Millennials' drinking habits are causing a crisis for America's most iconic beer brands — and now they're banking on nonalcoholic drinks to survive

BudweiserMillennials are turning away from beer.
  • Anheuser-Busch InBev, the beer giant that makes Budweiser and Bud Light among other popular brands, announced on Thursday that revenue in the United States dropped by 3.1% in the second quarter as its two main brands lost market share.
  • The beer market is being hit by a shift in drinking habits among millennials, who are increasingly opting for wine and spirits. Consumers in Generation Z also tend to favour spirits over beer and are already drinking less than previous generations.
  • In response, AB InBev is growing its nonalcoholic-drinks business. On Thursday, it announced it would add a new executive position at the company – a chief non-alcohol beverage officer – to oversee growth.

Apparently, even the “Dilly Dilly” phenomenon isn’t enough to entice young Americans to pick up a Bud.

On Thursday, Anheuser-Busch InBev, the beer giant that makes Budweiser and Bud Light, announced that revenue in the United States dropped by 3.1% in the second quarter as its two main brands continued to lose market share.

Beer is being hit hard by a shift in drinking habits among millennials, who are increasingly opting for wine and spirits. As a result, beer lost 10% of its market share to wine and hard liquor from 2006 to 2016. Beer penetration fell by 1 percentage point in the US market from 2016 to 2017, while both wine and spirits were unmoved, according to Nielsen data.

It looks as if this trend could be further exacerbated by the next generation of drinkers. A recent report from Berenberg Research found that members of Generation Z also favour more premium drinks such as spirits and wine over beer and that they’re already drinking less than their predecessors.

In response, AB InBev has been rolling out new flavours of lighter and premium beers, such as Michelob Ultra Pure Gold, Bud Light Orange, and the Budweiser Reserve series. These beers saw more growth during its most recent quarter.

During its earnings call on Thursday, the company said it would create an executive role to head up its nonalcoholic-beverages business and accelerate growth. Lucas Herscovici, now the global marketing vice president of strategic functions, will become the company’s chief non-alcohol beverages officer.

The nonalcoholic-beverages sector accounts for more than 10% of AB InBev’s volumes, and it plans to grow that to 20% by 2025.

Budweiser Washington BeerHollis Johnson/Business InsiderBeers from Budweiser’s Reserve series.

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