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Will Teetotal Millennials Spell Doomsday for Beer Bigwigs?

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Millennials are known to be a health-conscious generation, spending less on alcohol and more on fitness. As a matter of fact, analysts estimate that millennials spend 1% or less of their total income on alcohol.

Also, when it comes to consuming alcohol, millennials prefer drinking wines, clean spirits and wellness beer. Studies have shown that these are not only sugar-free, but also keto and paleo-friendly. This has given rise to a new group of individuals who are considering giving up alcohol altogether and find being sober a hip choice.

Analysts believe that such developments have led to a crisis of sorts in the beer industry. Furthermore, craft brewers have cropped up in large numbers across America and eaten into the conventional brewers’ pie. Quite literally, life isn’t all beer and skittles for the space. But does that mean the game is over for major beer players? Let’s find out.

Millennials Believe Body is One’s Temple

Market research firm Nielsen estimates that more than half of America’s adult population, with approximately two-thirds in the 21-34 age group, have openly confessed to quitting drinking in order to live a healthy life. They care for their heart and take cholesterol problems seriously. In fact, low or no-alcohol beverages have been selling like hot cakes in 2019 and are the next big thing in the market.

A majority of young adults in the United States prefer healthier options when it comes to drinking. Natural wines or raw wines are a top choice for social drinkers because they undergo a lower degree of processing and are largely chemical free. Consequently, it does not load one’s system with toxins and cause a hangover.

How Have Major Beer Players Adapted to Changing Preferences?

Major players in the beer industry have upped the ante to adapt to the needs of the largest cohort of consumers —the millennials. Market research firm, IWSR estimates that the U.S. market for ready-to-drink, low- or no-alcohol beverages is poised to grow to 39% by 2022.

Taking a cue from such developments, beer-giant Anheuser-Busch InBev (BUD - Free Report) had announced a new position within its corporate ranks— that of chief non-alcoholic beverages officer — in June 2018. The company also announced the launch of two new non-alcoholic beer brands across the globe.

Anheuser-Busch’s non-alcoholic beer O’Doul’s has been a major hit among teetotallers. The company has also announced a non-alcoholic beer campaign in New York, Chicago and Los Angeles to raise awareness regarding alcohol free drinking at social gatherings.

Meanwhile, Molson Coors Brewing Company (TAP - Free Report) announced the purchase of kombucha maker Clearly Kombucha on Jun 6, 2019. The company plans to further venture into such territory by providing a non-alcoholic, cannabis-infused drink in a joint venture with Canadian cannabis brand Hexo. Constellation Brands (STZ - Free Report) is also rumoured to be investing in non-alcoholic, cannabis-infused drinks.

Furthermore, Diageo (DEO - Free Report) has also acquired a minority stake in non-alcoholic spirit company Seedlip.

Anheuser-Busch, Diageo, Molson Coors and Constellation Brands have year-to-date returns of 35.4%, 23.7%, 6.2% and 13.4%, respectively. Anheuser-Busch, Diageo and Molson Coors carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

To Conclude

While traditional beer makers have been facing difficulties in the recent past, all’s not bleak and hopeless. Studies have shown that even though millennials tend to move toward sobriety, they still consume a lot of alcohol. The largest generational cohort among the modern consumers, the 1990s born, drink considerably at social events, albeit carefully.

Nielsen also estimates that millennials constitute about 35% of the total beer guzzlers in the country, which is a good sign from the producers’ point of view. Meanwhile, these customers are consistently looking to try out newer craft brands as well. Major alcohol players have also started taking advantage of the new beverages trend of 2019. As long as they can improvize to suit the need of the hour, beer majors have nothing to worry about.

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