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BMO Beer Report: Female Consumers, 'Tapping Speciality and Innovative Products' Are Growth Opportunities for North American Brewers

- Traditional brewers face intensifying competition from wine and craft brewers

- Per capita consumption of beer has fallen in the U.S. and remains flat in Canada

- Female demographic represents a vast untapped market

- Rising commodity input prices will begin to pinch profits



TORONTO, ONTARIO--(Marketwire - Aug. 15, 2012) -

Editors Note: There are two photos associated with this press release.

As the North American beer industry undergoes a major structural shift, opportunities for growth exist through capturing high-yielding niche demand, catering to an aging population, and a relatively untapped female demographic, according to a new report from BMO Capital Markets Economics.

The annual report details key shifts and trends in the North American beer market. While alcohol consumption is on the rise, per capita consumption of beer has fallen in the U.S. and remains flat in Canada. Coupled with pressure from craft brewers, the wine and spirits industry, and imports, traditional brewing companies have had to compete for increasingly selective consumers in a shrinking market.

"With the aging of the North American population, the number of consumers of legal drinking age is growing, although what is equally clear is that consumers are becoming more diverse in their selection of beers," says Alex Koustas, Economist, BMO Capital Markets. Since the 1990s, imports have tripled their market share in both Canada and the U.S., and domestic craft brewers have doubled production since 2003. By comparison, lager beers, the core offering of the major breweries, have been experiencing a multi-year decline.

The report also indicates that input costs will begin to pinch profits. "Material costs equal 40 per cent of revenue for major producers. The recent sharp rises in commodity prices - particularly barley and wheat - will soon trickle into the production pipeline. For an industry that has struggled to keep pricing at a pace with overall inflation, this will likely mean a reduction in margins," said Mr. Koustas.

"Despite some market challenges, our breweries have a long tradition of sourcing quality ingredients, including barley, grains and hops produced here by Canadian farmers," said David Rinneard, National Manager, Agriculture, BMO Bank of Montreal. "While there has been a rise in the price of many commodities, consumers can be confident that the Canadian food products that go into the making of their favourite beer, continue to be among the best tasting, safest, and highest quality in the world."

Looking beyond what appears to be a long-term downward trend, the report sees potential opportunities for growth, including the virtually untapped female demographic. Mr. Koustas underscores the importance of product specialization and branding that targets females, including low-calorie options and lighter flavoured, beer-based beverages. At present, males account for approximately 80 per cent of beer sales.

Mr. Koustas notes that while major breweries face rising market headwinds, they are taking some cues from craft breweries, ramping up innovation and specialization as they attempt to scrape back market share and boost more profitable products.

The full report can be downloaded at http://www.bmonesbittburns.com/economics/reports/20120815/SR120815.pdf.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly-diversified North American financial services organization. With total assets of $525 billion as at April 30, 2012, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.

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For media inquiries, please contact:
Paul Cunliffe
416-867-3996
paul.cunliffe@bmo.com

Ron Monet, Montreal
514-877-1873
ronald.monet@bmo.com

Laurie Grant
604-665-7590
laurie.grant@bmo.com

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