ABInBev Starting price war?

[okiedog]

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.

Rolling Rock isn't bad as a low cost, low taste beer. I drank some back in upstate NY, years ago, but even on tap it didn't seem to me to have much flavor. Like a lot of beers, it's better on tap. But those green bottles? I'd never buy those skunky beers in a six pack. Same with Corona (clear bottles) here in Cali. To each his own though. Since I started brewing my own though, even my wife, who preferred wine, likes the beer. Viva La Craft (Independent Craft that is).

 

[Genuine]

This read was eye opening to me as far as pricing and strategies.

https://www.goodbeerhunting.com/blog/2017/5/5/watch-the-hands-not-the-cards-the-magic-of-megabrew

 

[madscientist451]

Great article, thanks for posting!
Anyone interested in beer economics and strategies should check that out!

So now my mind is changed, Mega beer isn't lowering their "premium" beer prices.
What looks more likely, is continued "sale" prices on brands like Goose Island IPA and other "craft" beers now owned my the big boys to put pressure on regional and national craft brewers.

I was just in a beer store last night and was thinking of trying the Avery Bug Zapper sour ale. But the $13+ price reminded me why I brew my own.

 

[Cape Brewing]

You guys know that Good Beer Hunting is partly owned by AB Inbev righf?

http://adage.com/article/cmo-strategy/ab-inbev-s-move-digital-publishing-backlash/309291/

... if you didn’t know that... now go back and re-read that article. Personally, I read the whole thing as nothing more than pure marketing bullshti that uses some accounting terms to try to pretend they’re not doing exactly what they’re doing.

Go to any liquor store and compare AB Inbev “craft” brands prices to any other craft beer.

... and I’m not even saying they shouldn’t. Why wouldn’t they? That’s business 101. If you can create economies of scale and as such provide a product at a lower price?? Again... that’s business 101. But don’t bullshti me and pretend you’re not doing it. THAT is a big reason why so many have problems with AB Inbev in the first place... it’s whole “whaaaat??? Ussssssss?? Noooooo, we would never do that!” As you’re literally watching them do that.

“Whaaaaat??? Us??? Pay to play???? Neeeeeeever” as they stand in front of a row of brand new Bud Light coolers that are worth more than the entire mom and pop liquor store they’re in.

 

[Andrew Hodgson]

I would argue the biggest threat to independent craft breweries is not AB Inbev it will be the impending US economic contraction. Once that happens and we get through the other side we will see the real staying power of this independent craft beer uptick.

 

[kh54s10]

I don't know the present economics of the tariffs. But the reaction was so quick that in some cases they were complaining of price increases BEFORE the tariff went into effect.

I believe that many companies of all types will use the excuse of the tariffs to increase prices, often by much more than to offset any increase.

If AB Inbev starts selling their craft brands and $8.99 a case, then there might be signs of a price war. But when it is only one brand, of IMO swill, that is really meaningless.

 

[RPh_Guy]

You guys know that Good Beer Hunting is partly owned by AB Inbev right?

Careful, someone might call you a yupster.

 

[betarhoalphadelta]

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.

Agreed. The "local brewery" is IMHO one model that can and will survive. The margins in a captive tap room are great. We might also start seeing more and more brewpubs. As Sam Calagione said in his book, the great thing about a brewpub is that the margins on the beer can help the restaurant survive, and the traffic in the restaurant offsets some of the need for the brewery to generate its own traffic. I can tell you that I'm seeing more and more breweries opening that are actually serving food rather than relying on the food trucks or other outside service.

I think one of the biggest problems breweries face today is people who got into the business with outside financing based on plans of growth to tap handles and retail, and suddenly their investors realize they're screwed and that market is too crowded for growth. The business plan for a small local brewery makes sense. Trying to grow into the established market takes a level of differentiation that most craft breweries haven't established, when all they do is follow the trend of the next "super-juicy hazy IPA!"

I think the market will see a contraction. It'll be a pinch where the bigger regional / national craft breweries thrive, and the local tap rooms thrive, and the pinch will be those mid-size breweries who get squeezed out of retail / tap handles but can't generate enough traffic at their tap room to cover costs.