The Great Alcohol Battle

Beer has long been the undisputed booze king of America. But over the past two decades, that dominance has been dwindling – and now it’s on the precipice of losing its crown.

🤔 What’s going on?... Since 2000, the inroads made by liquor makers have been mostly driven by young drinkers preoccupied with their waistlines and thirsty for new flavors, the WSJ reports. And the pandemic has only accelerated this trend.

• In 2020, distillers reported their best sales in four decades while beer sales dropped.

🍻 But there is a bright spot for the beer industry… Almost all hard seltzers sold are technically malt-based (White Claw) or sugar-based (Truly) beverages, so for reporting purposes they’re considered part of the beer industry.

• They’re also part of the ready-to-drink (RTD) category, which grew by ~60% last year and is set to become the second-largest beverage alcohol category in the US.
• Its jump has been driven by hard seltzer sales, which experienced triple-digit growth from 2018-2020. They currently account for more than half of all sales in the category.

☝️ Although… The liquor industry is also making RTD inroads, with products like hard kombuchas and canned cocktails gaining traction and bagging large investments. 

• Industry tracker IWSR estimates that US volumes of spirit-based premixed drinks grew 53% last year, double the rate of malt-based hard seltzers.

📊 Looking ahead… Distillers are mounting various state lobbying campaigns to cut taxes and expand distribution of canned cocktails (liquor is taxed much higher than beer). Michigan and Nebraska have already reduced taxes on canned cocktails, and lawmakers have proposed bills to reduce taxes on canned cocktails in five other states.

Brewers expect more to follow, and are launching a coordinated lobbying campaign in opposition thanks to an industry rallying letter sent out in April by Jim Koch, the founder of Sam Adams maker Boston Beer Company.

• “If they succeed in changing state regulations,” Koch wrote, “the beer industry, brewers and wholesalers alike, would face virtually permanent declines in volume, revenue, and profits while liquor volume and profits would soar.”