CGA evaluates the recovery of the beer category in the Americas on-premise, key changes in consumers’ habits and opportunities for growth
Beer has long been the most popular choice of on-premise drink across the Americas, and suppliers will be closely watching the category’s recovery from the Covid-19 pandemic. Exclusive research from CGA reveals the clearest picture yet of how it is shaping up after a tumultuous 15 months, and how consumer interaction with it is evolving fast.
CGA’s recent global research highlights the huge importance of beer to the on-premise, with more than half (53%) of all on-premise users choosing it when out — the figure rises to 56% in the Americas. With on-premise consumption far higher than at-home levels — on average, 13% more consumers in the Americas drink beer in the on-premise than at home — it is not only the category that is important to the channel, but the channel that is important to the category.
Beer drinkers pour back after Covid-19
This harmony between the on-premise and the beer category is particularly evident in Latin American countries, where two-thirds (66%) of on-premise consumers choose beer. Indeed, of the 24 markets featured in CGA’s recent global recovery study, three of the top four-ranking countries for beer consumption were in Latin America — Argentina, Mexico and Brazil, with Argentina the top-ranking country.
“Beer has always been a go-to choice in the on-premise across the Americas, and it is retaining its pole position as markets start to recover from Covid,” says Amy Warren, CGA’s director of client services for the Americas. “Beer consumers in all the big markets tell us they are drinking beer out even more frequently than before the pandemic, and they have been among the first to re-engage with the on-premise as restrictions ease, mitigating the enormous damage caused by prolonged closures.”
As a result, beer has been able to maintain — or even gain — share of total alcohol sales in markets in the Americas. While the US on-premise’s overall sales have been significantly down over the last year due to ongoing restrictions, the beer category (and associated long alcoholic drinks) has gained 0.5% of total alcohol volumes. Value share gain is even more impressive at 1.2%.
Premiumisation and polarisation
Sharper growth for value than volume points to one of the big category trends at play across the Americas: premiumisation. “In North America in particular, we’re seeing consumers happy to spend more for a better quality of beer in the on-premise,” says Warren. “They’re increasingly knowledgeable about the category, and find themselves with an ever-increasing range of high-quality options.”
However, many people — especially Latin Americans who have been hit financially by the pandemic — continue to choose cheaper beer in the on-premise. This is creating a new wave of polarisation in spend, between those seeking to trade up and those focused on value, which Warren expects to alter the category dynamics. “We expect to see continued growth in both super-premium and value offerings, with potential casualties those who do not articulate their quality or value credentials,” she says.
Changes in craft
There are more interesting dynamics in subcategory choices, including major differences between the north and south, with share of beer sales seemingly at a turning point on both sides of the equator. They include craft beer, a movement that has propelled sales in the US to the point where the latest CGA research shows more drinkers choose craft than imported or domestic beer in the on-premise, and it accounts for more than one in four beers sold. In Canada, meanwhile, more than two in five beer drinkers now opt for craft when they drink out.
However, there are early signs that this trend might be at a turning point. Domestic beer — especially high-quality or ‘super-premium’ brands — have gained share since the post-lockdown reopening. In both the US and Canada, a greater proportion of beer drinkers are choosing domestic than before the pandemic, while craft beer has declined.
“We’re seeing beer drinkers in the US revert to well-known domestic beer brands — partly because they trust them so much, but also because big breweries enjoy better distribution and more logistical power than smaller craft producers,” says Warren. The category that is perhaps meeting consumers’ needs best of all is domestic super-premium, where trust credentials are still important but quality cues are emphasised.
Domestic beer has been even more dominant in Latin American markets, with nine in 10 on-premise beer drinkers opting for the category in Mexico and Brazil, and eight in 10 in Argentina. However, in contrast to north of the equator, consumers have been slower to return to domestic beer. While it remains the top choice, drinkers in Latin America have been choosing imported beer more often than they did before the pandemic. They still like their trusted and favourite brands, but they also appear to be increasingly open to high-quality products with a good international reputation.
Craft beer has grown into a mainstream and intensely competitive on-premise category in the US and Canada, with numerous local and national players fighting for attention. Craft’s appeal is based on its perceived quality, which is the leading factor in its choice in both markets. “Craft drinkers love to try new beers, and there’s a big thirst for experimentation in the on-premise,” says Warren. “Specialist taprooms and brewery bars have allowed drinkers to trial new options and learn much more about the category, and they are essentially acting as incubators for category growth.”
Styles and serves
While craft isn’t quite as popular in Latin American markets, it still holds widespread appeal. More than two in five consumers in Argentina (44%) and Brazil (42%), and slightly fewer in Mexico (31%), say they would be likely to trial craft beer if it was available in an on-premise outlet.
However, CGA’s research shows the concept of craft beer is fluid, and varies by region. When asked about the factors that are essential for a beer to be defined as craft, ‘a unique flavour’ is the top factor — but ‘produced by a local company’ tops the list in Canada, and ‘high-quality ingredients’ leads in Mexico.
Preferred styles similarly vary from country to country. IPA is the most popular style of craft beer in the US, whereas amber lager is the No.1 choice in both Canada and Mexico. Sours also over-index in Mexico — the only market in which bottled craft beer is more popular than draft serves.
This mirrors the broader trend of bottled beer being by far the preferred serve style in Latin American countries, whereas draft, or on tap, is the most popular serve for domestic beer across North American markets. Bottles are more popular for imported beer in North America, with Mexican and European brands the most common choices. In total, imported beer accounts for 19.4% of the category’s sales in the States, down slightly from 19.9% a year ago.
On the rise: Hard seltzers and no/low options
It is not just imported beer that has lost share of the total beer and long alcoholic drinks category over the past year in the US on-premise: domestic premium, craft, import, below-premium and cider have all dropped too. Aside from domestic super-premium, the other big subcategory winner over the past year has been hard seltzers, which have gained 1.4% of the total category. That equates to a huge 38% growth in category share, and takes it to 4.1% of total volumes in beer and long alcoholic drinks.
While hard seltzers have disrupted the sales mix in North America, an appetite for no/low-alcohol beer may have the potential to do so in Latin America. More than a quarter of consumers in Mexico, and nearly as many in Brazil, say they would trial no/low beer in the on-premise if it was available — notably higher than the global average of 18%.
“Beer is going to remain fundamental to on-premise occasions across the Americas, but we are in a period of major change in the way consumers interact with the category,” summarises Warren. “Consumers are becoming polarised in their finances, which is increasing interest in both high-quality and value options, and trusted and new brands alike. Consumers have never been as knowledgeable and demanding about their beer choices, and the rise in hard seltzers and no and low-alcohol categories is continuing to add even more disruption to a category that has traditionally been very stable.”
All these shifting dynamics potentially put some domestic beer brands at risk, unless they can leverage a combination of local, community, value and quality links — all of which will continue to be very important to beer drinkers. Whatever changes lie in store, it is certain that the on-premise will remain fundamental to the overall health of the beer category — and vice versa.
