A Good Beer Blog

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Have you read The Unbearable Nonsense of Craft Beer - A Rant in Nine Acts by Alan and Max yet? It's out on Kindle as well as Lulu.

Maureen Ogle said this about the book: "... immensely readable, sometimes slightly surreal rumination on beer in general and craft beer in particular. Funny, witty, but most important: Smart. The beer geeks will likely get all cranky about it, but Alan and Max are the masters of cranky..."

Ron Pattinson said: "I'm in a rather odd situation. Because I appear in the book. A fictional version of me. It's a weird feeling."


Comments

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Stan Hieronymus -

When your beer costs more and you sell more of it then you will naturally gain a larger percentage of dollar sales.

The following numbers are totally made up and also pretty simple because I'm a simple guy. Let's start with a market that includes 100 6-packs, and doesn't change from one year to the next.

Year 1
Category 1 brewers sell 6 six packs at $8 per and make $48
Category 2 brewers sell 94 six packs at $5 per and make $470
Category 1 brewers' sales equal 9.2% of overall dollar sales

Year 2
Category 1 brewers sales grow to 7 six packs, they do not raise prices. Sales = $56
Category 2 brewers sales fall to 93 six packs, thus $465
Category 1 dollar sales now 10.7% of overall sales

I hope my math is right. In fact, both small breweries and large breweries raised prices, volumes shifted, etc. This simply illustrates how a smaller producer who charges a higher price may claim a larger dollar share when growing at a faster pace, and is not meant to contest/address the other questions posed here.

Alan -

Not sure what you mean by the last bit but what you have written describes the increases for (i) sales or 14/17.25% and (ii) inflation or 2.1/17.25%. It's the third component, the premium beyond those two expansions you describe, that extra 1.173 billion that hangs our there every year.

Velky Al -

Something that has been trotting through my brain since the infographic came out was how much of the increased market share is a product of being in a shrinking industry? I have read that volume in the industry peaked at 200 million barrels in 1990 and has been steadily shrinking ever since, down to about 190 million now. I have also read that beer consumption in general is falling, while wine and spirits increase.

While the numbers are certainly impressive, I am convinced that over the next five or so years you will see the Big 3 picking up more and more 'craft' breweries as their founders' look at their exit strategy.

Alan -

Well, there is that, too. When Sam Adams if snatched up by SABMIller how will we of "the movement" cope emotionally?

Having all that extra change in the kitty certainly won't deter the mergers and acquisitions folk.

Jeff Alworth -

have no clue if these figures mean anything.

I think they mean everything. It's what I tried to highlight in my post--but perhaps failed. The notion is this. Large breweries are doing their best to sell mass market lagers in volume, and one of the main ways they compete is by keeping prices low. "Craft" breweries* are competing on flavor and so are able to raise prices. That's why craft breweries are grabbing a bigger percentage of the dollar pie than they are the barrelage pie.

And because beer is business, not a pissing contest, dollars matter a lot more than barrels. As a business matter, the loss of dollars to the craft segment is far more worrying than loss of barrels to them.

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*With apologies, caveats, and regrets for the term.

Alan -

You know when I writing things like I "have no clue if these figures mean anything" it usually means I have some clue what they mean! ;-)

My concern is that the consumer still is fed the line about how tough it is brewing good beer. Done well it is very profitable but without a consumers organization no one asks whether this is entirely to the consumer's benefit... or on his back.

Jeff Alworth -

That is a theme I've recognized around here.

dave -

I'm missing where the link talks about brewer expenses? You mention "1.15% more post-expense revenue". It is certainly more revenue, but its not a guarantee that it is more then expenses (yes, that is what it should be but not always... Nokia comes to mind where their revenue was increasing but their expenses were increasing more). If the link had said operating income, instead of revenue, then that would mean there was 1.15% more after expenses. I think... I was never good at Finance... or did I just win myself an orange or an apple?

Alan -

Yes but, let's be honest, there are four components in the figure.

1 - previous year's revenue
2 - increased sales
3 - inflation
4 - bonus of 1.15%.

If 1 and 3 were not taking care of expenses there is no 4. Keep in mind this is me making this up but I think they can't suck and blow. Post tax post inflation revenue increases are not the signs of struggle.

Alan -

None of which, now that I think of it, takes into account the deduction for capital expenses due to deferral of depreciation.

dave -

This is true (on both comments). I was looking a bit too micro for macro data. There are definitely some percentage of breweries making a bonus (with a certain percentage of that making more then a 1.15% bonus... with those being the one's investment bankers will be going after).

capt-capsaicin -

First, 1.15% of $10.2 billion is NOT $1,173,000,000. It's $11,730,000. Big difference.
Second, let's be honest, Ska, New Belgium, Avery, Oskar Blues, Lost Abbey, Green Flash, Stone, Dogfish Head are all making bank. No doubt, look at their growth. They have gone beyond just passion and the love of brewing. What they have done is what any good dealer does. They have created a market where one did not exist before. they have created junkies that will pay $20 for a bomber of DIPA when 10 years ago they would not pay $10 for a bottle of good let alone crappy wine. Folks are paying better money for better product and this is where your figures are coming from. Now excuse me, I must attend to my Brainless Golden Ale.

Alan -

Friggity frig. I knew that. It's not "$1.173 billion" either. Funny how that works. But top drama queen points for "NOT" schoolboy. The figure is actually $117,300,000 which is a hell of a lot divided by production. If Sam Adams has 23% of barrels sold in 2012 that is post-cost, post-tax, post inflation over $26 million. A small brewer? The net revenue declared for 2012 was only $6.6 million but they have also re-bought almost $30 million in shares.

I don't think that 1.15%, though, is the $20 bucks for a bomber. It's the $8.49 six pack which could be as easily $7.99. That's the sort of thing that attracts the buyers of businesses. Steady solid money.