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What’s To Blame For Declining Retail Beer Sales?

What’s To Blame For Declining Retail Beer Sales?

 

Source: Forbes

Tara Nurin

September 28, 2016

 

On Friday night’s season premiere of “Shark Tank,” reality TV investors Mark Cuban and Lori Greiner made two beer entrepreneurs an offer they couldn’t refuse by teaming up to fund the expansion of a product called Fizzics. Sold for a suggested $169.99 in Brookstone, Target TGT -0.69%, Best Buy BBY -1.49% and on Amazon.com AMZN +1.53%, Fizzics is a counter-top beer dispenser whose “patented technology uses oscillating sound waves . to convert your favorite bottle/can of beer’s natural carbonation into densely compacted, uniform bubbles that enrich texture and taste.”

 

But as Fizzics’ founders gasped, bar owners in the TV audience probably groaned. Beer sales by volume at bars and restaurants have dropped for the third year in a row and the last thing publicans want is another reason for drinkers to stay home.

 

“Staying in became the new night out,” Danny Brager, vice president of beverage alcohol at The Nielsen NLSN +0.30% Co., told Beverage Industry magazine in 2010, as a battered nightlife industry tried to figure out how to pry financially strapped patrons off their comfortable couches and away from Netflix, Xbox and GrubHub.

 

Though the economy has improved since those darkest days after the recession, spending on drinking still hasn’t rebounded at bars/restaurants (on-premises) or package stores (off-premises). According to the Beverage Information Group’s 2016 Cheers On-Premise Handbook, beer sales by volume at U.S. bars and restaurants declined 1.4% from 2010 to 2015 and 3% from 2014 to 2015. Compared to the last decade, Americans aren’t really consuming beer with any less frequency or in smaller quantities, though since 2007 on-premises consumption has dropped as much as 12% in the northeast, Midwest and south, with an incongruous 5% on-premises uptick out west.  Over the last seven years, 1.5% of the share of beer sales has moved from bars to package stores, marking a huge shift in the balance between the two, though off-premise beer sales themselves remained stagnant over the last decade.

 

So what gives?

 

As the Brewers Association details in this September 15 essay, the convenience, feel-good factor and family-friendliness of local brewery taprooms hold some of the blame for keeping patrons away from traditional beer outlets. So, too, the advent of growlers, glass containers that allow consumers to take 32 or 64 ounces of draught beer home from the brewery or liquor store to drink that night or that week.

 

But it also has to do with innovation and marketing. In a crowded beer marketplace, brands need to think creatively to attract attention and hog shelf space with as many types of delivery methods as possible. Sometimes that means bringing the beer to the people . at home, where they can put on sweats and put the kids to bed.

 

“We’re seeing a proliferation of all these different new formats. Stella Artois just released a beer dispenser that’s like a soda fountain. How deep does that rabbit hole go?” says Nick Rellas, cofounder and CEO of Drizly, an online alcohol delivery service.

 

Rellas points to the wine industry as somewhat of a leader in the movement to “unbundle” the bottle into various sizes and packaging materials for various occasions. He notices, too, that in an attempt to save money on bar tabs and foster collaboration and goodwill between employees, three-quarters of his corporate clients are putting social spaces into the workplace; half of those are outfitting them with alcohol dispensers, like kegerators. It began with tech start-ups and is moving into more staid law and business consulting offices.

 

“It’s not necessarily the two-martini lunch but alcohol in the workplace is coming back,” he says.

 

Call it the new watercooler; what’s more chattable than a contraption that serves beer in a novel way to several people at once? It wouldn’t be fair – yet – to blame the new at-home draught beer gadgets like Fizzics, Hopsy and ManCan for the demise, as there aren’t enough on the market to make a noticeable difference. But when a product category pops up that promises to bring home the gustatory experience of drinking fresh draught beer, it will inevitably compound the current desire to stay in and potentially save money while still being social.

 

“Beer is the superstar of social beverages, and there’s this whole engagement component of being your own bartender,” says Fizzics CEO Phil Petrecca.

 

Rellas says the at-home beer movement continues with online subscription and delivery companies like his that let consumers try small quantities of craft beer without leaving the house.

 

“Why hasn’t it happened sooner? Because the Internet is coming into alcohol,” he says.

 

He adds that the breweries that enjoy larger margins are going to have to lower prices if they want to keep their customers coming into their retail accounts and those accounts are going to have to keep reinventing themselves to stay fresh.

 

Ironically, a company like Fizzics could help. The New Jersey-based engineers behind the company are working with 200 pilot breweries to develop a device for their tasting rooms that will let brewers program the amount of foam they want dispensed with each of their beers. In 2018, a version of the Fizzics could appear in bars as a faucet attached to the draught system that releases the perfect head for each beer (as determined by the brewer), chills it to the right temperature and alerts the brewery to any bacterial issues.

 

The new contraption won’t necessarily save drinkers any money or diminish their preference for the comforts of home, but at least it might encourage them to drink draught beer where it was intended: at the bar.