Beer demand falls due to rising gas prices, data shows

U.S. beer sales fell more sharply than expected, as new scanner data points to weakness in the category.

The slowdown is also raising concerns on Wall Street that rising gas prices could put pressure on discretionary spending, particularly at convenience stores.

Beer, full malt beverage (FMB) and cider volumes fell 6.3% year-on-year in the week ending May 2, on a two-week and four-week basis, according to data tracked by Nielsen. This is worse than the trends seen between November and mid-April, when category declines were only 3%.

Although some volatility in beer sales was expected due to Easter being earlier this year than last, according to analyst firm Bernstein, the magnitude of the slowdown could indicate broader pressure on the U.S. consumer.

The weakness is becoming most evident in the convenience store sector – chains like 7-Eleven, Wawa, Shell And Exxon – where volumes are down about 9% year-over-year in the two weeks since April 26.

Analysts said convenience stores are very susceptible to gas station traffic and impulse purchases related to commuting and travel – both of which appear to be under pressure as average gas prices in the United States sit at around $4.51 per gallon, according to AAA.

“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,” said Nadine Sarwat, an analyst at Bernstein.

This relationship is becoming increasingly visible in the data, particularly in more expensive fuel markets.

Average gasoline prices in the United States have increased about 52% since the start of the Iran conflict, according to AAA data.

Since then, data suggests beer volume is down in states with the highest gas prices, with California the weakest market. The state saw a 16% deceleration in volume between the four weeks before May 2 and the four weeks after April 4, with the nation’s most expensive fuel market at about $6.16 per gallon. Arizona and Texas also saw notable slowdowns, with volumes down 10% and nearly 7%, respectively, during the same period, with gas prices averaging $4.82 and $4.00 per gallon respectively.

According to Bernstein, this weakness also seems to extend beyond beer.

“The gradual weakness in beer/FMB/cider appears to be materializing in other beverage categories as well,” Sarwat said. “This perhaps indicates intensifying cyclical pressures on the U.S. consumer.”

The beer spending trends come after data showed U.S. consumer confidence hit a new record low in May. A third of respondents in the closely watched University of Michigan survey cited gas prices as their biggest concern.

Although beer spending is declining overall, volume trends have been mixed for some brewers.

In AB InBevMichelob Ultra remains resilient with relatively stable volumes, while Bud Light and Budweiser continue to post double-digit volume declines. Boston beer remains the least efficient among the major brewers, while Molson Coors continues to lose market share.

Constellations Brands continues to gain market share over its competitors despite near-term weakness in the category as a whole.