2008 Beer Industry Update: How To Leverage Consumers’ Ever Growing Interest in Beer

1. 2008 Beer Industry Update: How To Leverage Consumers’ Ever Growing Interest in Beer Lester Jones, Beer Institute Cheers Beverage Conference January 20, 2009

2. The Beer Institute was organized in 1986 to represent the industry before Congress, state legislatures and public forums across the country. It is committed to developing sound public policy that focuses on community involvement and personal responsibility

3. Senior Board ABInBev Miller Coors Heineken USA Crown Imports, LLC Supplier Members Hop Growers Barley and Malt Rice/Corn Growers Packaging Suppliers Brewing Equipment Ex Officio Board - Brewers Bell’s Brewing Co. Boston Beer Co. Boulevard Brewing Co. Brooklyn Brewery Corp Deschutes Brewery, Inc. FEMSA FX Matt Brewing Co. Harpoon Brewery New Belgium Brewing Co. Sierra Nevada Brewing Co. Beer Institute MembershipBrewers, Importers and Suppliers

4. Beer Serves America • The Beer Serves America (BSA) study is the industry’s primary communication platform describing the breadth and economic contributions of the beer industry to the public and government • Throughout the year, the Beer Institute, its members, and allied organizations use The Beer Serves America (BSA) message in communications to the media, government, special interest groups and the general public.

5. 2006 Study Summary • The brewing industry is a dynamic part of the U.S. economy, accounting for about $189 billion in economic output or 1.5 percent of US Gross Domestic Product • Brewers, distributors, and retailers directly or indirectly employ approximately 1.7 million Americans • Employees earn over $54.9 billion in wages and benefits • Members of the brewing industry and their employees pay $24.8 billion in direct federal, state and local taxes • In addition, the consumption of beer throughout the country generates $5.2 billion in federal and state excise taxes, and another $6.2 billion in state taxes. • Every state and virtually every community in the country contributes to the brewing industry in some way.

6. Industry Direct Economic Impact Total direct and indirect impact in the US includes 1.7 million jobs and $189 billion

7. Per Capita Consumption of Malt Beverages1980 to 2008 (gallons per person/total population) • 21.8 in 2008 from a high of 24.6 in 1981 • Changing Demographics • Increased alcohol beverage competition • Additional non-alcohol beverage choices • Policy Changes (21 LDA and .08) Source: Beer Institute, 2009.

8. Per Capita Consumption Beer Wine and Spirits 1970-2008 Source: Beer Institute and The Beverage Information Group 2009

9. Index Per Capita Ethanol Consumption Beer Wine and Spirits 1970-2008 Share of volume Segment 1970 1998 2008 Beer 48% 62% 57% Wine 10% 11% 12% Spirits 42% 28% 31% Assume 4.5% for beer, 14% for wine and 40% for spirits Source: Beer Institute and The Beverage Information Group 2009

10. US Population 2007, Ages 21 to 75 Beer demo (21-27) - about 29.4 million people or 14.9% of LDA Population Tail end of the baby boom generation born between 1957 and 1964 - about 32 million people or 16.2% of the LDA population Difference of 2.5 million consumers at 20 gallons/year per capita…equates to about 1.6 million barrels less demand…beer has weathered the storm with 28-34 yr old age cohort (13.9% of LDA). Source: United States Census Bureau, 2009

11. 40.0 > 30.0 ≤ 34.9 ≤ 29.9 35.0≤ 39.9 2008 Annual Per Cap Consumption Gallons per person 21+ Source: Beer Institute, 2009 (2006 Beer Institute Population Estimates)

12. Top 10 Largest States, 2008 21+ Per Capita Consumption (Gallons per LDA person) Source: Beer Institute, 2009 *1,000s of gallons

13. Top 10 Per Capita Beer States, 2008 21+ Per Capita Consumption (Gallons per LDA person) Source: Beer Institute, 2009 *1,000s of gallons

14. Top 10 Per Capita Beer States Growth, 2008 21+ Per Capita Consumption (Gallons per LDA person) Source: Beer Institute, 2009 *1,000s of gallons

15. Industry Supply of Malt Beverages Domestic production and imports of malt beverages in the US

16. Total Malt Beverage Industry2007 vs. 2008 est. (millions of gallons) Total Industry added over 37 million gallons of beer in 2008. That’s over 16.5 million cases of beer for a gain of over 400 million 12 ounce equivalent servings. Source: Beer Institute, 2009

17. Domestic Malt Beverage Industry2007 vs. 2008est (millions of gallons) *Tax Paid on beer that is served directly from serving tanks in brewpubs and taverns Small relative to total market but over 100 million 16 ounce servings. Source: TTB and Beer Institute, 2009

18. Import volumes fell for first time since 1991 to 28.8 million barrels in 2008 Imports of Malt Beverages1984-2008 (1,000s 31 Gallon Barrels) Import share is holds at 14% of market in 2008 Source: US Dept of Commerce, Bureau of Census and Beer Institute, 2009

19. Import Package Mix2007 vs. 2008 (1,000s of gallons) Import draft added 4.6 million gallons of high value on premise draft for a 6.1% gain in 2008 (slow down from 11% growth in 2007). That’s over 37 million additional 16 ounce draft pours in 2008! Source: US Dept of Commerce, Bureau of Census and Beer Institute, 2009

20. Imports of Draught Beer into the US1999 to 2008est (31 gallon barrels) Draught imports have grown 4.5% CAGR since 1999 to reach 2.6 million barrels in 2008. Source: US Dept of Commerce, Bureau of Census and Beer Institute, 2009

21. European Draught Beer Volumes1998-2008 est. (31 gallon barrels) 70% of draught beer comes from Europe. Draught beer volumes now stand at over 1.7 million barrels in 2008. Source: US Dept of Commerce, Bureau of Census and Beer Institute, 2009

22. Latin American Draught Beer Volumes1998-2008 est. (31 gallon barrels) Latin America draught beer volumes now stand at over 200,000 barrels in 2008. Source: US Dept of Commerce, Bureau of Census and Beer Institute, 2009

23. Belgium Draught Beer Volumes1998-2008 est. (31 gallon barrels) Belgium draught beer volumes now stand at over 400,000 barrels in 2008. Almost $100 million 16 ounce pours! Source: US Dept of Commerce, Bureau of Census and Beer Institute, 2009

24. 11% < share 2008 est. Draught Share by State 9% < share < 11% 1% < share < 9% Source: TTB and Beer Institute, 2009

25. Draught Beer Share – On Premise MeasureDraught Share of Market 1946 to 2008 • Draught share of market has fallen consistently from over a third of the market to less than 10% in 2008. • But still significant, over 600 million gallons (domestic + imports) in 2008 and over 5 billion 16 ounce servings. • There are over 29,000 miles of draught lines in the US Source: TTB and Beer Institute, 2009

26. Top 10 Draught Volume StatesTotal Year 2007 vs. 2008 (31 Gallon Barrels) Source: State Shipments from Beer Institute, 2009

27. Top 10 Draught Growth StatesTotal Year 2005 vs. 2006 (31 Gallon Barrels) Source: State Shipments from Beer Institute, 2009

28. Beer CPI –Away from Home vs. At HomeOn Premise vs. Off Premise, 2000 to 2008 In last two years, trading up and premium pricing on premises has exceeded off premise (at home) pricing. Source: BLS and Beer Institute, 2009

29. Thank You Lester Jones Beer Institute Washington, DC ljones@beerinstitute.org