Changing Beer Preferences Amid Economic Strain

Financial constraints are causing shifts in beer consumption, posing challenges for breweries dealing with reduced sales.

Consumers are increasingly turning away from traditional mid-range beers in favor of high-end or budget options, noted a prominent Danish brewery on Thursday. This trend comes as breweries encounter extensive pressures within the beverage industry.

"We observe a continuing divergence in consumer choices," mentioned CEO Aarup-Andersen during a CNBC segment on Thursday.

"Customers are gravitating either towards premium or budget brands. The ones likely to feel the pinch in today's market are the mid-tier brands," he elaborated.

Brewers have faced multiple quarters with lower growth in sales volumes as consumers resist price hikes, choosing alternatives instead.

Carlsberg, holding the position as the third-largest brewery globally, revealed on Thursday a decrease in growth during the second quarter. This includes the recent loss of San Miguel, although there was marked interest in their high-end and non-alcoholic selections.

Following this, AB InBev, the biggest brewing company worldwide, reported a 1.9% reduction in second-quarter sales year-on-year, whereas another major brewer noted a slight decline of 0.4% during the same timeframe.

"Globally, consumers are hitting a pause on spending, so sales volumes are not as robust as they were years ago," Aarup-Andersen remarked.

Despite this, AB InBev's leader, Michel Doukeris, pointed out last month that their financial and operational growth demonstrates the "sturdiness of the beer industry," with Heineken's CEO Dolf van den Brink highlighting the resilience across different regions.

Evolving Drinking Patterns

Breweries have been somewhat shielded from recent industry challenges, such as and persistent U.S. trade tariffs.

Brewers generally produce locally, reducing the need to move operations to the U.S., even as they endure elevated aluminum tariffs for cans.

Broader economic difficulties, however, pose risks to drinking trends and general consumer expenditures.

CEO Aarup-Andersen indicated on Thursday that Carlsberg’s core brands — including their notable Danish labels like Tuborg and Kronenbourg — are most pressured by cautious consumer spending.

He anticipates that these economic challenges will persist throughout the year, while also acknowledging a trend in consumer willingness to invest selectively.

"The traditional beer segment is declining, whereas our growth categories are actually thriving," he observed.

In the meantime, he noted an increase in at-home beer consumption as rising prices deter people from drinking in bars and restaurants.

"What we've observed over several quarters is that bars and restaurants, categorized as on-trade, currently face difficulties," he explained.

"Off-trade segments — supermarkets and store sales — are gaining at the expense of bars and restaurants. The shift is gradual, but noticeable."