Competitive Alcohol market but prices never come down

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madscientist451

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So Sam Adams Stock took a dive, but this is after their earnings were up by 30%+. The article below says they over estimated potential sales of their Truly hard seltzer and that's why they missed their earnings target by $50 million:

The article explains that with 220 seltzer brands on the market, consumers are getting "confused".
But with all the competition among seltzer, craft beer and other alcohol producers, why don't consumers ever see price reductions?
Sam Adams is sitting on excess inventory and is a well established producer, why don't they lower their price, dominate the market, and drive less established competitors and inefficient producers out?
How much does it cost to make hard seltzer anyway? Shouldn't it be cheaper than everything else?
Simple econ 101: more competition in the marketplace = better products and lower prices.
Rant over.....
 

Birrofilo

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But with all the competition among seltzer, craft beer and other alcohol producers, why don't consumers ever see price reductions?
You don't expect that competition brings prices down and down, do you? Competition keeps prices at a normal level of remuneration of risk and capital, it keeps them stable.

Without competition, prices would be higher.

Here in Italy, in "deep discount" supermarket chains, beer, vodka and gin of very decent quality (actually some of them very good) are sold at prices which are hard to believe, considering the €8/litre excise tax on anhydrous alcohol. "Brand" products cost more, and sometimes are actually worth more, but I do believe that without the competition from the cheap guys the prices would actually be higher. I can find very good beer at €1 - €1,30 per liter. That includes 10% VAT and an excise tax of €0,03 per Plato grade per litre, plus obviously the glass, the label, the distribution cost, the seller margin etc. Sometimes this beer is Czech or Polish or Romanian so it has to travel a lot to arrive to Italy. But one can find inexpensive Italian beer as well, which I tend to like more than the typical Moretti or Peroni.

In the cathegory bitter - amaro - grappa - mistrà etc. I still have problems in finding decent and cheap products, though.
 

bracconiere

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in my experience that's the way it always works with drugs. why i'm glad alcohol is easy to make. that's competition i like!


last time i bought a twelve pack of MGD for a kick, i was expecting it to be $8 like days of old. they wanted f'n $15 for it!

just think of this, and how much you want to punch his face!

1627157057051.png
 

Gnomebrewer

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Sam Adams is sitting on excess inventory and is a well established producer, why don't they lower their price, dominate the market, and drive less established competitors and inefficient producers out?
If they lower their price to get rid of excess inventory, the product is devalued in consumers eyes and it's very hard to raise the price again in the future. It's only worth doing to get rid of stock of a discontinued line. If they used a strategy like that to drive out competitors with the intention of raising prices again afterwards, it would be anti-competitive misuse of market power (illegal in Australia, not sure what the laws are in the US).
 

bkboiler

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This is a classic scheme they teach you in business school...
If you think demand is going to explode, you can go all in and produce as much as you possibly can (three shifts, overtime out the wazoo)...
If you overpredict, then you're left holding all that inventory....
My guess is that they make pretty high margins on this stuff if they were willing to overproduce that much possibly.
10% of their revenue overpredicted is a lot when truly is probably only 20% of their portfolio.
That means they were off of demand by like a factor of 2x....oof!
 

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