IE 11 is not supported. For an optimal experience visit our site on another browser.

Beer closing in on cocktails as drink of choice

After years of losing people to mixed drinks, industry experts say the beer industry regained some of its lost luster in 2007, helped by surging interest in craft beers.
Microbreweries Flourish As Traditional Beer Sales Decline
The growing interest in microbrews, such as these offered at Sam's Wines and Spirits in Chicago, is also helping beer sales stay steady as mixed drinks lose flavor.Scott Olson / Getty Images
/ Source: The Associated Press

Go ahead — forgo the mixed drinks and bubbly and ring in the new year with a foamy cold one.

After years of losing people to mixed drinks, industry experts say the beer industry regained some of its lost luster in 2007, helped by surging interest in craft beers, a slowing economy and the desire of more drinkers to imbibe at home.

Final year-end data has not yet been released, but Eric Shepard, executive editor of trade magazine Beverage Marketers Insight, said growth in the number of spirits sent to sellers slowed in 2007 while beer shipments remained about the same.

"It looks like the gap between the growth rates has clearly narrowed," Shepard said.

According to preliminary numbers — which use estimates for December — spirits shipments grew between 2 percent and 2.5 percent during the year. That compares to growth of 4 percent a year ago.

Meanwhile, beer shipments have climbed between 1 percent and 2 percent in 2007, compared to a rise of about 2 percent in 2006.

According to ACNielsen monthly retail sales data, beer also outperformed spirits in September, October and November.

Brown-Forman Corp., which makes Jack Daniels whiskey and Southern Comfort, partly blamed the spirits industry slowdown for its lackluster U.S. performance in the fiscal second quarter.

In a conference call with investors at the end of November, Brown-Forman Chief Executive Paul Varga said wine and beer companies have benefited from slower growth in spirits, particularly in a weaker economy.

"We speculate that the typically higher out of pocket cost for the standard sizes purchase hurts spirits relative to beer and wine in an environment where many consumers are feeling short on cash," he said.

Drinking at home
Consumers, faced with fewer discretionary dollars to spend — as food and gas costs surge and home values decline — are also drinking more at home, Varga said.

Heightened interest in craft beers may also account for some of the slowdown, Beverage Marketers' Shepard said.

Crafts are now one of the fastest growing beer categories. Even domestic brewers have been trying to horn in on the success by developing brands like Blue Moon — made by Molson Coors Brewing Co. — and by buying smaller craft brewers.

But not everyone agrees that the popularity of spirits is waning.

John McDonnell, chief operating officer at tequila-maker Patron Spirits Co., noted sales seem to have picked up in the past week — a sign that the numbers may be higher than the industry expected.

"The lines were out the doors," he said.

McDonnell added that he believes growth will continue in 2008, particularly as more new drinkers enter the market with less money to spend on larger luxury items.

"The cocktail culture is getting stronger," he said, adding that liquor represents "an affordable luxury."

Final year-end shipment and sales data is expected to be released January 11.