ABInBev Starting price war?

[madscientist451]

Mega brew has been falling in market share for years; is ABInBev starting a price war to get
beer drinkers away from high priced "craft beer"?
Around here, Rolling Rock is selling for $8.99 for an 18 pack.
Has anyone else noticed low priced "specials"?

 

[danielthemaniel]

I'm in Indiana and I'm a manager at a Kroger grocery store. As a brewer, I'm always keeping an eye on the trends of beer costs. I will say we ran the 18pk of Rolling Rock last year for $9.99 but it hasnt gone on sale for about a year now and is a consistent $14.99. I havent noticed any price discrepancies from the norm, meaning we run specials for holidays especially the drinking based ones. During the hop and grain harvest season we have a chance to buy a lower cost shipment of last seasons ingredient beers before the new ones come out which is accompanied by a price hike annually.

 

[TBC]

Was at the distributor today here in PA and they had Bud Reserve for $10.99 a case. There was a whole pallet. I’m assuming it didn’t go over well and they are just trying to get rid of it.

 

[RPh_Guy]

Bud Reserve

Bad tasting molasses water, the premium version of bad tasting water. Now on sale while supplies last!

 

[bleme]

There was a news "special report" this weekend claiming that beer prices are going to skyrocket because.... global warming!

 

[schematix]

I’d welcome a price war. The price of craft beer has gotten way out of control. Anything decent is approaching $2/bottle.

On the rare occasion I buy beer I frequently grab goose island IPA because it’s one of the few that is always fresh, is the cheapest by $2 and is better than most.

 

[RPh_Guy]

You do realize Goose Island is ABInBev, right?

I've mostly given up on buying bottles of commercial beer, certainly not a six-pack, and especially not from inbev. Don't care how cheap it is.

Homebrew FTW!

 

[day_trippr]

I can't see the mechanics that would support a craft beer price war. That's a paradigm common to widely available competing commodities. eg: Bud and MillerCoors can beat each other's brains out in every national venue. Not really the same as the narrowly marketed craft business.

ie: I wouldn't expect craft to get caught up in a macro fistfight...

Cheers!

 

[madscientist451]

The usual laws of economics don't seem to apply to beer. More producers should lead to more competition for the same amount of drinkers and lower prices for consumers.
But lately, prices keep on rising, and as long as people keep on buying that trend will continue.
Nationwide though, beer is losing market share to spirits and wine, this could be a result of higher and higher beer prices.
There do seem to be a lot of sale prices around here being offered, but maybe that's just the usual summertime activity, I only noticed it because the Rolling Rock was $8.99 for 18, and I used to drink it years ago.

 

[RPh_Guy]

The usual laws of economics don't seem to apply to beer. More producers should lead to more competition for the same amount of drinkers and lower prices for consumers.

Might demand be increasing?

 

[day_trippr]

This shows craft and imports have been growing well, at the implied expense of the macros.

This one is interesting. Brand loyalty may be an anachronism soon. Could explain how so many micros can survive.

Cheers!

 

[schematix]

You do realize Goose Island is ABInBev, right?

I've mostly given up on buying bottles of commercial beer, certainly not a six-pack, and especially not from inbev. Don't care how cheap it is.

Homebrew FTW!

I buy with an eye for quality and price. I’ve had more expensive bad “craft” brew than good and cheap.

I am not yupster enough to make a beer decision based on brand alone.

 

[Ozarks Mountain Brewery]

I actually prefer my beer over store beer, some are ok and some started having an oily texture to them, not liking it at all, most give me the craps or a hangover, mine never does go figure

 

[RPh_Guy]

I find goose island to be very average.

Given the option between two average brews, I'd pick the one that's not owned by a monopolistic mega corp. Guess I'm a yupster!


I'd definitely take one of my brews over either.

 

[Northern_Brewer]

There was a news "special report" this weekend claiming that beer prices are going to skyrocket because.... global warming!

Well it's certainly true that it will be a difficult year for the barley market, the spring barley crop in much of Northern Europe has been a disaster thanks to a hot summer. But that's weather, not climate. Been great for winter barley though, people were even harvesting Otter in June which is unheard of.

If the weather keeps up it will be good for hop quality, not sure about quantity though.

But just generally increased demand for beer and higher hopping rates per barrel mean that hop prices have shot up in recent years - EKG has almost tripled for instance. It takes time and capital to increase hop production, so there's bound to be price craziness as the market adjusts to the "new normal".

 

[day_trippr]

Considering the hopping rates for the neipas it's gotta be stressing the heck out of the supply chain for the "juicy" strains. Prices are showing the effect - assuming there's any even available at this half of the year.

I've been noticing some recipes that are trying to use what traditionally were bittering strains in post-boil applications. When you glance at the huge price differential between say Apollo, CTZ and Chinook vs Mosaic, Citra and Galaxy, there's gotta be more to it than experimentation...

Cheers!

 

[Cape Brewing]

Personally I think there will be pricing pressures on craft but it won’t come from macro brands...
It’ll come from within craft (and we’ve already started to see that in some areas).

Macro and craft, in some ways, are two completely different products. Craft is so much more about being local (I think is more to that than people appreciate). It’s about image... which a lot of craft breweries intentionally price to in order to be perceived as a “premium product”. It’s about hype and being part of an “in crowd” (do a blind tasting with the average consumer and see what % can pick out any given brewery’s beer).

All of those factors are real and all of them mark very clear boundaries between macro and craft... so macro can price anywhere they want and it’s not going to effect a very large percentage of craft fans.

That said... with every week that goes by, another pile of breweries open and another pile of breweries that WERE open, refine their process and their beer gets a little better. That competition has no way of NOT pushing down prices. You are already seeing a lot of “WTF am I going to stand in line to three hours and pay $7 a bottle for when I can walk in and buy the same, or better, for $3 a bottle two blocks from my house?”

That said... “standing in line” as an achievement and driving of “premium craft” is absolutely still a thing... but that’s tapering off big time in terms of percentage of craft beer fans willing to do it. And once the whole hype monster really dies down, it’ll be an all-out price war within craft

 

[betarhoalphadelta]

Personally I think there will be pricing pressures on craft but it won’t come from macro brands...
It’ll come from within craft (and we’ve already started to see that in some areas).

Macro and craft, in some ways, are two completely different products. Craft is so much more about being local (I think is more to that than people appreciate). It’s about image... which a lot of craft breweries intentionally price to in order to be perceived as a “premium product”. It’s about hype and being part of an “in crowd” (do a blind tasting with the average consumer and see what % can pick out any given brewery’s beer).

All of those factors are real and all of them mark very clear boundaries between macro and craft... so macro can price anywhere they want and it’s not going to effect a very large percentage of craft fans.

I think there is more to it than that, though...

I don't think something like Rolling Rock being priced low is going to affect craft. I suspect that's a way to get macro drinkers to remember that Rolling Rock exists and goose the brand relative to other macro.

But I think macro-craft, i.e. all the breweries/brands that the macros are acquiring, could cause a price war. Especially as the popularity of breweries wanes from the peak. I think right now we're still in the "golden" era of a craft beer boom (whether you call it "bubble" or not is up to you), and I'm not sure that it's going to remain hip to be visiting breweries at the level they need us to in order to remain afloat.

If the popularity does wane a bit, and the "crafty" brands use their market power to try to gain market share, they're going to do it partially with pricing. I already see it. Goose, Lagunitas, Golden Road, Founders, etc are attacking the market through things like packaging [more than just 6-packs, like the 15-packs, offering both can/bottles side by side, which leaves less shelf space for craft, etc], and by trying to hit price points that craft isn't trying to hit. At the same time, Constellation is trying to maintain Ballast's "super-premium" pricing strategy--one of the reasons they acquired Ballast in the first place, so at least there is one that is avoiding that price war.

So yeah, I don't think OP's example is an effort of a price war aimed at craft. But I can see the big breweries using pricing as part of a multi-layered strategy to crowd craft off of store shelves and tap handles.

 

[Morrey]

Is the tariff on imported metal for cans responsible for the rumored price hike on canned beer and soda? I saw recently that Coke was going up.

Of course canners/bottlers could go up on cans only and leave the bottle prices as is, but that is highly unlikely to happen. Or is the OP's post totally unrelated to the rumored tariff increases on imported steel/metals and related to beer wars among the big players?

 

[schematix]

Currently aluminum costs roughly $1 per pound. It is a commodity that fluctuates, but over the past 30 years has actually been quite stable. The tariff is 10%. So that amounts to about $0.10 per pound.

There are about 31 cans per pound of aluminum. Figuring some scrap in the process of converting bars of aluminum to sheets, then to circular blanks, let's be conservative and say 25 cans per gross pound.

So a case of canned beer will have an additional cost of $0.10 in it.

 

[Morrey]

Currently aluminum costs roughly $1 per pound. It is a commodity that fluctuates, but over the past 30 years has actually been quite stable. The tariff is 10%. So that amounts to about $0.10 per pound.

There are about 31 cans per pound of aluminum. Figuring some scrap in the process of converting bars of aluminum to sheets, then to circular blanks, let's be conservative and say 25 cans per gross pound.

So a case of canned beer will have an additional cost of $0.10 in it.

Good point. Let me ask your opinion:

I have an AA can seamer and buy empty cans w/lids to fill with beer and seal. I just looked at empty cans by the case and they just went up 18% since my last order. Is this possibly in response to the tariff? Based on the math you provided, the amount of increase is quite a bit more than the real costs incurred.

 

[bleme]

So a case of canned beer will have an additional cost of $0.10 in it.

Although, I wouldn't be surprised to see a price hike of $2-$4, since they have someone else to blame it on, and most of the public seem completely incapable of math...

 

[AZCoolerBrewer]

Although, I wouldn't be surprised to see a price hike of $2-$4, since they have someone else to blame it on, and most of the public seem completely incapable of math...

I’m not sure but I think that an increase in the commodity cost ends up rolling up like a snowball because the percentage margin has to remain the same for each pair of hands the material goes through so by the time the product has been manufactured and marketed the cost of the raw material can in essence triple or quadruple.

 

[AZCoolerBrewer]

As far as InBev starting a price war. I think that have, but in the other direction. They worked with the distributors and with their own craft buy outs to raise the cost of craft beer. This way everyone wins but beer drinkers. Independent breweries can charge more, InBev makes big bucks on their acquisitions and there’s no pressure to lower prices on their commodity beer products because that is a different market and they are getting their cut of craft. I have noticed that your New Belgium and Sam Adams type beers have most recently started to get off the money train and become more competitive again.

 

[schematix]

Good point. Let me ask your opinion:

I have an AA can seamer and buy empty cans w/lids to fill with beer and seal. I just looked at empty cans by the case and they just went up 18% since my last order. Is this possibly in response to the tariff? Based on the math you provided, the amount of increase is quite a bit more than the real costs incurred.

My thought would be that aluminum can supply is actually a very competitive industry with low margins. Aluminum costs for the metal alone are up about 1/3 in the last 5 years.

So maybe everyone was just taking less profit and now some people are trying to use this as an opportunity to make a price increase. Others may follow suit.

 

[Jayjay1976]

Cheap beer appeals to cheap people who don't value quality.
Remember the good ole' days of slugging down nondescript macro-swill, blissfully unaware of the intentional homogenization of American beer culture to slake the unquenchable thirst of an unrelenting beast we call capitalism? Those were the days! So maybe this is just big beer trying to MAGA, amiright?

 

[ancientmariner52]

Cheap beer appeals to cheap people who don't value quality.
Remember the good ole' days of slugging down nondescript macro-swill, blissfully unaware of the intentional homogenization of American beer culture to slake the thirst of the unrelenting beast we call capitalism? Those were the days! So maybe this is just big beer trying to MAGA, amiright?

I agree. 'Unaware' is the key word here. After years of craft beer and homebrew, I recently bought a 12 of what used to be my favorite macro beer, because I was tired and didn't want to make another stop. Weak, watery, flavor-free. I don't see many people going back once they become aware of real beer, regardless of price.

 

[Cape Brewing]

I think there is more to it than that, though...

I don't think something like Rolling Rock being priced low is going to affect craft. I suspect that's a way to get macro drinkers to remember that Rolling Rock exists and goose the brand relative to other macro.

But I think macro-craft, i.e. all the breweries/brands that the macros are acquiring, could cause a price war. Especially as the popularity of breweries wanes from the peak. I think right now we're still in the "golden" era of a craft beer boom (whether you call it "bubble" or not is up to you), and I'm not sure that it's going to remain hip to be visiting breweries at the level they need us to in order to remain afloat.

If the popularity does wane a bit, and the "crafty" brands use their market power to try to gain market share, they're going to do it partially with pricing. I already see it. Goose, Lagunitas, Golden Road, Founders, etc are attacking the market through things like packaging [more than just 6-packs, like the 15-packs, offering both can/bottles side by side, which leaves less shelf space for craft, etc], and by trying to hit price points that craft isn't trying to hit. At the same time, Constellation is trying to maintain Ballast's "super-premium" pricing strategy--one of the reasons they acquired Ballast in the first place, so at least there is one that is avoiding that price war.

So yeah, I don't think OP's example is an effort of a price war aimed at craft. But I can see the big breweries using pricing as part of a multi-layered strategy to crowd craft off of store shelves and tap handles.

I think I mostly agree but also think you’ll see pricing strength at the small local level.

I think the days of Stone, Lagunitas, etc are... not winding down... but as more and more local breweries open, those large national brands are going to lose more and more share. And while I agree tap space and shelf space is getting tighter, ya gotta remember that the small local brewery.... They don’t need those tap handles and that shelve space. A lot of small breweries are perfectly happy being a small local brewery and have zero plans or expectation to try to become a large regional.

If you’re not trying to become the next Greg Koch, you’re not sweating increased pressure across a couple hundred accts. Chances are there is a tap room involved throwing off multiples of margin compared to those accts anyway.

I think if you have a loyal local following, you’re going to be pretty insulated from even the “macro craft” prices coming down.

And bah!! Bubble schmubble. That’s a whole other thread.

[emoji482]

 

[madscientist451]

most of the public seem completely incapable of math...

Agreed....or just don't really care enough to gather the actual numbers to DO the math....
But back to the original topic...after reading the above and looking around at some more prices, I don't think a price war will develop until Bud Light and other Mega beer brands loose another 15-20% of market share. At some point the excess capacity (and diminished profits) will catch the attention of the accountants and then something will be done. For now, Mega beer is doing just fine, so they will put some brands on sale, but generally maintain or even raise their prices on their core products.
I still say, however, a craft beer industry "shakeout" is looming....

 

[RPh_Guy]

What percentage of breweries opened within the last 5 years and may not even be operating in the green yet?
Think they'll participate in a price war? Doubt it.
Think they're vulnerable to a price war? Doubt it, if they make decent beer.

It's my understanding that pre-prohibition there was a brewpub on every corner. Seems like we're heading toward that eventuality just based on my observations on how many are opening and the huge demand for their products.

For several reasons I don't have much of an opinion on price.