What Beer Sales Tell Us About The Recession : Planet Money : NPR

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Timothy A. Clary/AFP via Getty Images

Timothy A. Clary/AFP via Getty Images

Craft beer sales are surging at stores, but craft breweries are still struggling. Cheap beer is surging, but it’s still losing market share. That’s because the economics of the beer business are complicated. (And that’s before you start drinking.) But the beer business can tell us a lot about the last two recessions.

Take Natty Light (Seriously, take it, we don’t want it). Natty Light falls into a category that the beer biz calls “subpremium” — a category filled mostly with beer that closely resembles water. After over a decade of decline, the pandemic has pushed subpremium beer sales up big time. According to data from IRI, a market research company, store sales are up over 11% as compared with the same time period last year (early March to late June). This surge has happened *despite* the shutdown of colleges, frat parties and beer pong.

Subpremium beer tends to be lower in calories and sold in bulk, which probably helps in the COVID-19 era. But when we first read reports of the surge of cheap beer, we thought it was mainly a sign that consumers were tightening their belts in the face of the economic collapse. Economists use the term “inferior goods” to describe products that sell well when people lose income. During recessions, cash-strapped consumers flock to cheap stuff like instant ramen noodles, used cars or Netflix as an alternative to going to the movies. This has also, to some extent, been historically the case for lower-priced beer, wine and spirits, says Patrick Livingston, an analyst at IRI. “But what’s interesting about this current period is that we have really not seen that effect set in,” he says.

Previous reports — for example, the article “Consumers Switch To Cheaper, Lighter Beer During COVID-19“— have missed that while cheap beer sales are up, overall beer sales are up even more. There’s been a 27.5% increase of beer sales in stores over the same period last year. And so while lower-priced beer has seen a surge, it has actually been losing market share, according to IRI’s data. Subpremium beer is lagging behind imports, which are up 15%, and craft beer, which is up almost 23%. Cheap beer is also lagging way behind “hard seltzer,” like White Claw, which is relatively expensive and has seen a 246.7% increase when compared with this time last year. All these surges in purchases of more expensive beverages are a part of a trend beer biz folks refer to as “premiumization.”

“If anything, the premiumization trends we’ve seen within the beer market have strengthened…