Dive Brief:
- Volatility in beer is being driven by a decline in consumer interest in lower-value brews and growing interest in higher-end options, Garth Hankinson, Constellation Brands’ executive vice president and CFO, told Wall Street investors at a conference Tuesday.
- Hankinson said the buy rate of the premium alcohol category is up year-over-year. This indicates consumers see pricier drinks as an “affordable luxury” they are more willing to spend money on despite the run-up in inflation.
- As the beer category continues to struggle, alcohol giants are pivoting to higher-end offerings to meet consumer demand.
Dive Insight:
Despite continued inflation and an unstable economy, Hankinson said consumers looking to cut back are not abstaining from premium booze purchases. This stands in contrast to what some industry analysts have reported recently.
He cited Circana data showing the price of food is 4% to 5% higher than usual, compared to only 1% to 2% in alcohol.
“Alcohol is not a big driver of their costs and probably not a place where [consumers are] going to compromise,” Hankinson said.
The executive told investors the company has thrived despite the inflationary environment and has been gaining shelf space.
Constellation expects top-line growth of 8% to 9% for its 2024 fiscal year, which ends in February, with 1% to 2% of that tied to price increases. The alcohol maker has approached pricing cautiously this year, as CEO Bill Newlands told investors in January the company would enact more muted price hikes amid fears of slowing demand.
Compared to its rivals, which have seen multi-year declines in beer consumption, Constellation is a bright spot for the category as its flagship products, led by Modelo and Corona, continue to grow.
It has benefited from the boycott and sales decline at AB InBev-owned Bud Light after it collaborated with transgender influencer Dylan Mulvaney earlier this year. Modelo dethroned Bud Light as the best-selling beer in the U.S. by dollar sales last spring.
Constellation’s Mexican lagers have grown steadily during the last decade, and the company has benefitted from appealing to both its core Hispanic consumer base along with non-Hispanic drinkers, beverage analyst Dave Williams told Marketing Dive earlier this year.
According to Constellation’s CFO, half of its net sales come from Hispanic consumers. The company believes this demographic will continue to drive its growth in the future.
Shifts in the beer segment, including an oversaturation of craft brews, are driving leaders in the category to make tough decisions.
Molson Coors — best known for its lower-tier brews such as Miller Lite and Coors Light — is leaning heavily into premium offerings outside of beer, including through its collaboration with Coca-Cola for beverages like Topo Chico Hard Seltzer and Simply Spiked.
Guinness maker Diageo is considering selling off several of its beer brands, Axios reported Tuesday, citing sources familiar with the company who said the brews drag on the rest of the alcohol giant’s portfolio.
