sidneysaintpe
Active Member
- Joined
- Sep 15, 2008
- Messages
- 34
- Reaction score
- 1
I don't know where to start!
I am an MBA student and have done a lot of research on the beer industry. First, why do you want to enter into a price war with the macro brewers?? I ask this because, 1. They WILL win and 2. Beer is price inelastic! Demand is NOT affected by price! This is shown in multiple studies:
Ornstein and Hanssens (1985) -0.142
Nelson (1999) -0.200
Nelson (2003) -0.174
As you lower price, demand barely moves so, in effect, you are just transferring economic value to the consumer for nothing + attracting the attention of the big brewers who will crush you if you start to gain any kind of traction!! You must keep price integrity of your respectable beer segment!
I ran multiple regressions on all types of data (California) and saw that the only thing that affects beer demand there is TPI (personal income). My results showed that overall beer demand is not affected by price BUT as people made more or less income they traded up to craft beer or down to macro swill accordingly. People will drink beer in all economic conditions; what beer they drink is only determined, more or less, by their income. Everything else was statistically insignificant!
Further:
From Texas Alcoholic Beverage Code Title 3, Ch. 12;
"Brewpubs are not allowed to distribute (self or otherwise) in Texas. Shipping breweries can self-distribute if they manufacture less than 75,000 bbls of beer per year. You need a manufacturer's license in Texas to make "beer" defined as less than 4% ABW. You need a brewer's permit to make "ale" defined as more than 4% ABW. The 75,000 bbls is calculated as total "beer" and "ale"."
So you can self-distribute as long as you aren't a brew pub or produce more than 75,000 bbls a year.
However, the 25% that distributors tack on should not be looked at in a vacuum. You must look at your ability to achieve the same market penetration for that cost. You can not due to the economies of scale and scope the distributors enjoy. This is a distributors value-add!
Even then it is highly unlikely that a distributor will pick you up until you build sales on your own (especially due to the massive consolidation in the wholesaler industry)
Good luck!
I am an MBA student and have done a lot of research on the beer industry. First, why do you want to enter into a price war with the macro brewers?? I ask this because, 1. They WILL win and 2. Beer is price inelastic! Demand is NOT affected by price! This is shown in multiple studies:
Ornstein and Hanssens (1985) -0.142
Nelson (1999) -0.200
Nelson (2003) -0.174
As you lower price, demand barely moves so, in effect, you are just transferring economic value to the consumer for nothing + attracting the attention of the big brewers who will crush you if you start to gain any kind of traction!! You must keep price integrity of your respectable beer segment!
I ran multiple regressions on all types of data (California) and saw that the only thing that affects beer demand there is TPI (personal income). My results showed that overall beer demand is not affected by price BUT as people made more or less income they traded up to craft beer or down to macro swill accordingly. People will drink beer in all economic conditions; what beer they drink is only determined, more or less, by their income. Everything else was statistically insignificant!
Further:
From Texas Alcoholic Beverage Code Title 3, Ch. 12;
"Brewpubs are not allowed to distribute (self or otherwise) in Texas. Shipping breweries can self-distribute if they manufacture less than 75,000 bbls of beer per year. You need a manufacturer's license in Texas to make "beer" defined as less than 4% ABW. You need a brewer's permit to make "ale" defined as more than 4% ABW. The 75,000 bbls is calculated as total "beer" and "ale"."
So you can self-distribute as long as you aren't a brew pub or produce more than 75,000 bbls a year.
However, the 25% that distributors tack on should not be looked at in a vacuum. You must look at your ability to achieve the same market penetration for that cost. You can not due to the economies of scale and scope the distributors enjoy. This is a distributors value-add!
Even then it is highly unlikely that a distributor will pick you up until you build sales on your own (especially due to the massive consolidation in the wholesaler industry)
Good luck!
)
