US Beer Sales Down, But Craft Way Up..Again

From the Sacramento Bee, another story on the beer business:

For the fourth year in a row, the beer industry has continued its declines and lost 1.9% to total 2.8 billion cases. According to the Beverage Information Group's recently released 2011 Beer Handbook, continued declines in the Light segment continue to contribute to the overall losses in the industry. This segment has seen declines amongst its core brands and is only seeing pockets of growth from newly introduced line extensions.

Despite the struggling economy, growth was seen among the Craft segment as well as Imports. The higher-priced Craft segment continued to post solid gains due to consumers' attraction to the interesting flavors craft brewers offer. Imports, which previously have been experiencing declines, gained 0.9% to 362-8 million cases last year, but that is still 11.1% lower than its pre-recessionary levels.

From Monday's post on falling macro sales, the theme was that the big brewers are seeing sales of their regular beers drop, while light beers held steady - however, this appears to be isolated to the beers highlighted as the overall trend is down.  Overall beer consumption in the US is falling which suggests that beer is not recession proof, as the anemic economy appears to be having an impact. 

But craft beer does appear to be recession proof, but that clearly comes from the cannibalization of the macro market and not from overall market growth.

UK Beer Sales Switching From Pubs to Supermarkets

Photo: REUTERS

This is fascinating: the Telegraph is reporting in the UK, supermarket beer sales are poised to overtake pub beer sales for the first time.  The thing that always struck me about the beer scene in the UK was precisely the fact that almost all drinking happened in pubs and there was very little beer for sale in the markets and little found in household refrigerators. Seeing the 'off license' sign, signifying their ability to sell take-away beer, outside the little markets was a rarity. From the article:

Back in the 1970s more than 90pc of all beer drunk in Britain was bought from the "on trade" – pubs and clubs, with less than 10pc brought from the "off trade" of supermarkets and off-licences.

According to the British Beer &Pub Association this ratio had fallen to 50.9pc from pubs and 49.1pc from supermarkets at the end of last year. "It will cross over in the near future," said a spokesman, possibly as soon as this Christmas.

Why? Well, the pub scene in Britain is in crisis suggesting that the changing lifestyles are leading more and more people to find their entertainment in the home instead of outside it.

Pub closures hit a record rate of 53 a week at the height of the recession. Last year, 26 a week closed their doors, leaving just 52,500 pubs in Britain, nearly half of the level at its peak before the World War II.

The Beer & Pub Association blamed competition from the supermarkets, which often sell beer as a "loss leader" to drive customers into their stores, and above-inflation increases to beer duty. The GMB blamed large pub companies putting up their prices because they were struggling with too many debts.

The GMB has calculated that the average price of a pint of lager cost 93p at a pub in 1987. If it had risen in line with the Retail Prices Index measure of inflation it would now be £2.18, but in fact it has climbed to £3.09, making it unaffordable as a daily staple for many consumers, already hit by rising utility bills, petrol prices and salaries which have been frozen.

Leaving aside the humorous notion of beer being a daily staple of British life, I think the blame is misplaced if it is aimed at pricing strategies of supermarkets. There is always a premium to be paid in a pub, after all, but the sea change we are seeing now has come during a time (until recently) of great prosperity in Britain, so I think the changing lifestyle explanation carries more water.

US Beer Sales: Falling Macros

Here is an interesting compilation of eight beers whose sales have declined precipitously from the blog "24/7 Wall St."

Number 1?  Michelob which saw a sales decline from 2006 to 2010 of 72%.  This makes sense as it was ABs 'premium' beer which, it stands to reason, was most subject to competition from micros.

From the blog post:

Most of the beers whose sales declined that much have one thing in common — they are “full-calorie” beers, or about 145 calories a can. Instead, beer drinkers have turned to “light beers,” which have 100 calories a can, and “ultra-lights,” which are closer to 90 calories.

Surprisingly, Budweiser, the best-selling beer in America for years has lost 30% of its sales over the five-year period. Given that Budweiser sold 18 million barrels last year, this is a massive loss – more than 7 million barrels less. Sales of Bud Light, on the other hand, held steady at just over 39 million barrels during the five year period. Six products on our list have lost half their sales since 2005.

Other than lighter-calorie beers, drinkers have also turned to imports, such as Corona, and to craft beers, which are produced, and usually also consumed, in relatively small regions, according to Eric Shepard of beer marketer’s INSIGHTS. Overall, sales of beer from 2005 to 2010 rose 1.9 million barrels to 208.4 million barrels. But sales of the top 20 brands dropped 10 million barrels to 149 million, a sign that Americans have turned to craft beers and imports.

Bud is the number 8 beer on the list.  Go and see the rest here.

Growing Your Own: Fresh Hop Brewing

The hops, after a disappointing (but expected) first year with no blossoms, flourished this year and produced a bumper crop.  So I finally got a chance yesterday to brew my very own fresh hop ale with my very own (organic!) hops.  The problem is, of course, that I have no experience using fresh hops and the whole endeavor is pretty new, so there is not a lot of collective wisdom out there about the use of fresh hops.

Nevertheless, I forged ahead.  I am a huge fan of fresh hop ales, but I also know how hard they are to make well.  Most fresh hop festivals have as many failures as triumphs.  One thing I have settled on is that dry hops should be used for the bitter charge.  There are some who would argue that this then makes the beer not a true fresh hop ale, but I disagree.  The point of the fresh hops is not the bitterness but the green earthy note they impart to the beer.  And bad beer is bad beer, so using the very hard to anticipate fresh hops as the bitter charge increases the risk of a bad beer significantly.  In fact, I am confident that my beer will be quite enjoyable no matter what I have been able to extract from the fresh hops.

 I decided on a very simple recipe - a light colored pale ale (no, not a redundancy) hopped exclusively with Cascades, both dry and wet.  My brewing compatriot came over at 10 and we began the harvest of the hops at 10:30 while the strike water was heating up and by 10:45 we mashed in and continued to pick the hops.  Just for kicks I threw a couple of handfuls of wet hops in the mash at vorlauf for some wet hop first wort hopping.  Then the dried Cascades at the beginning of the the boil with a big bunch of wet hops at the end.  Having no idea how much to add I just grabbed handfuls and dumped until satisfied.  Something about that lack of precision - in a process defined by precision -  seemed fitting to the whole fresh hop beer ideal.  All went well and the beer is now fermenting happily. 

It'll be interesting to see how long the beer will last.  We will have five gallons of the stuff and I expect the fresh hop note to be ephemeral - I wonder how long it will take for the beer to either lose its character or become stale and unpleasant.  Those with experience are encouraged to chime in to prevent me from wasting beer.   

The whole endeavor feels very Portland to me - backyard hops cultivating, home-brewing, and making a northwest pale ale.  It was also a very cool experience regardless of the outcome.   

Beer Arbitrage

I am going to hop on (get it?) an ongoing debate started by Jeff at Beervana (in fact he egged me on to do so) by talking about beer arbitrage.  It all started with a link to this article in the Washington Post. [You should go and read Jeff's post and the very interesting and informed discussion that followed in the comments]

While it focuses mostly on the eBay marketplace for beer (which is both prohibited by eBay and, if sold across state lines, most likely the law), I want to focus on the bigger picture: the secondary beer market itself.

The fact that these market have arisen suggests that there was a missing market problem: buyers and sellers who would like to transact but for whom there is no forum for such transactions.  The most common reason for such transactions is some sort of regulatory constraint.  Black markets in command and control economies like the former Soviet Union are a perfect example: shoes are on sale in Moscow, but there is little demand, so buyers buy them and sell them illegally in Siberia and so forth. 

In this case I suspect the main culprit is interstate restrictions on the sale of alcohol and the fact that a lot of the special beer can only be obtained close to the brewery. So this secondary market is really about circumventing the law - making money by breaking it.  But it is also about beer lovers who are willing to pay a lot to get some special beers that they crave and I agree entirely with Jeff, I fail to see how the resale market in any way exploits brewers.  The very existence of such markets means that additional value from the production and consumption of the beer is being created.  Which is good.

For the sake of argument let's forget about the regulatory constraint and suppose I decide to sell the bottle of Roots Epic that I have in my basement to a local buyer.  I am pretty sure I could get more for it now than when I bought it.  I have a willingness-to-sell price above which the cash is worth more to me than the beer.  I suspect there is someone out there with a willingness-to-pay price above my sell price and below which the beer is worth more than the cash.  If we can agree on a price somewhere in between my price and his/her price we are BOTH better off going through with the transaction.  This is precisely the entire point of markets: they create value by facilitating mutually beneficial exchanges.  Why this should be frowned upon is completely beyond me.

Here is a snippet from the article:

“In another life, I would be a consumer advocate,” Stone’s Koch says, adding that high prices also are problematic because they often accompany second-tier products. Some beers, such as hoppy India pale ales, quickly lose their vibrancy or go rancid when exposed to light and heat. “Frankly, somebody’s naive if they pay big dollars for this stuff on eBay,” Koch says. “They think they get a rare, special beer, but the reality is that they get a rare beer but it’s no longer special.”

Ultimately, though, what seems to upset brewers most is their sense that they are being exploited. “You want to hear about the framboise story?” said Russian River’s Cilurzo. “I am furious about this.”

Last September, Russian River released Framboise for a Cure, a raspberry-flavored beer that it sold for $12 per bottle to raise money for a local breast cancer treatment center. The beer sold out in a day, and soon somebody sold a bottle on eBay for $400. Then someone else put one up for sale. “We contacted that person,” Cilurzo says, “and we said, ‘This is absolutely ridiculous, because we donated 100 percent of this for charity.’”

But this is ridiculous, there is nothing pro-consumer about special releases and events that restrict the beer to a lucky/well-connected/eager set of consumers. What this secondary market is telling you is that you are excluding lots of your consumers and doing so in an inefficient way. And if Russian River wanted to raise money for the Cure, they should have raised the price of the beer, because they probably could have sold it for more. But they got the $12 they wanted for charity, I fail to see how the resale of the bottle has anything to do w.th it, it is not going to affect the amount raised.

Furthermore, the implication that buyers of high priced Vertical Epic bottles are getting a degraded product is totally beside the point. Any buyer paying that much surely knows enough about beer to know the risk he/she is taking. And who are we to judge their preferences. I would not spend the money, but that is me, everyone else can follow their bliss.

So in the end, I do not think secondary markets are evil, just the opposite.  In general I love to find little instances where markets arise spontaneously due to some missing market problem and this is but another case.

Fresh Hop Fest in My Backyard

I am happy to report a bumper crop of Cascade hops in my backyard.  Now it is time to harvest and brew.  This will be my first ever attempt at a fresh hop beer.  I am of the opinion that fresh hop beers are best when dry hops are used as the bittering hops and the fresh hops are saved for the aroma.  I do not think this in any way creates somehow an ersatz fresh hop beer. I am, in general, a big giant fan of fresh hop beers and appreciate them even with their green and grassy warts.  Beer's connection to the earth is never more apparent, and the beer itself never more fresh tasting, than with fresh hop beer. 

All that said, it seems to be a real challenge to brew good ones.  Most fresh hop beer fests contain a few great ones, many so-so beers, and quite a few total failures.  I don't expect much from my first try.

Any and all advice is appreciated.

Timbers Pints are Honest

Thank god, Timbers pints are honest pints.

These are the pints season ticket holders were given as a thank you and, of course, I had to check.