Anheuser-Busch InBev and Molson Coors Beverage are set to gain market share from craft beer makers in the United States this year as cost-conscious consumers are opting for cheaper six-packs, according to analysts and industry experts.
With inflation making goods more expensive nationwide, consumers are trading down to more affordable beers, boosting sales and protecting margins for major beverage players. Beer is often touted as recession-proof, so large companies may continue to earn solid profits even as economic activity slows.
"Most cost-conscious consumers are still buying the same volume of beer, but in the less expensive category of beer," said Neil Reid, professor of geography at the University of Toledo, who has researched the beer industry.
Analysts polled by Refinitiv expect annual revenue to grow about 6% for Molson Coors and 7.5% for AB InBev in 2023, while craft beer maker Boston Beer Co SAM.N is expected to post a near 3% fall in revenue, compared with last year's 1.6% rise.
Overall US beer sales grew 1.8% in the 12 weeks ended 20 May, according to data from research firms NielsenIQ and TD Cowen.
Craft beers are more expensive and made from higher-quality ingredients, and have a consumer base that rarely shifts to cheaper brews. However, those brands have suffered a drop-off in demand since the pandemic as premium brews rely heavily on in-store shopping.
"The craft beer category has suffered from a couple of headwinds. One is kind of just the legacy issues from the pandemic, but also from a trade-down because craft tends to be priced at a premium," TD Cowen analyst Vivien Azer said.
Sam Adams maker Boston Beer, the largest craft beer maker, saw its market share slip last year.
The company's market share was 1% in the overall US beer industry, down from 1.1% last year for the first four months of 2023, according to data firm Numerator.
Sales growth in Molson's Blue Moon, its craft brand, declined 8.6% in the 12 weeks ended 20 May on a year-over-year basis, according to data from NielsenIQ and TD Cowen.
Meanwhile, AB InBev's market share in dollar terms rose to 40.4% in the first four months of 2023 in overall U.S. beer sales, up from 38.3% at the same time last year.
Molson Coors' market share was second at 25.3% and Constellation Brands STZ.N, maker of Corona and Modelo, was at 9.4%, compared with 23% and 8.8% a year earlier, respectively.
While AB InBev and Molson Coors bought brewers to expand into the craft brewing segment starting in 2011, the companies have seen little success and have lost market share in the category.
As a result, Constellation Brands' Funky Buddha and AB InBev's Appalachian Mountain Brewery were sold back to the founders in May.
The larger brewers are less likely to buy additional craft brewers and instead invest in their best-selling products like Miller Lite, Coors Light, Bud Light and Beyond Beer products, said Jon Reynolds, certified instructor in the business of craft beer at the University of Vermont.
Giants such as Molson Coors and AB InBev are insulated somewhat from economic downturns by their diversified portfolio that allows them to sell not just premium brews but also cheaper varieties with low alcohol content like Bud Light and Miller Lite, Reid said.
AB InBev executives said the company is tripling its investment in Bud Light for the summer, even though sales have been hit after a social media promotion on April 1 with transgender influencer Dylan Mulvaney resulted in a backlash from U.S. conservatives.
A 16-ounce six-pack of AB InBev's Natural Light and Molson's Keystone Light averages about $4.99 in the United States, making them lower-priced beers.
Bud Light and Coors Light, popular premium light beers, average about $7.40 for a 12-ounce six-pack, while Boston Beer's Sam Adams costs between $10 to $12.
AB InBev CEO Michel Doukeris said the beer industry in the United States remains resilient, with industry volume trends improving sequentially and sales on a dollar basis up 3%.
"The American consumer likes light beer," Molson Coors CEO Gavin Hattersley said at a conference in early June. "I think dynamics within the subsegment might change, but the overall consumption of light beer is not going to change materially."