Cheaper Beer, Cigarettes Gain Favor as Inflation Pinches Shoppers

Vincent Jarbou, co-owner of Washtenaw Liquor in Ypsilanti, Mich., said he has noticed customers buying single cans of beer instead of six-packs to save money. Demand has also increased in recent months for cheaper cigarette brands like Pall Mall and Maverick, Mr. Jarbou said.

Customers ask: “What’s your cheapest pack?” Mr. Jarbou said. “We try to please the customer. We just try to work them down to something cheaper.”

In the four weeks ended July 2, retail-store sales of economy beer increased by 5.4% from the same period last year, according to an analysis of Nielsen data by beer-industry consultant Bump Williams Consulting Co. Brands in the category making the biggest gains this year include Busch Light, Icehouse and Milwaukee’s Best Ice. Last year, retail-store sales of economy beer fell by 10.9%.

Overall, retail-store beer sales ticked up 1% in the four weeks ended July 2, according to the Bump Williams analysis. Last year, they fell by 2.8%.

Anheuser-Busch InBev SA, which makes Busch Light, the bestselling economy beer brand in the U.S., said limited release “For the Farmer” cans, designed in collaboration with

John Deere,

have helped fuel the brand’s growth, along with a seasonal apple-flavored version of the beer. The brand is most popular in Wisconsin and is growing fastest in Tennessee, according to the company.

While retailers—not brewers—set prices for beer, Anheuser-Busch said it has observed that in the states that generate more than 70% of Busch Light’s sales volume, Busch Light is priced higher than other beers in the economy segment and closer to mainstream beers like Budweiser. AB InBev is scheduled to report its latest financial results Thursday.

Vincent Jarbou grabs a pack of lower-price cigarettes at his store. In addition to selling more discount-brand cigarettes, he says he is selling more single cans of beer as customers cut back on six-packs.

Molson Coors Beverage Co.

in the spring began a new marketing campaign for economy brand Miller High Life, aiming to reach younger legal-age drinkers as well as the brand’s core audience of 35- to 55-year-olds. In one spot, a young couple toasts their new grill with “the Champagne of beers.” The company also introduced in-store displays for its Icehouse brand with the tagline: “Make a bolder choice.”

Molson’s portfolio of beers includes a range of styles and price points, which allows the company to “meet consumers’ needs—and that’s important particularly in uncertain economic times, which is what we’re dealing with right now,” spokesman Adam Collins said.

Marvin Hamama used to stop by Mr. Jarbou’s store every day to pick up a 24-ounce can of Corona or Pacifico beer. But a few months ago, worried about the rising price of gasoline and other expenses, Mr. Hamama made some cutbacks.

Mr. Hamama, 39 years old, quit smoking and canceled his lawn-care service. He reduced his beer runs to once or twice a week. And he switched to Icehouse, a cheaper beer.

“I don’t like the cheap stuff, but sometimes you still go for it,” said Mr. Hamama, who works as a marijuana cultivator. A Corona Familiar at Washtenaw Liquor costs $2.99 before tax, while an Icehouse costs $1.29.

Not all beer drinkers are trading down. Sales of imported and superpremium beers like Modelo Especial and Michelob Ultra also are growing, underscoring the impact that inflation is having on lower-income consumers while more affluent people continue to spend more freely.

Inflation has been a boon for cheap cigarettes, too. Marlboro, the market-leading cigarette brand, is losing U.S. market share as discount cigarette maker Liggett Vector Brands—a subsidiary of

Vector Group Ltd.

—gains ground, said Morgan Stanley analyst Pamela Kaufman. Vector’s cigarette brands include Eagle, Pyramid and Montego. Vector declined to comment, citing the quiet period before its coming earnings report.

Lee Levinson, co-owner of discount-cigarette maker Xcaliber International, said his company’s sales growth also has accelerated this year. Based in Pryor, Okla., the company sells brands such as 24/7, Edgefield and Berley. In some places, they sell for half as much as Marlboro, Mr. Levinson said.

“Consumers are much smarter than they were, and they’re more price-conscious,” he said. “They just got smarter in how to spend their money.”

Marlboro’s share of the cigarette market increased during the first year of the pandemic, when people had more money available because of government stimulus payments and lower spending on gas, travel and entertainment. That has since reversed, and some smokers are trading down to cheaper brands, said

Billy Gifford,

chief executive of Marlboro maker

Altria Group Inc.

on a conference call with analysts in April.

Even so, 90% of Marlboro smokers buy the brand every time they make a cigarette purchase, he said.

Altria is set to report its latest quarterly financial results Thursday.

Write to Jennifer Maloney at jennifer.maloney@wsj.com and Alex Harring at alex.harring@wsj.com