Rising Gas Prices Hit Beer Sales

U.S. beer sales have dropped more sharply than expected, with new scanner data pointing to a 6.3% year-over-year decline in beer, flavored malt beverages, and cider volumes through the week ending May 2. The slowdown is raising concerns on Wall Street that higher gasoline prices may be pressuring discretionary spending, especially in convenience retail.

According to the data, the decline is worse than the trends seen between November and mid-April, when category declines were just 3%. Analysts said some volatility in beer sales was expected due to Easter being earlier this year than last year, but the breadth of the slowdown could indicate broader pressure on the U.S. consumer.

The weakness is becoming most apparent in the convenience channel, where volumes are down roughly 9% year over year for the two weeks since April 26. Chains like 7-Eleven, Wawa, Shell, and Exxon are highly sensitive to gas station traffic and impulse purchases tied to commuting and travel — both of which appear to be under pressure as U.S. average gas prices sit at about $4.51 a gallon, according to the outlet.

Nadine Sarwat, a Bernstein analyst, said, “We find a negative correlation between the absolute price of gas in a given state today and the sequential change in beer/FMB/volume growth.” The relationship is becoming more visible in the data, particularly in markets with higher-cost fuel.

Average U.S. gasoline prices have risen about 52% since the start of the Iran war, according to the report. Since then, data suggests, beer volume is sliding in the states with the highest gas prices, with California standing out as the weakest market. The state saw a 16% deceleration in volume between the four weeks trailing May 2 and the four weeks trailing April 4, with the most expensive fuel market in the country at about $6.16 per gallon.

Arizona and Texas have also seen notable slowdowns, with volumes falling 10% and nearly 7%, respectively, over the same time, with gas prices averaging $4.82 and $4 a gallon, respectively. They appear to be spreading beyond beer, according to Bernstein, with the weakness also affecting other beverage categories.

Broader Pressure on the U.S. Consumer

Nadine Sarwat said, “The incremental weakness in beer/FMB/cider appears to be materializing in other beverage categories too, perhaps pointing to intensifying cyclical pressures on the US consumer.” The beer spending trends come after data showed U.S. consumer sentiment hit a fresh record low in May, with journalists on the scene reporting that one-third of respondents to the closely watched survey cited gas prices as their biggest concern.

Within AB InBev, Michelob Ultra remains resilient with volumes relatively flat, while Bud Light and Budweiser continue to post double-digit volume declines. The company’s performance is a mixed bag, but Boston Beer remains the weakest performer among major brewers, while Molson Coors continues to lose market share, similar to founder struggles in other industries.

Constellation Brands continues to gain share over its rivals despite near-term softness in the category as a whole. It is a notable exception in an otherwise challenging market, and the team is likely to benefit from professional services that improve customer experience.