September 6, 2023
The average case price for beer in grocery stores has increased +16.7% since 2019, with consumers now paying more than $4 more in 2023 than they were pre-pandemic, according to Bump Williams Consulting (BWC) founder Bump Williams in his monthly industry update.
The beer category has now “priced itself out of competition compared to spirits and perhaps even wine,” Williams wrote.
The price of beer in grocery was steadily increasing prior to the COVID-19 pandemic at about +2% to +3% each year from 2015 to 2019, according to Williams. In 2020, that price increase jumped to +4.4% year-over-year (YoY), not an entirely unexpected increase due to the abnormal market conditions of the pandemic. However, price increases have remained over the “norm” each year since, with a +3.6% YoY increase in 2021 and +4.4% increase in 2022.
Price increases across beer segments in 2023 (year-to-date through August 12) versus 2019 range from +$2.09 to +$7.49:
Premium: +15%, to $22.67 (+$2.95)
Craft: +11.5%, to $41.62 (+$4.30)
Import: +13.7%, to $34.12 (+$4.12)
Super Premium: +8.7%, to $25.97 (+$2.09)
Hard Seltzer: +13.4%, to $36.20 (+$4.28)
Below Premium: +17.2%, to $18.39 (+2.70)
Flavored malt beverages (FMBs): +13.7%, to $38.81 ($4.68)
Cider: +18.4%, to $48.21 (+$7.49).
“We acknowledge that product/package mix is playing a role to some extent, but this same narrative plays out even at the segment-level, in addition to [the] total beer category,” Williams wrote.
The question is whether price hikes are impacting consumer buying behavior. For some segments, it is, according to Williams.
Williams analyzed the average sales velocity versus average case price for the premium beer segment in grocery, and found a “notable dip in performance” in early 2021 when the segment’s average case price passed the $20.99 mark. At the time, sales velocity declined -11.3% versus 2019.
Similar drops happened with the next dollar milestones:
When passing $21.99 in early 2022, sales velocity fell -5.4%;
When passing $22.99 in late 2022, sales velocity fell -8%.
“In fact, if we look at the average velocity during the mid-June through mid-July time period when performance usually peaks (4th of July), we see a drop of -23% if we compare 2023 to 2019 when the avg. case price for premium beer was $3 higher,” Williams wrote.
“Now, recent turmoil within the premium segment lately may be influencing 2023 metrics to some degree, but the picture was pretty clear even prior to that point with the segment bleeding velocity with each step up the pricing ladder, calling growth into concern if the $ gains from the increase can’t fully offset the losses from the volume side,” he continued.
A similar trend has played out with craft, with the average sales velocity for the segment continuing to “slide” since 2019. Those declines have accelerated over the last two years as the average case price has risen, according to Williams.
The most significant decline happened when the segment passed the $40.99 mark for average case price, and velocity declined -10.8% versus 2019. In late 2022, when it passed the $42.99 mark, sales velocity declined -9.6%.
What sets craft apart from premium is “craft beer is a particularly difficult segment to make sweeping generalizations about as there are several price tiers beneath the surface, from the entry-level all the way up to the apex, where we can point to both struggles and successes,” Williams wrote.
However, the segment had a similar lackluster 4th of July versus 2019, with sales velocity in grocery down -17%.
A segment that is going against the trends is Mexican imports. The average case price for imports has been “on an upward trajectory” since 2019, but that has been “little to no slowdown in velocity” in the same time.
In Q4 2022, the average case price for Mexican imports crossed the $33.99 mark and sales velocity declined -4% versus 2019 levels. However, velocity levels have remained “rock solid” overall, Williams wrote.
For the July 4 holiday, sales velocity actually improved for Mexican imports in 2023, increasing +5% versus 2019, “a feat that not many offshoots across the beer category can also lay claim to,” Williams wrote.
“Now, like with any category (beer or otherwise), elasticity is always a factor and I do want to keep an eye on any velocity metrics that show signs of slowdown or decline,” Williams wrote. “But right now the Mexican import landscape has clearly experienced a different reaction to rising prices than some of its peers in the category and may have room to take more price than what we have seen elsewhere in the category.”