By Bill Saporito

An hour of investigative drinking made the pattern clear to me. At T-Bar, a semiswank eatery on Manhattan's Upper East Side, the bartender was serving a steady stream of pricey vodkas like Grey Goose and Ketel One, scotches like Glenlivet, and wine. Only once did a solitary Budweiser get the call.

Perhaps the drinks selection was a geographic anomaly--I was in a martini ZIP code. To investigate further, I hailed a subway downtown to my friend Ronan Downs' joint, a proper watering hole called Beckett's. Downs, who's been in this business for decades, confirmed my hunch. "It's a very interesting dynamic," he observed. "The Budweisers and Coors are losing out to vodka, Irish whiskey, tequila, bourbon." And craft beers. Downs also co-owns a craft-beer place called Taproom No. 307, where he doesn't offer Bud or Coors or Heineken. At his next place, he's hiring a full-time mixologist to cater to the under-30 set.

It's not just New York. Demography, economics and the cocktail culture have combined to help make spirits and wine the preferred alcoholic beverages across the U.S. at the expense of the brand-name premium beers. Throw in superior marketing by the liquor companies and the rise of craft beers and you can distill the reasons the major beer brands are in decline. By the end of 2010, total beer sales slid below 50% of the beverage-alcohol market. Sales by volume declined an additional 1.7% in the 52-week period ending Nov. 12, according to Nielsen, while spirits sales increased 4.3%.

This isn't small you-know-what. In the $60 billion alcoholic-beverage industry, each market-share point is worth about $600 million at wholesale. Anemic growth potential is one reason Anheuser-Busch, a 150-year-old U.S. institution, was taken over by Belgium's InBev (now called ABInBev) in 2008. Hundreds of jobs were lost in AB's home of St. Louis in the vicious cost cutting that followed.

You'd think economics would favor beer, since it's relatively cheaper than liquor. But the recession was a gut punch to big brewers, whose drinkers have lower incomes and took more of the downturn's brunt. You'd also think demographics would favor beer, since the LDA--that is, legal drinking age--population has grown by a million young people to 22 million.

But it's the composition of that crowd that matters. And among millennials in general and women in particular, a trendlet trio known as premiumization, individualization and feminization has hurt premium beer.

Premiumization is a return to fewer but better. "You are seeing more and more consumers who prefer two bottles of Fat Tire ale over four bottles of domestic premiums," says craft-beer-industry financier Bill Anderson, CEO of First Beverage Group. That's why craft-beer sales, 10% of the total market, are rising by double digits. It also explains the success of superpremium and flavored vodkas and a slew of artisanal bourbons, ryes and gins being ginned up in small batches and sold at high prices. Downs estimates that he carries 30% more varieties than he did five years ago.

Individualization is all about millennials, who are far more attracted to what marketers call authentic brands and to personalizing their drinks. Wayne Hartunian, U.S. vice president of whiskeys and cognac for major French distiller Pernod Ricard, says, "Millennials overindex with spirits consumption vs. the rest of the population." That's marketing-speak for "They prefer liquor to beer in a big way." Pernod has made Jameson Irish whiskey a huge success. Sales increased 25% in 2011, according to Nielsen, through clever advertising of a 230-year-old brand and by cultivating a corps of bartenders across the country to promote the product.

Women have also changed their drinking patterns: they're now as likely to drink shots as cosmos, says Downs. The liquor companies have focused attention on them, from Absolut's faceted, feminine Glimmer bottle to Beam's creation of 22 products aimed at women, among them the cocktail brand Skinnygirl.

Meanwhile, the big beer brands are flailing with their frat-jock advertising--all coarse jokes and party-hearty pitches. Coors Light touts a label with stripes that change color when cold and then "supercold," apparently believing young men need help comprehending the thermodynamic properties of beer. It isn't working anymore. Even the kids are drinking like grownups.