The COVID-19 pandemic has hit many businesses due to the necessary lockdowns implemented by governments across the world. As the global economy spirals down, economists are trying to study the current trajectory and the possible future outcomes. Amidst all this, experts have found a link between beer sales and recession.
Like all other industries, the beer industry is also struggling. The interesting thing is that while craft breweries are struggling to find ends meet, the sale of craft beer has gone up.
According to data collected by a market research company, IRI, the store sale of “sub-premium” beer has increased by 11% in comparison to the same period last year. The surge took place despite the closure of several suitable markets like colleges and frat houses.
The “sub-premium” category of beer includes those beers with much less alcohol content. They almost resemble water in taste. The sub-premium beer sales had been on a gradual decline, but the pandemic seems to have pushed its sales up.
Sub-premium beers usually have lower calories. And they are often sold in bulk. After the news of its increasing store sales, many thought that this meant consumers were hoarding on cheap products. Economists refer to these products as “inferior goods.” This is a general trend that takes place every time there’s a recession. Consumers choose a larger quantity of cheap products than a smaller quantity of quality products.
However, an IRI analyst, Patrick Livingston, claimed that there’s no proof of that trend setting in during the current pandemic yet.
Are Beer Sales Resistant To Recessions?
What is actually happening is that while the sales in cheap beer have gone up, the beer industry has seen a surge in all its products. Comparing to the same period last year, store beer sales saw an increase of 27.5%.
Moreover, while cheap beer sales have increased, it is still losing its market share. In terms of its import, it is far behind craft beer and hard seltzer. In fact, White Claw’s, a comparatively expensive product, sales have increased by 246.7%. This trend is called “premiumization” in the beer industry.
The Brewers Association’s chief economist, Bart Watson, explained that beer is quite recession-resistant. He said that the consumers of craft beer are usually people who have spendable income. He further added that it is quite unlikely for a person with enough savings to switch from craft beer to cheaper products. So, expensive beer sales are not completely dependent on a rising economy.
The struggle in the beer industry is with small breweries. An increase in store beer sales means that people are not going to bars, clubs, and restaurants. As these business venues are closed, several kegs remain untapped, leading to devastating losses. It’s the local breweries that are facing the brunt of the pandemic caused lockdowns.
Watson further warned that this trend of premiumization might not last long. He said that if the economy continues to spiral down for many more years, craft beer sales might be affected.