The Beer Institute Research Department publishes more than 700 statistical reports on the malt beverage industry during each calendar year. This presentation is our first analysis of 1997 results, predictions for 1998, and projections for the next five to ten years.
The domestic brewing industry has performed well in recent years, providing a stable, dependable market for our suppliers and our customers. In spite of the 1990 excise tax increase, and the fierce competition among the major brewers, small craft brewers, imports, and other alcoholic and nonalcoholic beverages, total industry sales are positive. More importantly, medium-term and long-range forecasts are even more favorable.
First let's note an important feature about the statistics presented here. The Bureau of Alcohol, Tobacco, and Firearms--(BATF), which issues official taxpaid withdrawals (also called domestic sales or shipments) data, is changing their data-gathering procedures. As a result, September 1996 is the latest official month of available data. In the absence of the BATF report, some of the statistics below are based upon Beer Institute's monthly forecast of sales estimates, based on confidential reports from the four largest brewers. Consequently, this forecast becomes even more invaluable than before, giving an important real-time indicator of domestic market activity. Beer Institute's estimate is the only publicly-available indicator of industry activity, and is available within twenty days of the end of the previous month. The timeliness of Beer Institute estimates have increased their importance in the absence of the government's "official" data.
1997 industry activity (activity defined as withdrawals plus imports, exports and nonalcoholic brews) built on the momentum generated in 1996:
Estimated domestic withdrawals rose 0.2 percent in 1997 after gaining 0.7 percent in 1996. The last time domestic sales increased two years in a row was 1989/1990, so this is very encouraging. Despite the percentage increase being small, domestic shipments still rose approximately a quarter of a million barrels. This result is even more impressive when recognizing that 1997 lacked some built-in advantages that existed in 1996.
Specifically, three circumstances almost guaranteed activity gains in 1996:
None of these circumstances existed in 1997, yet domestic brewers exceeded 1996 levels. In 1997, total shipments (domestic withdrawals plus imports) increased by 0.7 percent; an early prediction for 1998 total shipments is for an increase of approximately 1 percent.
From a suppliers' standpoint, imports are not a critical element in our discussion. While I will review their performance, let us initially concentrate on withdrawals, exports, and nonalcoholic brews. These categories include supplier sales and services to domestic brewers, and comprise 93 percent of total domestic industry activity.
This table shows the total of domestic brewers' output for 1989 through 1997. As you can see, output peaked in 1990, but has remained very stable in the years since then. Most importantly, 1997 output still represents an increase over the level eight years ago. While the market for supplier goods and services has not expanded greatly during this time, it has held at a consistently high level, and we are looking forward to significant gains in the future.
Additional evidence of the improved industry-wide situation appears when comparing preliminary state-by-state consumption figures for 1997 compared with 1996. Thirty-one states had shipment increases in 1997, with seventeen of those thirty-one registering increases of at least 1 percent. Only eight of the twenty declining states had drops of 1 percent or more. These estimates are based upon confidential information supplied by the major brewers.
With this recent improvement in mind, let us consider some aspects of the competition domestic brewers face today:
Our industry's competitors are no longer exclusively alcoholic; explosive growth of competing beverages, primarily non-alcoholic ones, has definitely affected our industry. The beer industry no longer competes with just distilled spirits (Seagram, Bacardi) and wine (Gallo, Mondavi) companies. Davenport and Company prepares annual statistics on liquid consumption for all kinds of beverages. Computing the "share of stomach," as they call it, shows that beer's share of total consumption declined from 13.4 percent in 1982 to 12.1 percent in 1996. Meanwhile, soft drinks have surged from 19.5 percent in 1982 to 28.7 percent in 1996, becoming an even more common beverage among Americans than regular tap water. In fact, the only other category with sizable growth during that period is bottled water, jumping from 1.6 percent to 6.1 percent. In 1995, beer's share of consumption eclipsed coffee for the first time since the late 1950's, and became the third most commonly consumed beverage, after soft drinks and tap water. Wine and distilled spirits, by contrast, lost 0.2 and 0.3 percentage points since 1982 respectively, and each accounted for 1 percent or less of all liquid consumption in 1996.
Beer shipment growth is especially noteworthy in an environment where both wine (mid single- digit growth the past several years) and distilled spirits (stabilizing after declining for much of the past fifteen years) have been doing better than recent historical trends. Wine shipments rose approximately 3 percent after rising 5.5 percent in 1996, distilled spirits were level after gaining 1 percent in 1996, and soft drinks rose 3.2 percent, a little less than 1996. Estimated per capita consumption increased for wine (1.88 to 1.94 gallons) in 1997, while distilled spirits held very close to 1996's figure of 1.25 gallons. In contrast, estimated 1997 per capita beer consumption slipped to 22 gallons per capita, the lowest level since 1977.
More breweries exist today than any time since before Prohibition. In 1997, according to the Institute for Brewing Studies, the United States had more than 1,250 brewing establishments. As a result, the United States surpassed Germany to become the country with the most brewing establishments. Establishment growth is just one measure of this industry's potential shipment growth.
Small brewers have been included in the fray with the domestic brewers and importers in recent years. After an initial flurry of publicly traded microbreweries and establishment of new brewpubs, the small brewer segment slowed suddenly in 1996. Most consumers do not know that, even today, these brewers comprise only 3 percent of industry activity. Since then, these small enterprises have encountered lower than expected growth, an increasing rate of closures, and many have had to rethink ambitious expansion plans.
Imports have set all-time shipment records each year since 1994. Last year marked the sixth consecutive year of growth for this segment. Since 1991, imports have increased by more than six million barrels, passing fourteen million barrels in 1997. The growth in imports provides few benefits to either the domestic brewers or their suppliers.
The strong performance from the import sector has caused two other difficulties for domestic brewers: a competitive industry environment, and the closure of several large domestic breweries. A proliferation of breweries, products and line extensions, combined with a low- inflation economy, have escalated the intensity of the competitiveness between U.S. brewers. Promotional specials, rebates, and expanded use of multi-packs reflect brewers' fierce competition for the consumer's retail dollar.
Demographically speaking, upcoming growth in the 21-29 year old age segment should encourage all brewers and suppliers that better times lie ahead. The highest per capita consumption of malt beverages occurs in this segment of the population, which had been declining in absolute terms for approximately fifteen years. According to the Census Bureau, projected growth in the 21-29 age group should begin by 2002. By 2005, growth in the 21-29 age group should average more than 1 percent a year. With improving growth rates among the age cohort that drinks the most beer in the future, one thing should be clear: If the beer industry is allowed to conduct our business responsibly and without unwarranted government interference, our industry has the opportunity to grow at least 1 percent annually in the near future.
In a recent presentation, Bob Weinberg, one of the leading analysts on the U.S. malt beverage industry, looked at industry trends since 1947. Focusing only on demographic factors as a measure for estimated future malt beverage demand, he concluded that demand would increase by just over 2 percent in the five-year period 2000-2005, and would then accelerate to more than 6.5 percent between 2005 and 2010. I believe that this factor alone suggests positive growth trends for our industry (and, by extension, our suppliers) in the not too distant future.
Let us turn now to some of the key aspects of the brewing industry as it relates to the industry's suppliers: can and bottle manufacturers, paper, plastic and paperboard suppliers, and agricultural materials, as well as scores of other necessary items and services.
Domestic draught barrel shipments have declined more than five million barrels since the early 1980's. Draught beer shipments for domestic brewers declined approximately 3.2 percent in 1997, while packaged beer sales gained about 0.5 percent. Draught shipments decreased 0.4 percentage points to a record-low 10.1 percent of the total in 1997, compared with 89.9 percent for packaged beer.
The shift from cans to nonreturnable bottles continued in 1997, but at a slower pace than in previous years. In 1997, nonreturnable bottles gained a share point at the expense of draught, raising their relative share of the package mix to 35 percent. Shares for refillable bottles and cans remained unchanged.
The beer industry uses approximately 25 percent of all can shipments, more than 45 percent of all glass container shipments, and high percentages of malt and hops (just to name several examples). Comparing 1997 package mix by type over the past two decades shows a significant shift to cans between 1977 and 1987, and an even larger move to nonreturnable bottles during the 1990s. I should note that mandatory deposit legislation increased in frequency and intensity during the middle and late 1970s: 1977 marked a time where the debate over this subject raged intensely. Only one state passed mandatory deposit legislation after 1983.
Comparing the 1977 national package mix with 1987 shows that the share of metal cans rose from 53 to 58 percent. This occurred mostly at the expense of refillable bottles, which declined 50 percent over that time. Nonreturnable bottles and draught remained virtually unchanged. Between 1987 and 1997, however, nonreturnable bottles were the only category to gain share points, gaining eleven points at the expense of cans (six points lower), refillables (off three points), and draught (down two points).
Beer Institute's package configuration series made its debut in 1992. Although 1997 data is not yet available, following is a comparison among package configurations (6-pack, 12-pack, 24-pack and others) for nonreturnable bottles and cans for 1991 and 1996. Between 1991 and 1996, in nonreturnable bottles, 6 packs lost nine share points; 12 packs gained all those points plus some from all others. During the same period, 6 packs in the aluminum can market also lost nine share points; however, "Other" package sizes took all of those points, plus two points from 12 packs, leaving 24 packs unchanged. Starting with the full-year 1997 reports, statistics on the popularity of 18-packs and 30-packs will be added to the analysis.
Next, let's discuss the 4 percent of industry activity that is neither taxpaid withdrawals or imports: exports and non-alcoholic beverages. I believe these categories were lower in 1997:
Exports consist of three parts: exports to overseas countries, shipments to the military overseas, and shipments to Puerto Rico. The export category (which is much larger than non-alcoholic brews) has experienced declines partly due to major brewers' establishing license agreements with foreign brewers. Once the U.S. brewer has established sizable shipments of a brand, producing the beer locally (rather than shipping the finished product over long distances) makes sense. Establishment of local alliances by major domestic brewers has increased in recent years, resulting in erratic export trends. Since the BATF has not published numbers for either series since September 1996, assessing these categories is difficult.
The final statistical portion of this State of the Industry update concerns trade figures for malt beverages and ingredients going into beer production (malt, hops, and extracts). The Commerce Department publishes monthly import and export figures for beer, non-alcoholic brews, and some raw materials used in the brewing process. For imported beer only, detailed information on package mix for bottles, cans and draught is available. Figures for 1994 through 1997 show that bottles held about an 80 percent market share each year. Draught and canned beer's shares of the import market have also changed little in recent years, with draught beer accounting for more than 9 percent of imports each year, and cans holding around 11 percent each year.
Malt extract exports have ranged between 12.3 to 15.3 million pounds during 1994-1997, much higher than the 2 to 8 million pound figures prior to 1993. Malt extract exports set an all-time record in 1993; however, this was an unusual year because more than half of all shipments went to Sudan, which has not imported malt extract in any other year during the past decade.
Exports of malt jumped sharply in 1997, to 9.6 million bushels, a 17.7 percent increase above 1996's level. 1997 marked the third highest year of malt exports in history. Hop exports declined about 2 percent in 1997, to 24 million pounds; hop exports have been above 20 million pounds each year since 1989's record exports of 38.5 million pounds.
In 1997, barley malt imports reached their third highest level in history (the record occurred in 1980), at 117.4 million pounds, 4 percent more than 1996. Hop imports in 1997 declined 15.9 percent to only 11 million pounds, one of the lowest levels seen in the past twenty years. The important point to note about trade in malt and hops is the following: The United States exports about three times as much malt as we import; and we export more than twice as much hops as we import. At least in these commodities, the U.S. can boast of a trade surplus.
Next, let's highlight several statistical reports produced by the Beer Institute Research Department. These represent examples of the current, timely and, sometimes, unique information published by Beer Institute, which we make available at no additional charge to our members. Examples of these reports include:
State Shipment Reports
Each week, BI publishes reports showing monthly and year-to-date beer shipments to all fifty-one states (including the District of Columbia). In addition, depending on availability of data, BI publishes a draught/package mix and shipments by individual brewers.
BI also issues a separate monthly state shipment report showing California beer shipments for individual brewers located both within and outside California.
Monthly Forecast of Sales
By the 19th of every month, Beer Institute publishes a forecast of national beer sales, based upon information from the four largest brewers (Anheuser-Busch, Miller, Coors, and Stroh).
State-by-State Shipment Estimates
The report shows estimates of (and actual, when available) total shipments, by state, based upon data received from major brewers, with year-to-date totals.
Agricultural Product Report
Our newest report gives information on usage of grains, sugars, sirups, and hops used in the brewing process, and trade statistics on agricultural products. Data used for this report comes from the same BATF publication as the one giving "official" domestic shipments referred to at the start of this presentation. The last month of information for this report is September 1996.
State Container and Package Mix, and Package Configuration Reports
One semiannual report gives percentage estimates of beer sales nationally and in every state for cans, one-way bottles, refillable bottles and draught. A separate semiannual report for cans and one-way bottles compares usage of different packaging configurations (6-pack, 12-pack, etc.).
This publication contains a wide range of industry statistical information. The Almanac includes production, taxpaid withdrawals, tax collections, consumption (total, state-by-state and per capita), agricultural statistics, imports, exports, financial statistics, employment, excise tax rates and methods of collection, and draught/package trends.
State of the Industry
Annual report on sales trends in the brewing industry, with regional details and comparisons with macroeconomic growth.
Periodically, Beer Institute collects information on the economic contribution of the beer industry, both nationally and in specific states. This information is often used to prepare arguments against excise tax increases or other initiatives begun in state legislatures.
These statistical reports also support other parts of the Beer Institute operation, especially when answering requests from federal and state officials seeking reliable industry-wide information. Many public policy debates at both the federal and state level are based on anecdotal evidence, or even the opinion of one lawmaker. Educating the public as a whole, but especially the officials that can enact harmful legislation to the beer industry, is one of Beer Institute's major functions.
For instance, we have given the industry an early warning of state proposals to increase beer excise taxes. Legislative researchers first called various government agencies seeking information, and, after the typical bureaucratic run-around, they contacted Beer Institute. We take great care to give government officials not just accurate data, but the proper context to interpret the data.
Another example: Several public officials assumed that the explosion in small breweries has significantly increased beer sales and consumption. They were shocked to learn that the more than twelve hundred small brewers in the country produce less than 3 percent of total product, and that overall beer per capita consumption is less than it was in 1977.
The U.S. beer industry and its affiliated suppliers contributed more than $175 billion to Gross Domestic Product in a recent year, making our partnership a very important part of the domestic economy. 2.6 million people, more than $8 billion in excise and sales tax dollars, and more than $55 billion in retail sales represent other significant and measurable contributions that the beer industry and its suppliers make to improving society's appreciation of the good things in life. The brewers cannot manufacture malt beverages without your assistance.
These contributions far outdistance those made by the U.S. wine and distilled spirits industries. And they should: Beer comprises 88 percent of total beverage alcohol consumption in this country.
Besides our large contribution to the economy and our society's well-being, we have worked together to improve the malt beverages supplied to the public over the decades. Such innovations as refrigeration, pasteurization, sterilization and the canning of liquid beverages became widely accepted due to use by the beer industry, with the assistance of our suppliers.
*Prepared in February 1998 for presentation to an industry meeting. For further information, please E-mail us using the link on our home page.