Inflation isn’t going anywhere any time soon. But what is it doing to beer sales?
Officials at the Federal Reserve are projecting that inflation as measured by the Personal Consumption Expenditures index should remain in the neighborhood of 3.5% for the near term, and well above 2% for at least the rest of 2023.
The rate of inflation, though somewhat slowed, is still a factor in the beer business. IRI’s March 2023 “State of the Beverage Alcohol Industry” found inflation for beverage alcohol (6.3%) is lower than total food and beverage inflation (13.2%).
Still, beer companies have reported that across-the board inflation in areas like transportation, raw materials such as malt and hops, and packaging is impacting profits, which has been pushing prices higher.
NielsenIQ, in its “6 Key Beer Trends for Emerging Brands in 2023,” published in March 2023, listed “customers reacting to inflation,” as one of its six trends. NielsenIQ noted that dollar sales are growing for many beer brands because of price increases, but the volume of beer sold isn’t rising as customers are reducing their spending.
In addition, research by Goldman Sachs has shown that beer and spirits volumes across America’s retail landscape continue to indicate only a minimal correlation with economic growth.
The good news for convenience store operators is that while consumer prices for beer have gone up, they have gone up less than for most other market-basket items and still represent strong value.
While beer may not be “recession-proof” then, it is less expensive than most other alcoholic beverages and more of a staple item than most. Thus, beer is an item that consumers are less willing to forgo when money is tight due to inflation.