Tuesday, January 27, 2015
YOLO COUNTY NEWS
99 CENTS

Point of Brew: Beer sales rebounding in tough economy

MichaelLewisW

By
From page A11 | October 10, 2013 |

Let’s not kid ourselves: Beer sales have not exactly sparkled in the past few years.

There have been several reasons for this, including the general economic conditions of the country. Oddly enough, brewers have long considered beer sales to be recession-proof; the idea is that although some drinkers drop out of the beverage market in poor economic times, they will be replaced by those moving down-market to less expensive products. Less expensive is where they will meet beer.

That general view has not held up too well recently. Part of the reason for this is that there has also been a move away from traditional beverages such as ordinary domestic beers to more exotic tipple found among imported and craft beers, specialty wines, ciders, flavored beverages, so-called RTDs (ready to drink mixtures) and distilled spirits of many different kinds.

As a result, the major brewers have watched the sales of their traditional flagship brands wallow in the doldrums. However, the specialty beers of the major brewers are doing well because beer drinkers are rewarding brewers of more imaginative and exotic or even extreme beers. Thus, the craft beer segment of the industry — though some producers these days are much too large to be considered microbrew or even local brew — is enjoying vigorous growth on a percentage basis (14 percent plus) and now commands some 6.3 percent of the domestic market.

It is also interesting to watch innovations in packaging: for example, craft brews are embracing the beer can, which has the potential to expand their reach; there is also developing legislation, favorable to craft brewers, on how they may sell their beers. Michigan has just passed legislation that could boost sales. A new law, which is long overdue nationwide, requires that beer sold on draft as a “pint” actually contains 16 fluid ounces; most “pint” glasses now in use contain at best 14 ounces and even as little as 12 ounces.

A company called Techtonic collects the necessary data and reports results such as these; my source of information is an Oct. 3 piece in USA Today by Bruce Horovitz quaintly titled “Cheers: Beer sales are foaming up.” The hard facts are that overall domestic beer volume increased 1.2 percent to 2.8 billion cases with an increase in retail sales of 3.5 percent to $62.3 billion; this just about replaces sales lost in recent times.

Much of this is from sales of innovative super-premium beers such as Shock-Top brands from AB-Inbev and Blue Moon from Miller-Coors and other beers that cost just slightly more to produce but sell for a noticeably higher price. In other words, the large domestic brewers can do exactly what craft brewers can do and, in the long run, probably can do it better than all but the most extraordinary craft brewers.

There is no question that it pays to advertise, especially in any saturated market (that is a market in which virtually all that can be sold is being sold). Spending can increase the overall beer space and one brewer can capture another brewer’s sales. Spending in major markets during 2012 grew by 6.5 percent to $1.3 billion or to nearly 50 cents a case. Most of this, of course, is spent on television.

One of the interesting developments is the steady rise of cider (that is fermented alcoholic cider) in the marketplace. Because this product is often sold in brown bottles that look like beer bottles, contain the standard 12 fluid ounces and, like beer, is a low-alcohol product, cider is often counted in the category of beer sales. Strictly speaking, this is not quite Kosher because cider, being fermented fruit juice, is by definition a wine.

However, brewers have never been particularly reluctant about niceties when there is a market available that is worth attacking. Thus we see the major brewers entering the hard (alcoholic) cider market by promoting new products such as Stella Artois Cidre from AB-Inbev, Redd’s Apple Ale from Miller (a product totally dominated by apple, not ale, flavors), Mike’s Hard Smashed Apple from Mike’s (a Canadian-owned company) or Angry Orchard cider products from the largest American-owned brewery, Boston Brewing Co. (makers of Sam Adams among many other beer brands).

Alternatively, brewers have bought existing brands such as Strongbow (a British product formerly from H.P. Bulmer) now owned by Heineken International, or the Woodchuck range of products from the Vermont Hard Cider Company of Middlebury, Vt., now owned by C&C Group (Cantrell & Cochrane) of Ireland that also produces Magners cider. Woodchuck is the biggest selling brand of cider in the USA with nearly half the market.

The final, though probably quite minor reason for an uptick in beer sales, is that more diners are asking for beer in restaurants to accompany meals. There is likely an economic component to this because some restaurants charge exorbitant prices for wines and cocktails; in fact, 25 percent of a total dinner bill can be the cost of alcohol. A much cheaper alternative, beer, that can aid gustation as well as any wine, is always welcome under such circumstances.

— Reach Michael Lewis at cymro@sbcglobal.net. Comment on this column at www.davisenterprise.com

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