Having neatly divided the beer industry into two customer segments (beer drinkers and beer connoisseurs), I fear my model is eroding, based on recent observations. A business strategist might wonder where the Ontario beer industry is going. First, I’m going to tackle product changes.
Single serving size is heading upwards.
The ~500ml portion, aka tall cans, which bear some resemblance to the concept of the ‘pint’ procured in an English/Irish style pub, has been a feature of imported and specialty beer for some time. It’s become the standard offering from craftbreweries.
A master small brewer recently was quoted1 saying they’d moved to the larger format because customers were demanding it, as a way of getting a bit more bang from ‘one’ beer. Perhaps non-coincidently, guidelines recently released show health correlated with the consumption of no more than one beer per day.2
The alcohol content of beer is creeping up3.
This is a regional thing but in Ontario, beer has had 5% alcohol for the last 50 years (don’t know what it was before the 1970’s because I wasn’t drinking it then). Now, it’s easy to find beverages into the 6 to 9 %.4 In this case, the consumer is unlikely to complain of inflation.
Shifting product lines at major breweries.
Some ‘regular’ beers are being discontinued5 by big brewers, a different phenomena than the constant presentation of new beers by the craftbrewer. Big corporations moving towards fewer labels suggests demand has shifted. We’ve probably all experienced our favourite product (shampoo, incandescent lightbulbs, donut) being discontinued. When it happens to this consumer, I assume it’s because a minority prefer these products and they go extinct like dinosaurs.
Or, the downsizing of brands at the big brewers could be the logistics of making money.6 Focusing on the most popular product lines makes sense from the economies-of-scale perspective. The necessity to focus might be spurned on by increased raw material or packaging costs, or increased competition from craftbrews and other drink categories (Porter would call them substitutes) like seltzers, ‘ready to drink’ like rum and coke in a can, or low to no-alcohol beers. This emphasizes the different business models that serve beer drinkers (big brewery, cost- focused) and beer connoisseurs (craft brewed, differentiated by novelty).
Perhaps beer drinkers increasingly prefer the variety of craftbrews. Canadian stats show that while craft beer is still a modest part of total beer sales, it is growing much more than non-craft beer7. As time marches on, the generational mix of beer drinkers does too.
It wouldn’t surprise me if current demand moved away from the large, 2-4, format. Consumption of almost everything has moved to moment to moment (for example, having a snack delivered by Uber Eats). Buying only enough beer for the evening would fit with this psychology rather than purchasing a case to last a week.
What about the increase in alcohol content and tall cans? Many with knowledge of the beer industry insist there is customer demand for a substantial single beer. There’s an interesting dichotomy here. As social trends favour ‘healthier’ consumption choices, both the higher alcohol beers and low to no alcohol beers are increasing in popularity.
There are separate elements evolving here. It’s all about beer, but still about two different segments of the beer industry. Both relate to preserving the business model. For the large brewers, this means looking for ways to satisfy the low cost beer product. Craft brewers keep adapting product to suit their novelty-seeking buyers. In Ontario, this may be only part of the story.
In the next instalment, I’ll consider the impact of beer distribution channels.
2 This site https://www.medicalnewstoday.com/articles/is-beer-healthy#recommended-amounts refers to US government guidelines but really, who do you think you are kidding when the guidelines say one beer, which clearly means one 341ml beer with 5% alcohol, that you are complying when consuming 473ml of a 7% beer?
4 This study, although it only covers until 2014, demonstrates exactly that people are drinking less beer, but beer of higher alcohol content.https://scitechdaily.com/higher-alcohol-content-craft-beer-popularity-growing-as-overall-beer-consumption-down/amp/. However, the tricky thing about averages is that this could reflect that the same people were buying less beer but what they did buy was higher alcohol content, or that the people who bought low alcohol beer stopped and the high alcohol beer buyers were the same, or increased.
5 For example, this story https://bestlifeonline.com/news-molson-coors-discontinued/ discusses the report from the large Molson brewery that they are discontinuing 11 products, to increase efficiency and profit margins. There is a lament that some customers who favour niche (low selling) products will be disappointed. Some covering the story suggest that the discontinued are ‘discount’ brands.
6 Discussed in this article: https://www.forbes.com/sites/hudsonlindenberger/2021/11/30/the-trends-and-challenges-the-craft-beer-industry-is-facing/?sh=2df92322cbb9