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Inflation, supply-chain disruptions, cultural controversies shake major brewers

The global beer market faced an unexpected rollercoaster in 2023, as inflation and supply-chain disruptions triggered significant shifts in consumer behavior. Despite a promising start, marked by robust sales during the Chinese New Year, major brewers grappled with unforeseen hurdles throughout the year.

Heineken’s Response to Setbacks

Heineken, the world’s second-largest beer company, encountered a 3% decline in beer sales in the first quarter of 2023, signaling potential vulnerabilities. Despite this setback, the company managed to uphold its full-year profit expectations by strategically implementing price increases and tapping into the demand for premium beers. Jacob Aarup-Andersen, Heineken’s CEO, acknowledged the rising production costs and hinted at potential price increases in 2024.

AB InBev’s Culture War and Global Revenues

Anheuser-Busch InBev (AB InBev), the world’s largest brewer, faced a different challenge—a culture war in the U.S. A controversial sponsorship with American transgender influencer Dylan Mulvaney led to a backlash and calls for boycotts, resulting in a 10.5% drop in U.S. sales, amounting to about $400 million year-over-year in the April-to-June quarter. However, AB InBev’s global revenues for Q3 reached $15.6 billion, up 5% from the previous year, thanks to business in other regions and strategic price increases. The company, nevertheless, had to make tough decisions, including laying off hundreds of corporate workers across the U.S.

Carlsberg’s Turmoil in Russia

Carlsberg faced its own set of challenges, dealing with a tussle with the Russian government that led to the seizure of its lucrative beer operations in the country. The loss of the “stolen” Baltika business, contributing nearly 13% of Carlsberg’s group revenue in 2021, posed a significant blow. Despite this turmoil, Carlsberg reported strong growth in premium and alcohol-free beer segments.

Economic Challenges and Consumer Behavior

Inflation and high production costs led to a notable increase in beer prices in 2023, influencing consumer choices. Heineken faced a 22% drop in operating profits and a 5.6% decline in year-over-year beer sales for the first half of the year, attributing it to a price increase and a “challenging economic backdrop.” Consumers, faced with pricier options, began shifting preferences toward more budget-friendly alternatives.

Shifting Preferences and Market Dynamics

While pricing concerns arose among consumers, major brewers saw success in the growth of premium beer segments. The pandemic played a role in cementing this trend, as consumers sought affordable yet premium experiences at home. AB InBev and Carlsberg both experienced success in the premium and alcohol-free beer segments, reflecting changing consumer preferences.

Navigating 2024: Challenges and Strategic Initiatives

As the industry looks toward 2024, challenges persist despite early signs of inflation abatement in some economies. Production costs, estimated to be up to 25% higher in mid-2023 compared to 2019, may continue to impact beer prices. Heineken emphasized the potential threat of economic volatility on consumer demand in 2024, stressing the need for a cautious approach. Major brewers, including AB InBev and Carlsberg, are preparing for the coming year with strategic moves.

AB InBev announced a €31 million ($34 million) investment to upgrade its Belgian breweries, expanding its low- and no-alcohol beer portfolio. Meanwhile, Carlsberg anticipates growth in Asian markets and increased investment in marketing and branding initiatives.

In the complex landscape of the global beer market, 2023 brought forth challenges and opportunities, shaping the industry’s trajectory for the years to come. As brewers adapt to shifting preferences, economic uncertainties, and global dynamics, the resilience and strategic maneuvering witnessed during this tumultuous year will likely play a crucial role in shaping the future of the brewing industry.

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