National overview.(The Beer Market)

Publication: Beer Handbook

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COPYRIGHT 2005 Bev-AL Communications, Inc.

The beer industry offset losses incurred in 2003 by climbing 0.7% last year. The story, however, remains the same for the beer industry. Its performance continues to be outpaced by both the distilled spirits and wine industries. The growth of these other beverage alcohol segments continues to erode market share away from the beer industry.

The beverage alcohol industry landscape is changing rapidly. The low-carb craze that took over the nation a few years ago was beneficial to both the distilled spirits and wine markets. Both wine and spirits tend to be lower in carbohydrates compared with beer. That trait aided the former two segments of the beverage alcohol market--particularly in 2003--at the expense of the latter. Another driver of the spirits gain in 2004 was heightened popularity among flavored products and premium offerings that transcended virtually all distilled spirits categories. This factor has led the much sought after younger adult consumer to spirits at the expense of the beer industry.

The landscape of the beer industry changed dramatically last year. The consolidation of brands and companies are equipping suppliers with a more diverse portfolio in an effort to remain competitive. The merger of Molson and Coors, two companies of almost the same size, created the fifth-largest brewer in the world. Although the merger created quite a sizeable company, it still pales in comparison with the size and scope of its larger rivals. The benefits of the merger are: that it creates a larger budget to compete with the industry giants, as well as a more diverse portfolio with brands that compete across all beer segments.

The second consolidation that took place last year was the formation of InBev USA, the combination of Labatt USA and Beck's North America. The combination of brands from both portfolios brought together a wide variety of imported brands from around the world. Even so, at approximately 3%, the combined company holds a relatively small share of the U.S. beer market.

The third major brand switch that occurred during 2004, although the actual changing of hands did not take place until the first of this year, was Heineken USA's victorious bid to market five FEMSA Mexican brands in the U.S. FEMSA and InBev USA decided ended their relationship. Corona Extra overtook Heineken a few years ago for the top spot among imported brews. The addition of the Mexican brands gives Heineken USA a more diverse portfolio, plus beer offerings from one the fastest growing import areas in the world.

The segments within the beer industry that are...

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