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Are Healthier Options Making the Craft Beer Market Suffer?

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Craft beer, which till some time back was a favorite with Americans, seems to be losing its appeal. According to market research firm IRI Worldwide, craft beer growth slowed in the first half of 2018 and the rest of the year doesn’t look good either. Moreover beer shipments from U.S. breweries too are down so far this year. An increasing number of Americans is opting for non-alcoholic beverages that have resulted in demand for energy drinks to shoot over the last few years.

Understandably, this has made soft beverage manufacturing companies focus more on healthier drinks, especially non carbonated, low sugary and energy drinks. So much so, that even alcoholic drink manufacturers are focusing on non-alcoholic beverages.

Craft Beer Losing Appeal

Till a few years back, craft beer was a favorite with Americans. However, with changing tastes and preferences of the new generation, the appeal for craft beer is fading. And the change seems to be more evident this year. According to the Beer Institute, beer shipments from U.S. breweries are already down 3.5% this year.

Per IRI, worldwide sales of craft beer across large-scale retail stores grew only 1.7% in the first half of 2018. Interestingly, in 2002, beer comprised 54% of overall alcohol sales but in 2017 beer contributed only 46% of total alcohol sales. This is certainly taking a toll on prominent beer manufacturers like Molson Coors Brewing Company (TAP - Free Report) and Anheuser-Busch InBev SA/NV (BUD - Free Report) , which are struggling to cope with declining demand for beer.

The reason for this sudden beer-apathy is the growing preference for healthier drinks. An increasing number of Americans is becoming health conscious, which has seen a decline in demand for carbonated beverages. The carbonated soft drink market has shrunk for 13 consecutive years now. Carbonated soft drinks volume fell 1.6% in 2017 and is projected to decline between 0.8% and 1.3% this year.

Industry Swings Toward Non-Alcoholic and Energy Drinks

The global non-alcoholic beverage market is anticipated to witness a CAGR of 5.5% between 2018 and 2023, according to Market Research Future. Analysts believe that growing consumer awareness and increasing interest in a healthier lifestyle is making people shun alcoholic and carbonated drinks.

This has resulted in the energy drink market to grow at a rapid pace over the last few years. Energy drinks continue to outperform the overall soft drink market in terms of value. The global value of energy drinks reached more than $51 billion in 2017.

Understandably, millennials are opting for healthier and non-alcoholic drinks, which has made not only soft beverages companies shift focus toward healthier drinks, but also beer manufacturers reorient their product line with low-alcohol content.

Beer manufacturers like Constellation Brands, Inc. (STZ - Free Report) , The Boston Beer Company, Inc. (SAM - Free Report) and Craft Brew Alliance, Inc. (BREW - Free Report) are trying to come up with innovative products and adding new flavors that have less alcohol content. The Boston Beer Company recently launched Fuzzy Traveler Peach Shandy that is low on alcohol content. Craft Brew Alliance has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

On the other hand, almost all beverage companies like The Coca Cola Company (KO - Free Report) , PepsiCo, Inc. (PEP - Free Report) , Dr Pepper Snapple Group, Inc. , Fomento Economico Mexicano S.A.B. de C.V (FMX - Free Report) and Monster Beverage Corporation (MNST - Free Report) are redesigning their portfolio along these lines.

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