AB has sent letters out to their distribution network indicating that pricing will be going up in September.
After a soft July 4th weekend, and continuing a soft year with sales down about 1%, AB will be taking a price increase across the board on almost all packages and brands. The price increase will vary by market, package side and brand, but it looks like AB is trying to drive consumers back to smaller pack sizes and to core brands after AB sub-premium brands have been outpacing the core brands.
Draft will be taking the biggest percentage increase with a hike of $4.00 to as much as $6.00 a half barrel. Core brands will go up about 25-30 cents a case and sub-premium about a dollar.
This could bode well for craft brewers who may be able to take a small price hike in order to maintain the price difference between major brands and the good beer category. What do you think?
“…between major brands and the good beer category.”
Please define “good beer category”.
You know, craft beer, the stuff we make. What constitutes a SUB-premium?
Half of my distributors have sent emails saying we need to take a small increase and how much do we want to go up. Weird huh?
With falling hops & malts prices, and fairly stable energy costs do you really need to go up, especially in these times?
“Good beer category” refers to authentic, well-made beer; both domestic craft and import. It’s a term that includes not just domestic craft, but also brands like Chimay, Pualaner, Duvel and other well-made imports that are true to style and not brewed just for the US market.
Sub-premium are brands like Busch, Keystone, etc.
Admin
IMHO – if we go up just because they are we, weaken our ability to gain market share. If the delta between craft and macro remains the same the consumer is not further inclined to purchase our products any more than they are now. However, if we remain the same and they go up – there is less of a gap between us and therefore more of a benefit (since the delta decreases). Do we want to continue to grow market share and actually reach that magical 10%? I do – so – I’m not going up.
What’s so magical about 10%? Do we stop there?
Um, no. I never understand these phantom and arbitrary numbers. Remember when the top of the “micro” brew designation was 10,000bbl.? Where is that number now.
I will increase my price based on my cost and implement when my distributor says it is time.
What if BBC depart our category? Don’t know if that’d be anytime soon, but that would drive the 10% number further outfield.
I said it before, the definition of a category should not change for one brewery. Make a new one for Boston. Something in between Regional and Macro. They will not be the last to reach that plateau.
“…between major brands and the good beer category.”
Sure sounds like a slam against the professional brewers at the large breweries. Is this site only for small brewers, or can we include discussions from the professionals at the major breweries who contribute more than their fair share to the science of brewing? (And make some pretty good beers) I don’t think “craft” beer is automatically better than the majors. I’ve had some really bad “craft” beers before. Let’s be inclusive and respectfully humble about our trade.
I am not against raising prices but I would be very leery about going up because one of the major domestic breweries signals that they are going up. If the other major domestic brewery does not follow at the same time AB will deal back to remain competitive as they have in the past. At that point you’re stuck with pricing that may be too high for the market or facing the prospect of dealing back in discounts and depletion allowances…
Yes – an arbitrary number – not one I support (although I guess I did reference it). My point is that we are trying to grow the market for micro-brewed beer right? So raising prices because one of the “big guys” did does’t make sense to me. Raise em when cost of materials go up? Ok. I understand there is a “charge what the market can bare” perspective at many breweries (and retail establishments for that matter) and there is a place for that in the market I guess. But I am not trying to be ubber expensive just because someone will buy it. I’d rather be affordable and tasty so MANY can buy it.
Here’s a completely different scenario to get the mental juices flowing.
In Canada, provincial jurisdictional liquor control boards generally set a ‘floor’ price for beer.
This does two things: it allows the major producers to sell their beer for more than it would be worth in a free market (read profit protection) and it also warps the value equation in the consumers eyes.
If there was no floor price, the national/international brewers would lower their prices to compete for the cheap beer market. They would also lower their profit margins.
I know that in some states, I can by a flat (24 cans) of ‘wet air’ for less than $15. In those same states, ‘craft beer’ might cost me $12 for a six pack.
This ‘value’ difference is important for consumer perception.
Currently, craft beer in Canada is very close in price point to the majors. We can only charge what the market will bear. The artificially elevated floor price distorts the value perception of consumers. Most of us here are very close in price point to the majors. This is not a good place to be.
Advice to my US brothers and sisters: Charge what the market will bear. Most craft beers are easily worth the differential and your consumers know it.
Good luck
Pax.
Liam
I’m not sure I understand this. Can you give some pricing examples, or simply elaborate?
Here’s a link to how it works in Ontario. $25.60 is the floor case price + tax and deposit. Beer cannot be sold cheaper by law.
A decent micro may cost around $40.
Liam
That’s a lot of government. Thanks for the link.
The scandanavian countries have shown that raising prices (there via taxation rather than setting nebulous minimum pricing) for alcohol does not deter youth or prevent alcoholism.
to get back to the original post about AB- It seems like ever since AB was purchased, their volume is down, but they continue to raise prices. Isn’t this counter to the law of supply and demand? How can they hope to draw customers back for a product that essentially sells as an inexpensive way to catch a buzz? I would think at some point, they would have to lower prices to gain market share back.
sam
Ahhhhhhh, but isn’t that how big business works. You make as much money as you can, as fast as you can and then get out before you have to lower prices or post a big loss or be bought out. Dealing with the consequences is the next guy’s problem.