group prefers cannabis over alcohol. The trend in this group is to turn away from any alcohol. Instead of alcohol, this group is more interested in cannabis and, it turns out, so are their millennial forefathers.

Anticipating marijuana legalization in California, the marijuana company OutCo partnered with Monocle Research to survey the alcohol/marijuana landscape. It turns out 51 percent of survey participants planned to replace alcohol with cannabis, and about one-third of them said beer would have to go. 

Supporting the trend, equities researchers at Cowen and Company recently reissued a hold on Molson Coors Brewing Company. Apparently, Cowen fears increased marijuana usage by the age group that should drink Coors.

Back in the spring of 2017 CNBC reported on Cowen’s finding that during the 1980s and 1990s alcohol consumption fell 22 percent and marijuana use rose 18 percent; today, the trend has reversed. Cowen believes the alcohol industry will be under severe pressure from cannabis over the next decade.

By focusing on large producers analysts might miss the increasingly important role of the wine tasting room in generating sales in the U.S. The surveys don’t address how the personal relationship between alcohol consumers and alcohol producers may have a positive effect on wine sales. Of course, the same might be said of beer tasting rooms — small production craft beer, that is. One can dream. ...

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