How to Win with the ‘New Normal’ in the Beverage Industry

The impact of millennials has been felt by nearly every market as this younger generation has disrupted the way nearly every industry does business; and the beverage industry is no different. Spurred in large part by these new customers coming of age, more and more consumers are now “cross-drinking” not just between, wine, spirits, and beer, but also between brands, flavors, and styles of beverages. Gone are the days when beverage distributors could count off their core items using their fingers; highly complex programs are now necessary to continuously monitor the performance of an ever-increasingly complex product mix. With the explosion in demand for craft beer, hard cider, flavored beverages, and premium products, distributors are now required to continuously monitor the shifts in the market or risk having their mix becoming obsolete entirely.

Given this “new normal” that exists in the beverage industry, it can seem impossible to balance all of the different offerings and maintain a profitable product mix. However, by using Margin Minder to closely monitor the contribution to margin that each product is making over time, distributors can stay ahead of the curve on what trends are coming and which have passed.

Here is a look at a few sub-segments of the beer industry and where they might be headed in the future:

Premium and Flavored Products

The trend of so-called “premiumization” has taken hold not just with the expanded production of higher-end products, but also with overall product packaging. The sub-premium offering category has continued to experience contraction while the premium and super-premium offerings have seen strong gains.

Another new trend throughout the market has been an increased variety of flavors of popular products as well as new products exploring the hard soda sub-segment. More and more major manufacturers are beginning to participate in this sub-segment which bodes well for continued growth.  

Hard Cider

While cider is one of the smaller sub-segments, these products have continued to outpace the growth of the beer category as a whole. New product offerings, diverse flavor offerings, and increased marketing focus could help cider offerings continue their growth. These gains and successes are not without potential challenges ahead, however. Seasonality and increased competition from hard soda / flavored beverages could provide a test to this sub-segment.

Craft Beer

A perfect storm of factors have conspired in recent years that contribute to the rise of craft brews, in particular the interest in a product that is local, small batch, and handmade. This presents a unique challenge to distributors who are left trying to figure out which products their customers will respond to and which will fall flat. The overall craft beer trend may begin to slow and settle as larger craft brands achieve a national footprint and reputation.

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