Beeronomics: Craft Brews and the Recession

Jeff Alworth has a wonderful post on the 25th Anniversary of Widmer Brothers Brewing Co. Well worth a read and congrats to the Brothers Widmer!

Unfortunately, this economic downturn is starting to take its toll on the craft brewing industry in Oregon. The Portland Business Journal is reporting the $33 million loss that the Craft Brewing Alliance, the company created by the Widmer - Redhook merger, suffered in 2008. Trends in the local brewing industry are worrisome as consumers abandon the more expensive craft brews for cheaper substitutes. From the article:

December and January shipments for all Oregon craft brewers fell by 5 percent and 7 percent, respectively. But in January and February, shipments for all beer in Oregon actually rose by 10 and 20 percent, spectively. “It would appear trading down from higher-priced, locally-made beer has already begun in earnest,” said Brian Butenschoen, executive director of the Oregon Brewers Guild.

This substituting cheaper alternatives has always been my concern for the local brewing industry. Just as department stores like Macy's are suffering while Walmart is thriving, during a downturn the purveyors of cheap substitutes tend to do well relative to their more expensive counterparts. This works both ways, however, which is part of the reason why craft brewing did so well during the last boom period. As this recession is going to be long and deep, I wonder how the breweries will fare. This is also a time in which big brewing conglomerates might try and snap up ailing independent brewers so that they have products with which to compete when the recession turns around.