BMO report shows opportunities for women’s beers, craft market
A new report from BMO Capital Markets reveals that the North American beer industry is undergoing a period of transition due to falling beer consumption, competition from the growing wine industry and rising commodity prices.
“With the aging of the North American population, the number of consumers of legal drinking age is growing, although what is equally clear is that consumers are becoming more diverse in their selection of beers,” says Alex Koustas, an economist at BMO Capital Markets.
Since the 1990s, imports have tripled their market share in both Canada and the U.S., and domestic craft brewers have doubled production since 2003. By comparison, lager beers, the core offering of the major breweries, have been experiencing a multi-year decline.
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The report also indicates that input costs will begin to pinch profits. “Material costs equal 40% of revenue for major producers, says Koustas. The recent sharp rises in commodity prices—particularly barley and wheat—will soon trickle into the production pipeline. For an industry that has struggled to keep pricing at a pace with overall inflation, this will likely mean a reduction in margins.”
But it’s not all doom and gloom. The report identifies areas of growth for the industry, including specialty craft brewers, and products that cater to such niche demographics as aging boomers and women.
Koustas says that males account for about 80% of beer sales, leaving the female market largely untapped. As such, the opportunity exists for brewers to specialize their products, including introducing low-calorie options and lighter flavoured, beer-based beverages to appeal to women consumers.
He also notes that while major breweries face rising market headwinds, they are taking some cues from craft breweries, ramping up innovation and specialization as they attempt to scrape back market share and boost more profitable products.
Read BMO’s “Good Time For A Beer?”
This article originally appeared in Profit.
