The U.S. is a country that overwhelmingly consumes beer at home rather than at bars, a trend that’s strengthening despite people mostly shrugging off pandemic-related concerns about dining and drinking out. In 2021, some predicted that pent-up demand would create a boom in draft beer, yet the last two years have proven the opposite. Through May, U.S. and imported keg beer volume has been down roughly -20% compared to 2019 levels.
“Draft beer is not really recovering anymore,” Brewers Association (BA) chief economist Bart Watson said during a midyear industry report in August.
Draft beer’s worse-than-expected slump has ripple effects for breweries and bars, who lose out on the higher margins that draft beer offers compared to packaged beer. But the downturn will also shape the very nature of U.S. beer. According to analysis by Beer Marketer’s Insights, draft beer—both in distribution and in taprooms—accounted for 10.8% of total U.S. beer volumes in 2018. That number fell to 8.4% in 2021, the most recent year for which data is available.
No matter where the data is coming from, the end result is clear: Draft losses since the pandemic’s onset continue to accelerate the pace at which the beer market is defined by packaged beer sales.
WHY IT MATTERS
Kegged beer volumes in the U.S. have been declining for almost a decade.
In 2019, U.S. and imported kegs sold at bars and restaurants were 2 million barrels (BBLs) behind 2014 numbers.
Watson noted that, had this pace held, 2023 draft beer numbers should total about 15.5 million BBLs.
Instead, draft beer sales are on pace to end the year at 13.5 million BBLs, even worse than the prevailing trendline.
At-the-taproom sales are estimated to be up single digits versus last year, but represent hardly enough volume to make up draft losses elsewhere. It’s why, in his midyear report, Watson devoted significant time to highlighting the difficulties for kegged beer.
“To see real weakness this spring, even some months that were down versus last year, that was still surprising to me and added to the urgency a bit,” Watson says.
When volumes shift significantly in favor of packaged beer, an element of commoditization increases. This feeling was enhanced by the COVID pandemic: “Off-premise sales” from stores have traditionally counted for about 80% of all alcohol volume sold in the U.S. But policy changes during the pandemic reinforced drinking-at-home occasions that have lingered, meaning off-premise share is likely a touch higher today.
Beer is either commodity or culture, depending on the context. The lines aren’t black and white, but there exists a can-versus-keg divide between the two.
Distributed beer sold in convenience and grocery stores is a consumer packaged good. Shoppers add it to their carts alongside cereal, toilet paper, and ketchup.
Draft beer, even when brewed by a multinational beer company, absorbs context from its setting: the bartender who poured it, the adjacent guest on the barstool, the glassware in which it’s served. Adding a humble orange slice to a glass of Blue Moon elevated the way millions of U.S. drinkers thought about beer.
In packaged form, beer has fewer tools to pitch itself to drinkers. It works with the same set of variables as any other beverage in a can or bottle, whether wine or pre-made cocktails or hop water. That’s a challenge as beer loses share of servings to spirits, in particular.
Between 2000 and 2020, beer has seen its share of U.S. alcohol revenue decline from 55.5% to 44%.
During those same two decades, spirits’ share has risen from 28.7% to 39%.
Some industry experts are concerned that draft beer’s declines could become a reinforcing cycle: As keg sales slip, bar and restaurant owners put less emphasis and attention on their draft beer selection and maintenance, which accelerates declines further.
“My worry here is that if this isn’t arrested, draft is just a less important part of the retail scene going forward, and that operators just think about it a little less,” Watson says.
This is also a concern for Jennifer Hauke, founder of Draftline Technologies, which collects data on draft volumes. She emphasizes that draft beer is, according to her analysis, a $9.2 billion industry, larger than U.S. movie box office revenue ($7.3 billion). But she says that a lack of attention to draft from the industry as a whole could create a missed opportunity to connect with drinkers.
“There is no other experience like draft beer,” Hauke says, adding that it’s a multisensory experience encompassing the visual of beer poured into a glass, enhanced aroma compared to beer from a can or bottle, and often an enhanced texture as a poured beer develops a head of foam.
Draftline data indicates there are 90,638 open draft lines in the U.S. today, representing 10% of the draft beer market. That’s about double the 45,000 open lines tracked in January 2019. Open draft lines means those existing taps are not currently pouring any beer; however, Hauke cautions that up to half of the “open” lines are merely idle between beers, not fully out of commission.
Hauke is hopeful for a return to bars and restaurants, pointing to record attendance at this year’s World Cup and unmeetable demand for Taylor Swift’s Eras tour as two high-profile examples of consumers’ desire to spend on in-person experiences. (One hiccup: More stadiums and venues are moving toward self-checkout for packaged beers.) There is data to indicate that consumer spending on travel and dining is up from its pandemic lows, with McKinsey analysis putting current spending on services above its 2019 levels, adjusted for inflation.
Draft beer, theoretically, should be well positioned to capitalize on this desire. Without kegerators, the vast majority of drinkers can’t replicate the experience of a perfectly poured pint at home. It is distinct, special, and experiential. But so far, consumer interest in experiences hasn’t translated to a thirst for kegged beer. The continued dominance of packaged beer indicates they may not see the value in the particular experience of beer served from a tap.
The decline of draft beer dovetails with a consumer purchasing phenomenon: Drinkers increasingly trade among types of alcohol, with fewer defining themselves as solely wine drinkers or beer consumers. For example, the percentage of weekly craft beer drinkers who also report drinking certain other types of alcohol at least once a week has increased since 2020: Flavored malt beverages have seen the biggest gains (+7%), with domestic non-craft beer (+2%) and spirits (+2%) increasing as well. Reported weekly wine drinking fell significantly (-7%) as did hard seltzer (-1%) and hard cider (-2%).
The lines are blurring not only in terms of what consumers drink, but how those beverages are presented. Beer once had the strongest grip on draft presence and canned portability, but wine in a can is no longer taboo. Draft cocktails dispense as quickly as beer. Drinkers both on- and off-premise can find nearly every type of flavor they want in any type of format they want. And in the minds of U.S. drinkers, beer is becoming synonymous with a six-pack more than a pint glass.
Words by Kate Bernot