She said.......
It's about the beer
     He said........

Gina Miller            and                Bill Keeper
GINA-

Hey Bill,  -  Now that macro brewers have acquired so many breweries and even home brew
supply shops (did you see that Northern Brewer sold out?) that once belonged to the
independent ranks, I'm starting to wonder is there any place left where the macro big guys
don't dominate?

Now before you tag me as the eternal pessimist my answer is yes.  They certainly aren’t
abundant at the top end of the market where beer prices get, well, pricier. That’s one place
where craft breweries remain strong. After years of struggling to gain acceptance, beers that
have more and better ingredients, longer aging periods, and a surplus of creativity are
beginning to impact the marketplace. According to data from  research firm IRI revenue from
higher-priced beers is increasing faster than any other segment.

This is good news for we consumers when it comes to being able to buy a wide variety of
exceptional beers—if we’re willing to pay up that is. But what about the rest of the story? Does
this upward trend also mean that the $8 and $9 six-pack of craft in the longstanding affordable
middle segment is becoming a thing of the past?   Well, maybe.

I just came across some interesting statistics on that.  There's a purchasing trend where craft
beer consumers are increasingly breaking into the higher-priced categories which are usually
classified as  Super Premium ($12.50 to $15 per six-pack) and Apex ($15 and up). Ouch,
those are scary numbers to people like us who remember when $6 a six pack was expensive.
The data showed that as beer drinkers move up to more expensive beer—they very rarely turn
back down.  Once they migrate up they tend to stay in Super Premium and Apex-type craft
beers.  Let me put it this way, at the upper pricing levels we’re seeing that craft brewers who
differentiate do well.  The macro brewers just can't go to that category.

Craft can dominate things like cork and cage bottles and the more complex (and expensive)
beers that utilize everything from a coolship and wild yeast to traditional Belgian yeast strains
and funky Brettanomyces to create distinctive beers. I see this  general move to higher-priced
craft beers continuing because beer is just beginning to flex its strength when it comes to
quality, particularly with regard to more complex sours, whose acidic content is not unlike wine.

I can almost hear you saying that a $25 for a 750-milliliter bottle would equate to a $72 six-
pack, which is crazy.  But you're not buying a six pack.   And the quality is worth it.  But that's
not my point.  All I want to say is that there are areas - more than just this upper end by the
way - where craft beer dominates and in fact has the landscape pretty much to itself.  Don't get
me wrong Bill, there are still great craft beers we both love sold at reasonable prices.  They
remain the backbone of the industry.  I'm just saying that with a little thinking craft can carve
out new areas which will protect them from the macro onslaught.

That's it from me, chug-a-lug, Bill.....see you next time.
BILL-  

Hello Gina -  I'm glad you cleared things up in your last paragraph.  For a while I thought you
were advocating even higher prices for beers that are often overpriced in the first place.  Look,
beer has always been affordable. Even better, please note that If you want to go out and buy the
best wine in the world or if you want to buy the best whiskey in the world, you pay a fortune
compared to what you would pay for truly great beers. That’s the appeal and the magic of beer to
me.

Look Gina, I'm turned off by the snobbishness of wine/whiskey drinkers, with an attitude that
I believe begins with pricing.  Beer, on the other hand is a new frontier where ingredients and
process are key pricing factors not snob appeal. In brewing, prices can be kept in check relative
to the top end of the wine/whiskey market.

Beer does and should have different retail pricing levels. And for the record I believe that the
average price craft beers can compete with any thng produced by the Big Guys. I wonder why
you seemed to suggest that craft should move to the most expensive styles to avoid having to
battle macros. . On one end of  the industry there are beers that are highly complex which can
still be relatively affordable and there are entry level craft beers that are less expensive to
produce. Craft can survive over the board spectrum of price points not just the upper ones.

As I see it the pricing creep of craft  began with the arrival of beers from companies like Ballast
Point and Dogfish Head. They busted that $9.99 price ceiling for craft beer. The distributor
margin to my knowledge is not driving prices higher; their markup has not increased
substantially.  We can blame it on the cost of glass, box cost, insurance, hops, grain, labor, etc.”

Gina, under the three-tier system, it’s illegal for brewers to discuss pricing with retailers. The
process starts with a wholesale price brewers offer distributors, who generally mark up those
prices as much as 25 to 30 percent. Retailers have different markups and gross profit goals that
they use to arrive at their own price points. Finally, sales tax differs from state to state, and some
states are simply more competitive when it comes to beer pricing.

In overall beer sales, the macro prices of Budweiser, Coors, Miller, and Pabst brands have
shadowed craft beer, edging up over the past decade as consumers accepted craft’s higher
prices. Now that Big Beer has acquired craft breweries, I wonder if the macro brewers will choose
“shadow” prices to help boost sales volumes for the acquired brands.

Here's a good note for price-sensitive consumers - there are alternatives. Larger independent
craft brewers are pursuing volume sales with some success through 12-packs that bring prices
back down to the $8 and $9 six-pack range, and variety 12-packs, which the macro guys don't
do.  

All I can say is that ten years ago, if you asked me could a craft brewery sell a bottle of beer for
$20 II would have said, ‘No way.’ But here we today and there’s hundreds of craft brewers selling
beers for that amount and more.. And believe it or not they are still amazing values.


Here's looking at you Gina
Round 61
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