Beer executives looking for recipe to stem share declines

Heineken USA President Ronald den Elzen didn’t mince words about the state of the beer industry in the United States: “We are losing, at a dramatic scale, share of throat.”

Speaking at the 80th annual National Beer Wholesalers Association convention in Las Vegas, den Elzen was frank about the condition of the beer industry, which he says has lost 35 million barrels of beer, or 11 billion servings, over the last 20 years to wine and spirits.

Beer’s share of the total alcohol beverage market has shrunk over the last 20 years to 50 percent, down from 62 percent, den Elzen said. “If this is not a wake-up call that we have to do something, I don’t know what is.”

In a separate speech today, Anheuser-Busch InBev's North American president and CEO Joao Castro Neves echoed the same theme, saying the beer industry has yet to make up for share lost to wine and spirits in the late 1990s. It's a decline he blames on demographic and societal changes, better innovation by the wine and spirits industries and a decrease in the amount of beer-only occasions.

Indeed, a recent Goldman Sachs report reinforced what some industry leaders have been saying for years: cheap spirits are chipping away at beer. That report, issued in August, studied the historical correlation between beer and spirits buyers and found that premium light beers, such as Bud Light, Miller Lite and Coors Light, to be the “most exposed within beer to the spirits pricing dynamics.”

In short, the report said, lower pricing in spirits has paved the way for a decline in beer. That, coupled with generational shifts in which millennials and younger legal-age drinkers appear to be migrating to spirits, wine and non-alcoholic beverages, is a trend den Elzen said will take long-term planning to reverse. He advocated for more consumer and retailer education to change a lingering perception that beer is calorie-laden, not suitable for better dining occasions and not the first choice among women.

He also said brewers need to ensure the beer they’re putting into the marketplace is fresh, top-quality and served correctly. “The quality of draft beer in our country here is not the best in the world, to say the least.” Brewers, den Elzen said, need to redouble efforts to focus on the basics. “The basics matter, and we have forgotten about the basics. And we … need to solve it together.”

Urging competitors to band together to help the category grow, den Elzen called on big brewers and small brewers to “act now,“ “put a line in the sand,” and implement a long-term plan now to change beer’s trajectory in the marketplace.

Castro Neves plucked from a similar playbook: "Working together is key. Despite our occasional differences, we all have a strong, vested interest in growing the beer segment." His prescription: brewers need to "elevate the beer experience," compete in more occasions, capitalize on emerging trends and focus on quality.

Castro Neves' and den Elzen's speeches came after NBWA president Craig Purser stressed the encroachment of wine and spirits, particularly of the pre-packed variety, into what were once beer occasions. “Beer occasions," he said, "need to stay beer occasions."