Beer Index flat (STZ, BUD, SAM)
The National Beer Wholesalers Association’s (NBWA) Beer Purchasers Index (BPI) fell four points from February to 50 in March. The BPI is a diffusion index where a reading above 50 denotes expansion in volumes while below 50 indicates contraction. February was the first time the index was in expansion territory since May 2022.
- Imports were flat at 62 in March from February, but down from 67 last March.
- Premium regulars at 47, improved from 41 in February.
- Premium lights increased slightly to 47 in March from 46 in February but was 4 points below last year.
- Craft beer fell to 28 in March from 34 in February and 47 last March.
- Below premium was flat in March at 53 compared to February.
- FMB/hard seltzer fell to 21 in March from 40 in February and 42 last March.
- The at-risk inventory reading was 51, worsening from 47 in February.
February’s outlook was the best in months, but March represents a slight pullback. The only segments growing were imports and below premium while craft beer was abysmal. Distributors are only seeing below premium and spirits-based RTDs gaining shelf space. The industry is not at the point where it has to reverse price increases, but the incentive is there for a brewer to look for volume growth.
State drug taxes (BUD)
State alcohol taxes are as varied as the histories behind them. In Oregon, a state bill to raise taxes on beer, cider, and wine died before coming up for a vote. Oregon taxes beer, cider, and wine producers an excise tax of $2.60 per 31-gallon barrel of beer and cider and $.65 per gallon of wine. That works out to a penny per pint of beer and 2.6 cents per glass of wine. For spirits, the state marks up the wholesale price by 100%. Cannabis retailers charge a 17% state sales tax. Oregon generates significantly more revenue from spirits and cannabis than it does from beer and cider. The state tax on beer has not changed since 1977.
The beer industry generates a lot of revenue for the state indirectly and clearly, the lobbyists have a lot of influence compared to the other recreational drugs. Since the pandemic, there has been more state activity on alcohol laws and taxes, but the primary debate is over the tax rate on spirits-based RTDs.
Too many acres (NAPA, VWE)
Jeff Bitter, President of Allied Grape Growers, told the Unified Wine and Grape Symposium that the wine industry needs to remove 30,000 acres of vineyards in order to be healthy. “We didn’t pull out the acreage that I believed we needed to in order to be in balance. But three short crops in a row have masked the reality that those acres are still there. When you’re producing a 10% below-average crop, it’s like some acreage has been removed. And although the acreage base has been reduced somewhat from where we were three years ago we shouldn’t be fooled by those short crops because the acres are still in the ground.” The Allied Grape Growers is a 600-member statewide grape growers collective that sends $100M worth of grapes to the channel. He added on the demand side, “We’re not bringing in consumers at a younger age at the same time our more mature core consumer numbers are shrinking. Looking into the future, prospects appear dismal for demand growth based on current trending.” The wineries are having difficulty raising prices in an inflationary, supply-constrained environment. With a better-than-average harvest, it’s difficult to see how the industry passes through price increases.
