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Price of beer dropping due to increasing amount of breweries?

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  • Price of beer dropping due to increasing amount of breweries?

    Does anyone have any figures on whether craft beer prices are dropping due to the increasing number of breweries?
    Is demand growing at the same pace that output is?

  • #2
    Price Movement is a very interesting dilemma in this industry for several reasons:

    1. Based on basic microeconomics, as the quantity of goods available increases, the demand curve goes downward, thus lowering prices that consumers are willing to pay for a specific good. So the amount of brands in your area, will have a good effect on pricing, but typically within a $1 price range.

    2. As the middle class (most of the craft beer industry's target market), earns more money due to the economy getting better, they are less adverse to pricing and will generally buy what they want as long as it is quality. For example, you get a raise at work so you stop buying hamburger meat as often, and choose to purchase steak more.

    3. Bargain buying...several small/mid-size breweries, dropping prices on close dated beer to move it quicker. I dealt with several breweries back in my bar days dropping case prices in half to move them quicker just to get some revenue on them. This would make every other item slow down regardless of quality.

    4. My bet is that prices will increase as the cost of ingredients is continuing to rise. Margins will shrink, and eventually prices will go up. They do go hand in hand.

    Best way to hedge any market is to offer a quality product at a reasonable price to keep your customer base happy and growing. Also, it is very easy to get a bad reputation from having sub-par beers, which will hurt in the long run as competition increases.
    Paul M.
    Head Brewer
    Launch Pad Brewery
    Aurora, CO

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    • #3
      Originally posted by ptrain View Post
      Also, it is very easy to get a bad reputation from having sub-par beers, which will hurt in the long run as competition increases.
      Hah, you'd think that...

      But good points. I'd add that there's also a sort of 'rising tide floats all boats' kinda thing too. Craft Breweries see demand growing, so they up prices, and everyone else sees brewery X upped prices out in the market, so they up their prices too. Until someone drops theirs and the level adjusts. But in general it seems the only breweries regularly dropping prices are larger and not in major contention for the 'Craft' bars, more the B and C string accounts that are price conscious and prefer ease of a larger distributor. Brewers were pissed when Goose Island offloaded kegs of IPA into our market at half the going rate for a normal a 1/2bbl. But the 'good beer bars' saw that for the BS it was, while the C-string accounts ate that $#!& up. So it depends. In many ways the price of beer is quite a bit lower than it ought to be, and that's partly due to the enormous economies of scale in this industry. But I think small-mid craft brewers are starting to step out of the pricing game and just charge more across the board for unique and worthwhile products. Rising tide and all that.
      Russell Everett
      Co-Founder / Head Brewer
      Bainbridge Island Brewing
      Bainbridge Island, WA

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      • #4
        Originally posted by mattriggs View Post
        Does anyone have any figures on whether craft beer prices are dropping due to the increasing number of breweries?
        Is demand growing at the same pace that output is?
        I would doubt it. Increasing numbers of breweries could possibly reduce margins for breweries, but as far as production breweries, margins are rather low anyway. Most of the margin on beer comes from the distributer and the retailer. An increase in the number of breweries wouldn't put any downward pressure on distributers or retailers.

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        • #5
          I think this is more an issue for packaged beers than kegs. Keg pricing seems to be inching up, at least in my region but demand for $7 six packs is strong.

          I suspect that the savvy brewers will make adjustments to their lineups and their overall strategy as markets become more competitive. Shifting focus to styles that are not heavily saturated, producing lower cost beers without cutting corners and trying to move into accounts that are less cost conscious i.e. specialty markets.
          Owner
          Grind Modern Burger
          PostModern Brewers
          Boise, ID

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