Craft Beer in the Current Economy

While I certainly can not speak for other brewers, I can definitely say for myself that the next six months give me reason for concern. Craft brewers make products that are at the expensive end of the consumer beer market.  The economy is certainly not the happiest picture I have seen in my lifetime and there are a fair number of folks who might well be "downsized", some of whom are certainly craft beer drinkers.  While I happen to think that good beer is a very affordable luxury, I am concerned that for some folks any luxury at all might well be too much for a while.

Good news, bad news. 

Bad news first.

Exacerbating this scenario is the continuing inflation of brewing raw material costs.  Hops that cost us $4 to $5 a year ago, are $8 to $10 now, and will be $18 to $23 by the end of the year!!  Malt prices have stabilized somewhat, but we did just receive notice of a 10% increase in the cost of glass bottles. And of course, energy costs... And these are just the easiest price increases to talk about.

Now I am not trying to cry the blues, but what's a brewer to do?  In the face of a slowing economy do we raise prices and risk losing consumers? In this economy, do we lose consumers anyway?  Or do we attempt to hold the line, hoping things will improve, even though we are potentially sacrificing our bottom line to do so? 

Now the good news.

I think that whatever price increases the consumer sees in late 2008/early 2009 could very well be the last for a while.  While hop prices have gone thru the roof the last two years, they are beginning to stabilize.  Hops which will cost us $18 to $23 in 2009 are contracted for about $15 in 2010 and around $12 for 2011.  Malt prices seem to have stabilized as well.  And so while I am sure that many brewers will reluctantly be forced to increase prices for 2009, that may be the "high water mark" for the next few years (unforeseen circumstances not withstanding). I know I speak for many of my fellow brewers when I say that we would ALL like to see some stability come back to beer prices.

Craft beer has enjoyed some terrific growth the last 6 or so years.  People seem to like more flavorful beers.  Of course, to have more flavorful beers, we need to have successful craft breweries, and to have successful breweries, they have to have a business which turns a profit.  And therein lies the conundrum.  It is highly likely that a sixer of really good beer is going to hit the $10 to $12 price point, and then (I hope) level off.

Which brings me back to the concept of relative value.  Even if a sixer of great beer is $12, a comparable bottle of wine is probably $25 to $30.  And have you seen the price of malt Scotch lately!  And that needs to be the message of our industry in these troubled times.  So don't despair - this too shall pass.  And while we weave and dodge the "slings and arrows of outrageous fortune", I for one, will be waiting for the tide to turn, and while so doing, probably drinking a damn fine beer!