In U.S., beer is down, liquor up

The U.S. alcohol industry is a slow-growth market, but consumer tastes have changed since the dawn of the new millennium. That shift is illustrated in the enclosed chart, based on data from the Distilled Spirits Council of the United States.

The council attributes the growth of spirits to Millennials, who are drinking more whiskey instead of beer. That shift helped boost total shipments of spirits by 2.4% to 220 million cases in 2016.

That change is encouraging for leading spirits makers such as Diageo, maker of Johnnie Walker, and BrownForman, which sells Jack Daniels. But it’s less encouraging for beer breweries such as Anheuser-Busch InBev and Molson Coors, as they already are struggling with a market shift away from their mainstream brands toward craft beers.

Investors should expect more market consolidation, like AB InBev’s takeover of SABMiller for more than $100 billion, as well as acquisitions of popular craft beers and high-growth spirit brands (Diageo’s recent purchase of George Clooney’s Casamigos tequila brand is one example). There will also be continued emphasis on premium brands.