Crafts Slowing in Supermarkets Part 2

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Brew Blog

High prices cutting into velocity.

Craft beers continue to gain share in supermarkets — adding 0.4 points of share during the four weeks ended April 19 — but some ominous trends lie below the surface.

Craft beers have been gaining share through expanded distribution and retailers adding more craft beer items. But the bottles already on shelves are moving slower than they were in the year-earlier period.

The slowdown is likely driven, at least in part, by a 6 percent increase in craft beer prices — the result of higher input and fuel costs — over the year-earlier period, according to beer sales statistics from Nielsen.

Three developments are hindering craft growth, based on Nielsen’s beer market analysis.

 

They are:

1. Velocity — a measure of how fast brands move off of shelves — has been slowing. Over the past two years, crafts had been growing at rate of roughly 8.9 cases per million dollars of total grocery sales. For the past four weeks, that rate’s slowed to plus-1.3 cases.

2. Case sales per distribution point — a proxy Nielsen uses to measure breadth of distribution — has actually fallen below year-earlier levels. It’s down 7.6 cases versus the year-earlier period.

3. Baseline volume trends — which measures non-promotional volume — are weakening. For the latest four weeks, baseline volume was up just 4.5 percent. The two year average is plus-18.4 percent.

As craft beer has racked up three straight years of double-digit growth, questions have arisen whether the expansion was sustainable.

A repeat of the mid-1990s bubble seems unlikely. Craft brewers are better operators and make higher-quality products than a decade ago. Moreover, at least some of the 1990s growth was driven by hype. This time around, it’s more grassroots-based and more sustainable. Craft beer fits perfectly in with consumer trends of trading up and seeking stronger flavors.

That said, recent supermarket sales trends suggest that a slowdown could be on the horizon for craft beer. And — as seen by the recently announced deal between Magic Hat and Pyramid — that could pave the way for consolidation in craft.

Brew Blog last week noted the slowdown in craft beer in supermarkets.

 

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