Consumers Maximizing Payday Cash Cut Beer out of their Budgets

Beer is not a necessity

With consumers struggling to earn payday cash, many are cutting back on the extras. A recent study showed that those extras include beer. The previous notion was that beer was impervious to market changes—even when Americans were limited with cash, they still would buy beer. Possibly a repercussion of the recent recession is showing its power again with the visible decline in alcohol purchasing. Craig Purser, the CEO for National Beer Wholesalers Association, said, “Lots of folks have thought beer is recession-proof or recession-resistant. The numbers don’t bear that out.”

The beer market post-recession

One of the biggest beer companies in the country, Molson Coors, posted a loss this past year in Q4. Earnings were $1.02 per share, which is 8¢ below analyst’s projections. That’s bad news for the company and on top of that drop, sales were down by 4% since early last year. The company’s CEO Peter Swinburn said, “In the US, MillerCoors’ fourth-quarter results reflect a significantly weaker beer industry than expected.”

Molson Coors is not alone in its declining numbers. IBISWorld, market research firm, announced that beer overall is down 2.7% already from last year. The recession is contributing to overall market downturns for almost every industry, and that includes alcohol consumption. Part of the reason is that despite the difficult economy, there are few discounts to attract customers. Traditionally, every retailer uses bonuses and specials to bring in customers. During a recessionary period, they still use the tool as a means of maintaining sales and bringing in new customers. The beer industry has not turned to discounting. In fact, according to Nielsen date, the average cost for a case of beer is up by 2.5% since last year.

Why prices aren’t going down

Beer has been steadily increasing in price over the past few years. The reason is because brewers have had to struggle through their own rises in cost. Crude products have risen over the years and brewers have no way to handle the extra cost other than to keep increasing the price point for the end-user. Without some ease in purchase price, consumers can expect their payday cash to be limited when it comes to beer-buying power. In 2010, the price of beer is not set to come down at all. Experts are projecting that beer will continue to grow in cost as the economy regulates itself. Though the recession is over, there are still high costs for businesses to manage. Since all crude products are most likely not declining in cost, most likely neither will beer.

How consumers will manage

Surveys are showing that consumers will cut back on beer if it doesn’t fit in with their budgets, but that doesn’t mean they will completely stop buying. Many bars and pubs reported that though their numbers have yet to make a substantial jump, they haven’t declined either. That’s good news for breweries. Though they likely won’t see huge revenues, they will still be able to manage and hope for an increase in customers in the future.

Paying bills rather than buying beer

Breweries are struggling just like the rest of the world. Consumers want to return to their old buying patterns, but payday cash is just too precious a commodity right now. Luxuries like beer and alcohol in general are being put on hold. Consumers would rather focus on building up cash reserves, paying down debt and keeping their heads above water.

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