State beer sales going flat
Per capita drinking lowest since 1947
Monday, June 14, 2004 By Bill Toland, Post-Gazette Harrisburg Bureau
HARRISBURG -- All this depressing talk about Pittsburgh's impending tax increases and another losing season for the Pirates is enough to drive a person to drink.
Jay Goldstein would welcome such a move -- provided you crack open a beer instead of mixing yourself one of those fancy, fruity cocktails.
Goldstein, president of the Pennsylvania Beer Wholesalers Association, says the state's beer industry is flagging just as badly as the city treasury and the hometown ballclub.
State beer tax revenues were down by 5 percent for calendar year 2003, the biggest single-year drop since World War II. Through this year, beer tax receipts are down by an additional 3 percent.
Translation: Per-capita annual consumption of beer and malt liquor among drinking-age Pennsylvania residents is less than 23 gallons a person, the lowest consumption rate since 1947. The slide, Goldstein said, started in February 2003 and has been continuing monthly since then.
But is that a bad omen for local brewers and distributors? Or just a one-year, blown-out-of-proportion anomaly, exaggerated by an above-average sales year in
2002?Depends on whether your pint glass is half-full or half-empty. Goldstein says that while the state has been relaxing liquor and wine laws to allow for Sunday sales hours and a grocery store presence, laws governing beer distribution in Pennsylvania remain too strict.
"All we can do is stand there and get pummeled and lose more business," Goldstein said, cursing the Legislature on one hand while crediting Jonathan Newman, chairman of the Pennsylvania Liquor Control Board, with reinvigorating the staid spirits agency.
Goldstein, whose family owns beer outlets in Allentown, has his own motives for highlighting the slumping sales. He's been lobbying the state to allow for the sale of 12-packs at beer distributors, the theory being that a six-pack isn't enough for a dinner party but a whole case is too much.
Demonstrating lower-than-usual sales could prompt rule changes at the legislative level.
But Dick Yuengling, president of Pottsville's D.G. Yuengling & Son, said Goldstein's sky-is-falling routine is one part truth, one part puffery.
"I think Pennsylvania had an off year," Yuengling said. "But it's just a blip. It's happened before. We don't get excited -- we've been around for 125 years."
Either way, there's no denying that Pennsylvania beer-makers, as well as those who distribute it, have spent the last few years fending off a confluence of local and national trends:
A nationwide health kick, low-carb diets, took the beer industry by surprise. Brand lines advertised as having low carbohydrate levels are gaining market share, but the staying power of the Atkins low-carb diet could eventually have a detrimental effect on overall beer sales.
The so-called baby-boomlet -- the sons and daughters of baby boomers -- are exiting their prime beer-drinking years and approaching their 30s, an age when many turn to more expensive wines and cocktails over beer and malt beverages.
Locally, the continuing decline in numbers of veterans clubs, social clubs like the Elks and Eagles, and old mill bars means Pennsylvania is losing a sliver of its reliable beer market each year.
And though his theory is unproven, Goldstein wonders if schools have inadvertently bred a generation of kids, now drinking age, who prefer sweet drinks to bitter ones. "When I was in school, you had a choice of milk from the cafeteria or the water fountain," said Goldstein, in his 50s.
"Now, there's soda pop and fruit juice machines in every school," he said. "We've developed a generation of wine and spirit drinkers," who prefer a Sea Breeze to a Guinness.
That's a legitimate beef, reflected in the sales of "malternatives," those sweet, fruity bottled drinks like Mike's Hard Lemonade. Popular since 2000, such beverages initially didn't cut into overall beer sales because the drinks were primarily produced by traditional brewers.
But now that hard liquor companies have gotten into the act -- Smirnoff Ice and Jack Daniel's Original Hard Cola, for example -- brewers are feeling more of the bite, even though those liquor-brand brews are still sold through beer distributors, not liquor stores.
It all added up to a lousy year for beer in Pennsylvania, even as some of the regional brewers are experiencing growing sales outside of the state. Yuengling, for example, has been selling well regionally, especially since it opened a second brewery in Tampa, Fla., five years ago and a third in St. Clair, Pa., in 2001. Previously available in four states, Yuengling soon will be sold in 10.
Even so, "I think certain markets are struggling," Dick Yuengling said.
That includes traditional beer strongholds, nationally and even worldwide. Last year, beer sales in Germany were down about 5 percent from the year before, and about 1 million fewer people visited the 2003 Munich beer festival, mostly because Germans have become more health-conscious, according to a journal called "World Drink Trends."
Meanwhile, Japan's major brewers took a major hit in 2003, with Sapporo's sales dropping nearly 13 percent and brands Kirin and Suntory reporting declines of 7 percent, according to a recent report on the Japanese beer industry.
And in Britain, home to the smoky pub, beer consumption recently sank to a
30-year low, even as sales of wine shot up by nearly 9 percent and spirits sales grew by 2 percent, according to a news report by the BBC.Steve Kniley, spokesman for the Department of Revenue, acknowledged that Pennsylvania beer sales have been flat for the last decade.
But viewed over a two-decade stretch, it's been a slow slide of small decreases. From 1982 to 1990, Pennsylvania routinely took in more than $28 million in beer taxes, cresting at $28.9 million in 1990.
Over the last 10 years, the number has hovered between $25 million and $27 million.
Lately, Kniley calculated, "it seems to me it's been pretty stable. It's not going up, but it's not going down a whole lot, either. ... They're drinking about the same."
The slow slide in beer receipts stands in contrast to the great surge in liquor and spirits sales in Pennsylvania. From 1994 to 2003, Pennsylvania's liquor tax receipts have grown from $119 million to $193 million, according to the revenue department.
The tax rates on both malt beverage and liquor have been the same for decades, meaning the only variable is the amount sold. The malt beverage tax, commonly called the beer excise tax, is 8 cents on the gallon, $2.48 on a barrel and about a penny on the pint. The tax, in the end, is paid by the consumer, but remitted by manufacturers, importers and distributors.
The liquor tax stands at a flat 18 percent.
Even though beer is taking a battering from liquor, many brewers say it's up to the beer-makers, not the lawmakers, to adapt to changing consumer and health trends. At Pittsburgh Brewing Co., the company's advertising campaign has for about two years now been focusing on "more taste, less waist," and lately has been touting I.C. Light's carbohydrate count compared to other light beers.
As a result, said Jeff Vavro, Pittsburgh Brewing Co.'s spokesman, I.C. Light has seen increased sales for the last three years.