Beer will return to 2019-level or above discounting levels, and it appears to be happening. That is, in part, thanks to the return of more beer promotional activity.
Source: Beer Business Daily.
Remember that when price gaps get out of whack — not only within and among beer categories but compared with wine and spirits — (as they increasingly are now); and you have historically low production capacity utilization rates, (as we increasingly have now); and you take two price increases in a year, (which we did); and you are entering a recessionary period, (like we’re told we are about to); and volumes are challenged, (like they have been) — brewers are going to be brewers and they’re going to mash that price button.
You need to look no further than the comments made by aluminum can maker Ball Corporation chief Dan Fisher during their analyst conference call, where he indicated several times that beer has become more promotional in the first month of the year.
Their North American beverage can segment shipments decreased 0.3% in 2022, and decreased 7.1% in the fourth quarter, with beer accounting for the lion’s share of that falloff.
Beer is being more aggressive on the promotional activities because beer had the most precipite drop-off in volume. Given the December falloff on all consumer products, that has changed the behavior patterns initially this year, with a lot more price promotion. Will that continue for the balance of the year? I would suggest it will.
Customers (brewers) pushing price pushed it too far, and there was price elasticity that kicked in. Beer was down the most. And I think what we’re seeing is a return to more promotional activity here right out of the gate in Q1. So, I think there’s recognition of what happened there in the last four to six weeks of the year, which is well publicized.
Dan Fisher. Ball Corporation.
Beer promotional activity and price increases:
Something that is perhaps not mentioned enough is the lack of beer promotional activity in the period after Covid through 2022, coupled with the two inflationary price increases and the subsequent drop in volume, creates a ripe environment for discounting.
It’s really the promotional activity during the peak season that we didn’t see any of last year. We still grew a little bit. I would probably go back to sort of that 2018, 2019 range of growth that we saw. And I would put that up against what we actually saw in 2022. And I would say that delta, just speaking out loud, is probably what we lost out on because of a lack of promotional activity in the peak season.
Dan Fisher. Ball Corporation.
While all CPG categories that utilize aluminum cans saw soft volumes during the last six weeks of the year, beer “was more pronounced” and that has lead to promotions which has lead to “a really nice uplift in beer right out of the gate.” While some of that is attributed to a more dynamic Super Bowl, the promotional lift this year is “more pronounced.”
Incidentally, Dan sees greener pastures for cans in general as “historical beer customers are moving aggressively into other things from an innovation standpoint. So, within the portfolio of some of our customers, we like the fact that they’re acquiring products and they’re innovating products and they’re pushing new innovations” in cans (read RTDs, FMBs, and non-alc).
Either way, Ball wins. “There is volume ascribed to beer and there’s big volume ascribed to beer, and that’s always going to be an underpinning of us within a volume business. But as that beer skews to other drinks, and other alcohol profiles, it will be a trade-off within their portfolio. We’re selling them the cans. The label they want to put on it doesn’t matter to us. We just want to be with the winners on the brand side.”
You may be interested in: US Wineries Struggle to Raise Prices.
