Import Segment Spurs Optimism in the Beer Cave

NEW YORK — Younger consumers are losing the taste for beer, but a recent survey indicates there are some bright spots in the beer cave.

According to Wells Fargo Securities LLC's Beverage Buzz survey, beer distributors remain cautious about beer losing ground to wine and spirits — with respondents calling the loss of share "very concerning."

Those surveyed, who collectively service more than 100,000 retail outlets, also continue to see an oversaturation of craft beer, according to Bonnie Herzog, managing director of tobacco, beverage and convenience store research at Wells Fargo Securities.

In fact, one distributor said there is "a lot of dust on many crafts sitting on shelves," she added.

However, the survey respondents did express confidence in their outlook for imports and flavored malt beverages. Both are expected to grow in 2018.

Other takeaways from Beverage Buzz, according to Herzog, include:

• Constellation Brands Inc.'s beer sales are expected to grow approximately 9 percent this calendar year, significantly above its peers;
• Modelo Especial and Michelob Ultra are expected to generate the strongest sales growth in 2018 — likely up 14.7 percent and 13.5 percent, respectively; 
• Consolidation in beer is expected to continue, led by Anheuser-Busch InBev, MillerCoors and Constellation Brands, although few distributors expect merger-and-acquisition trends to accelerate; and 
• Little to no mention by distributors about the potential effects of higher aluminum costs on the industry – suggesting that investor concerns about tariffs/higher input costs may be unfounded.

Calling Constellation Brands "on a roll," the beer distributors surveyed expect the company to be the only brewer to take shelf or cooler space this year, and increase of roughly 5.5 percent, Herzog said.

Specifically, the distributors were generally confident about Corona Premier and Familiar. More than 50 percent suggested both brands could drive double-digit Corona brand case volumes and secure incremental space in 2018, she added.

In addition, according to Herzog, Modelo should "continue at its current trajectory."