Due to the easy availability of scanner data, most of what we read about the industry comes from outside. For handicrafts, on the other hand, nearly 40% of its market is done on site, a market that has been quite dynamic over the last decade. And while there have been recent articles in the popular and trade press that have suggested that beer is in decline outside of the home, I think there is growing evidence that in beer, on-site trends are better than they have been in a long time. Why? Consumer preferences and demographics.
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This is not universal good news. Data from the Bureau of Labor Statistics shows that the number of “drinking places” (NAICS 72241) has been decreasing every year from 2001 to 2017. Here is a graph of this NAICS code (72241) from 2001 to 2017. As you can see , this is not something that has happened in recent years; this is a continuing long-term trend.
Source: BLS (2018)
An overview of Total On-Premise
However, if we look at the onsite more holistically, the picture brightens. Yes, the number of pure drinking venues is down, but more importantly, bars are slowly being replaced by food establishments, many of which still serve alcoholic beverages. Looking back to 2016, Nielsen CGA found that while neighborhood bars were down -0.9%, food establishments were up 0.7%. And, as there are more dining establishments, the number of on-site establishments offering alcoholic beverages actually increased by 0.4% overall. Even when you control for speed (drinking locations have a higher speed for beer), Nielsen data suggests that on-site beer volumes were up, not down.
If we look outside the strict confines of the onsite, we can also see that the volume is slowly migrating into a new “third spatial channel”, driven by experiential desires. Third spaces (not home, not work, but a place to find community) include concert halls, sporting events, museums, zoos, and other quasi-public spaces that are increasingly places interaction and beer consumption. So if we shift our focus from cramped bars to a broader view of places to enjoy a beer away from home, we see more positive market signs.
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Breweries and tasting rooms are arguably part of the third space alternatives, and I think you can make the case that taprooms, along with those other occasions, have played a role in rejuvenating beer culture on place and volumes of draft beer.
Here’s the share of beer production from 1946 to 2017. Draft doesn’t equate to on-site volume (a decent piece is still packed), but it’s probably a pretty good proxy.
Source: Beer Institute Brewers Almanac, Brewers Association
For years, beer has gradually transformed into an increasingly offsite business. Now here’s the draft share of beer production since 2000. Based on my preliminary estimates, in 2017 draft had its highest share in two decades, and that statement is true whether or not you include the brewery sales, or even if you exclude them!
Tasting rooms draw interest from beer drinkers
Saying the share of draft is the highest in 20 years doesn’t necessarily mean its volume is that high, but as you probably already know, volumes are a challenge for all parts of the beer market. This leads to a simple conclusion: the biggest problem for on-site beer volume is that total beer volume continues to decline.
What seems to you to be a more likely cause of the recent difficulties with beer in general on the spot:
- There are a growing number of community gathering places where beer is the predominant drink and is celebrated with proper glassware, clean draft lines and knowledgeable servers.
- The fact that the number of beers per capita has been steadily declining for more than a decade and that overall beer volumes have fallen by 8 million barrels since 2008.
In other words, offsite beer was down 2 points in 2017. Against this backdrop, onsite beer numbers look good in comparison! Beer faces many challenges. However, comparing onsite and offsite trends suggests that onsite is not part of the problem. This is part of the solution.