Beeronomics: Is Craft Beer Recession Proof After All?

I stumbled across this little tidbit when I was looking for some coverage of Boston Brewing's Q1 report (the essence is business is down at Boston Brewing about 5%).  Here is the interesting passage from the Patriot Ledger of Quincy MA:

Craft beer sales appear to be holding up during the recession, boosted by customers strong demographics.

Throughout the U.S. beer industry, overall shipments from brewers have declined 3 percent year-to-date compared with the previous year, said Benj Steinman, president of the trade publication Beer Marketer’s Insights. Import shipments have declined 19.3 percent, with domestic shipments down 1.8 percent.

For the 52 weeks that ended on March 9, craft beer sales rose 12.6 percent from the previous 52-week period, compared with 3 percent for all beer, according to data from market researchers the Nielsen Company.

What is particularly interesting to me is that I had assumed that imports were probably a decent proxy for craft beer sales and I knew sales of imports have been down.  But in reality it seems that consumers are very loyal to craft beers and not shifting to macro from craft.  In economics terms the cross-price elasticity of craft and macro brews appears to be very inelastic, or that beer drinker do not think of macro lagers as a good substitute for micro brews.

This is good news, I wonder if Oregon brewers are experiencing the same thing?  I hear through the grape vine that things have been tough, perhaps this is due to inventory depletion on the part of distributors and retailers (something that would explain the seeming 3 percent down 3 percent up contradiction in the second and third paragraph).  If this is the case, inventory depletions rather than sales, we might see a lot of new orders coming in soon as the inventories run out.

But Boston Brewing's recent struggle also suggests that within craft beer the environment is getting more and more competitive and they need to continue to fight off the challenge of all of the new 'it' beers that come along.  As I mentioned a few days ago, I think this is precisely why Deschutes is pushing its specialty releases hard.

This is also good news for my brother, who is finishing his master brewer certificate program soon and is looking for work.  He has offers in hand, but nothing yet from Oregon.  Anyone hiring out there?

Beeronomics: Recession Proof?

The Portland Business Journal is reporting that Widmer-Redhook lost $33.2 million in 2008.

From the article:

In the [annual] report, the company said one-time charges related to the merger, the economic environment and fuller-flavored offerings from big-name domestic brewers have sliced into the company’s sales.

This is the first place where I have seen it said that offerings like Budweiser’s American Amber are starting to cut into craft brewer's markets. I hope this is not a reflection of the market, which only turned really grim in late 2008. As 2009 is horrendous, this would be very worrying for the state of craft brewers if it represents a general trend.

Beeronomics: Pubs and Recessions

Over on the Beervana blog, Jeff has posted a poll about beer drinking habit changes in a recession.  

In a visit to a half full Portland pub on a recent Friday night, he wondered whether pub going is declining in the recession in favor of drinking at home.  In the comments a reader mentions that pub going for her has not decreased as pubs are a substitute for higher priced bars and restaurants.

As I wrote in the comments, it is an interesting question: are brewpubs less expensive alternatives to higher priced bars and restaurants - or are they more expensive alternatives to drinking beer at home? I suspect both, but which is dominant in a recession?

My infrequent pub going experience has been to pretty packed pubs in Portland these days, so I would imagine that the former effect is at least as large as the latter in Portland.

But news from the "Land of Pubs" suggests that this is not generally true.  Apparently in-pub beer sales are down almost 10% in the UK.  Supermarkets and off-licenses (shops that are allowed to sell carry-out alcohol) beer sales are down 6.5%.  So it seems that Brits are substituting carry out beer for pub drinking, but overall the pub industry in the UK is in big trouble.  

What about for you, still frequenting the pubs?