Category: Economics

Are We Approaching Peak Hard Cider?

The All About Beer column by John Holl posted today begins “[h]ard cider continues to climb in popularity and now the largest producer in the country, Angry Orchard, has its own place to welcome customers….” This is odd because of the following news as reported by The Motley Fool a few weeks ago:

Similar to last quarter, Boston Beer’s founding chairman, Jim Koch, opted to be the bearer of bad news: “Our total company depletion trends of 6% in the third quarter of 2015 matched our year to date trends, but represent a slowing from our expectations, primarily as a result of weakness in our Samuel Adams brand due to increased competition and a slowing in the cider category”… Boston Beer CEO Martin Roper elaborated: “During the third quarter, we […] saw a slowing of the cider category, but believe Angry Orchard maintained its share even as competitors continue to enter or increase investment. We remain positive about the long term cider category potential, but short term growth is less certain. We are planning continued investments in advertising, promotional and selling expenses, as well as in innovation, commensurate with the opportunities and the increased competition that we see.”

I’ve heard a bit about cider in the lead up to American Thanksgiving like this piece on NPR’s Science Friday that focuses on Albany’s Nine Pin Cider. Like the All About Beer column, however, there was nothing indicating that the market for hard cider is softening in the way that Boston Beer has admitted. While most stories last year were all about the boom in cider, The Motley Fool saw clouds on the horizon as early as in May of 2014. That concern continues:

Total U.S. cider sales were down 3.4 percent in the 13 weeks ended Nov. 7, and the rate of decline accelerated to about 7 percent over the past four weeks, according to Nielsen. Four and five years ago, the rate of growth was in the heady triple-digits. Even a year back, the pace of growth was nearly 50 percent. “It’s been getting a lot of attention, because of all the huge growth rates in the past three to five years,” said Danelle Kosmal, vice president of the beverage alcohol practice at Nielsen. “It’s obviously difficult to sustain those triple-digit growth rates.”

So is it a case as I tweeted earlier today just that, “basically, Sam Adams bought a pretendy farm to suggest their cider-like product isn’t industrial” or is it worse? Is the farm one form of “the new packaging and advertising expenses taken on in the second half of 2015” in an effort to retain sales in a shrinking cider market? We get no guidance from the All About Beer column other than the oblique observation that the “vast majority of the company’s main brands will be produced at the Boston Beer facility in Ohio, with the focus of the new location being experimentation and small-batch only recipes.” As Jeff found in June 2014, getting a straight answer about Angry Orchard can be difficult. But at least he asked the questions. If the market for cider continues to shrink, it’ll be interesting to see how long it takes for the farm to be re-purposed or even sold off.

A Few More Thoughts On Craft Brewery Buyouts

I quickly wrote this over at the beer blog’s Facebook page* and thought it was clever enough to repeat:

With respect, the main point is being missed. The disassembling of the US craft beer market is itself the bursting of the bubble. The “big macro v. tiny craft” paradigm failed a long time as the BA’s failed “crafty” campaign illustrated. Continuing to suggest that the path of craft is being validated ignores the greater underlying realities. Big craft bought into scale a long time ago. Craft as brand regardless of what’s in the bottle is market reality. The brewery isn’t being bought. A battle with craft is not being waged. Macro is buying brands and markets to use for other purposes. The rump BA will appear to be quaint soon. Then pointless.

Some interesting comments ensued. I suppose it is related to the posts about how craft will kill itself from a few years back but this is really another thing. Craft being killed off by macro simply eating it after paying billions for the opportunity. We are likely not at mid-meal yet but that’s what’s going on. What we haven’t heard about yet, when you think of it, is how those brewers wanting to be bought but not getting offers are doing. You know, just because they are not worth buying doesn’t make them any less the traitors to the cause… if you are into that whole “cause” thing. What I expect we do know, however, is the guys at Goose Island must be really pissed off unless they took a deferred part of their $39 million chump change payment in the form of percentage share of future brand growth as part of their deal. That stuff is brewed everywhere and sold everywhere now and someone is making buckets of cash.

*…which reminds me of a pet cat having a pet hampster.

The Best Christmas Present For Ontario Ever?

I hadn’t thought of an attack on Ontario’s beer retailing weirdness from the Federal level but that may be just what is lining up for 2014:

A spokesperson for the Competition Bureau confirmed Friday that it’s “currently examining the differences between the beer industries in Ontario and Quebec and exploring the effect that these differences have on competition in each province….” “The bureau chose to focus on the beer industry as there have been a number of conflicting reports as to why the price of beer varies between Ontario and Quebec,” Phil Norris, a spokesperson for the Competiton Bureau, said via email. Sources told Global News Beer Store officials and others have been interviewed by the bureau. Regulators were “collecting information from industry participants,” Norris said.

Collecting information? I suppose if the mandate is limited to assessing a nutty regulatory system’s effect on pricing one must make a study of the obvious. As Jordan has detailed, the pricing arguments may not be all they appear but for me that is not the point. I have no interest in limiting my choice when it comes to my shopping whether for beer, cheese, shoes or books or anything. I buy at least half my beer ever the course of the year in Quebec or the USA. I’ve gotten the occasional wee lectures from overly eager border guards telling me I should not buy in the States but, really, when you allow yourself to take consumer product advice with folk with sidearms where are we?

I am happy to pay full freight. I am happy to declare purchases at the border, support local and support actual well crafted just about anything. But, when it is all boiled down, what I am most happy with is the idea of reducing the intermediaries. I prefer two parties to a transaction, the maker and me. Add a third as retailer and I am not upset but getting into wholesaler, bonding firms, distributors, importers and clearance certificate issuing laboratories and you start seeing not only why a simple product like beer is over priced but over wrought. As in what hath this system wrought?

At the moment – as it has since 1927 in Ontario – it hath wrought market constriction to the point one cannot be sure of value or even preference. We get what we are given and are expected to line up and praise the short shelves of selected goods. No thanks. I’ll continue to take much of my money elsewhere until that changes. If that takes a prosecution of the provincially regulated monopoly by Federal officials, so be it.

Another Good Reason To Support The Little Guy

Keeping in mind that by “little guy” I actually mean small brewers and not larger brewers who need their smallness to be defined by a trade organization… but this news out of Newfoundland is just weird:

…the bosses at Labatt Breweries in St. John’s apparently thought it was a good idea to instruct their employees to train workers who would replace them in the event of a strike. The employees refused and walked out, and are currently on a wildcat strike. The mind reels, and then reels some more upon news that a judge ordered the workers to stop interfering in Labatt’s daily business because, he said, they would do the company irreparable harm. Apparently, in a globalized knowledge economy, being replaced on the job does not qualify as doing irreparable harm to a worker.

We have to also be mindful, of course, that being a good brewer does not automatically entitle you to be considered as a good employer. You will recall how in 2011, Rogue of Oregon was the subject of “a devastating article about how Rogue Brewery treats its workers” to quote Jeff. Like any good consumer, that was the last time I bought any of their beer but, to be honest, anti-union tactics is something of a norm. But asking local workers to train their own foreign import replacements? Notice that a Canadian bank has been accused of the same thing this week. Which has led to an apology from now sweaty browed president and CEO Gord Nixon as clients are voting with their feet and withdrawing their deposits.

We clearly have a problem with any law that allows this. And any community that condones it. Will Canadians walk on Labatt, too? I hope so. Most likely in Newfoundland where the policy hits home most closely and people have an aversion to being led. They are not called the masterless men for nothing. One would hope these things would matter more generally, too. I do appreciate when Ethan points out that, hey, it’s capitalism but one needs to recall that capitalism is about trade and, frankly, turns on the principle “buyer beware.” As in be wary. Be aware. Know who and what you are dealing with. And appreciate, as Nixon now knows, that it is the consumer who defines what is appropriate within the construct of capitalism, not the law or business.

Has Discontent Struck Good Beer In A Time of Plenty?

A little bird, or rather an email correspondent, who was present advised me that at the recent Craft Brewer Conference there was a closed session at which at least one well placed big-mid-sized Midwest brewer “sure made for good entertainment at the voting members session of the CBC- you know, the one the toss the media out for”. Apparently, unlike what is seen on the public sessions, issues like the asymmetrical effect of tax breaks and grants are creating divisions amongst those who would like you to believe that they sing all from the same hymnal… and, then, would like to sell you the hymnal so you can keep in tune, too. Interesting, then, to read about one implication arising from this sort of thing as illustrated by one particular expanding good beer market, Ashville NC, as reported today by Bill Night at The New School:

If the $9 Mil for New Belgium that Magee mentioned sounds like a lot to you, maybe you’ll be interested to find that New Belgium actually snarfed up $13 million in total from “the public trough”, as explained in this post on the blog Ashvegas. As far as I can tell, Sierra Nevada wasn’t quite as gluttonous, and only needed a little under $5 million to set up beer camp in North Carolina:

– State of North Carolina: $1M grant to New Belgium
– Buncombe County: $8.5M tax incentives to New Belgium
– City of Asheville: $3.5M tax incentives and infrastructure to New Belgium
– State of North Carolina: $1M grant to Sierra Nevada
– Henderson County: $3.75M tax incentives and infrastructure to Sierra Nevada

You know who should be really pissed about all that money? The small brewers who built Asheville up into Beer City USA.

Redistribution of wealth is tricky stuff and it does not help that those receiving are national craft millionaires even though sometimes it seems they would like us to think that they are hunting for sofa change to try to make payroll. But it does not stop there today as Harry Schuhmacher in the Beer Business Daily touches on more of the questions left unanswered after the recent conference. He discusses questions of tax policy as I discussed here the other day as well as badly made and overpriced craft – and even how succession planning leading to big money buyouts are all discussed. All important big issues that can leave a bad taste… sometimes by actually leaving a bad taste.

But, most interesting to me is the “S” word – smugness. Harry puts it succinctly: “I’ve met a few new craft brewers over the last year, and I get the sense lately that many think they invented beer.” A great direct line. I can’t, however, speak to the truth of it as, being trained in the law, I assume this is a phenomena that is woven throughout all business sectors so I don’t know whether this is new to beer or that the guard has been left down a bit recently. Yet the other sources mentioned above might be indicating that might well be the case. Where does all of this lead? Good beer did well in the recession, expanding market share as the economy took a hit. But that does not mean the industry is immune to all risk.

For me, big business is big business and will act as such. Lobbying and entitlement will benefit the largest most. But the time needs to come when US craft will stop trying to pretend all brewers are small start ups even if only to argue for financing opportunities which can benefit businesses of different scales. Beyond that, the risk of fatigue needs to be addressed – and not fatigue of flagship beers as Harry suggests though that is happening too. Craft beer is starting to act like pre-teen soccer league where everything and everyone is special. Every brewer gets the medal. Every one gets the treat at the end of the game. In the case of craft beer, the treat is unending increased prices and increased sales forever and ever, amen. Nothing works that way.

Change will come and will likely be unexpected. Change may also be brought upon oneself. How would a brewer best situate itself to withstand a shift away from these present times of plenty? Admitting opening how things actually are might be a start.

Book Review: The Economics Of Beer – Swinnen, ed.

oxeb1I bought this because Simon told me to. Simon said.

This book is a series of essays related to the 2009 conference of The Beeronomics Society. It says on its back cover that it “is the first economic analysis of the beer market and brewing industry” but that is just silly puffery. There have been loads of economic analysis of the beer market and brewing industry. Frankly we have been weighed down by them. Don’t make me review Tremblay and Trembaly again. Do you remember those graphs and tables?

This book is a lot like one of my favorite sets of essays, the papers from the “Cooperstown Symposium on Baseball and American Culture.” It is also a lot like Beer and Philosophy, a set of essays which included one from me on the underlying philosophy of beer regulation in Canada. What they all have in common is that they are a collection of papers tackling aspects of a general topic from various points of view. In the TEOB you will find 18 papers from the 2009 conference organized under the four topics of history, consumption, industrial organization and the new beer markets. With any luck, as with the annual baseball conference but unlike Beer and Philosophy, the followup second conference of The Beeronomics Society will issue another volume of essays reflective of the topics covered in September 2011.

So is it worth getting? For a book nerd like me, sure. I was a little uneasy with the superficiality of the first essay “A Brief Economic History of Beer” given it covered so much of time and culture so quickly. However, when I saw that there was an essay by Richard Unger, everyone’s favorite beery medievalist and Renaissance man, I was won over. And the essay “Recent Economic Developments in the Import and Craft Segments of the US Brewing Industry” by the manical graph-huggers¹ T+T may serve as something of an update of their 2005 book. Best of all, each submission comes with its own bibliography alerting folk like me to other papers and texts that might be out there just waiting to be added to the book shelf.

Published, too, by Oxford University Press, this book is another sign that we fans of beer and brewing live in lucky times. If I have more intelligent comment after reading a bit more, I will add it in the comments. But at this point this, too, looks like a good buy for the serious beer nerd.

¹ There are seven graphs and four table in just 18 pages!!!

“I Am Less Free Today Than I Was 30 Years Ago…”

That is a shocking sentence to read. Gets the brain going. Here is the nub of an excellent post over at the always excellent The Last Exile:

Globalization was suppose to make us all free and rich. Although, it has not worked out that way for most of us. I am not any richer and my wages face a constant erosion from the rising rates of taxes and the general cost of just about everything while the corporate tax rate continues to slide ever downward. I know for a fact; I am less free today than I was 30 years ago. Canadians generally do not have any babies anymore; mostly because they cannot afford to when it takes a 2 person income just to raise a small family with ordinary expectations. We never really discuss that in this country, and if the topic does manage to come up in public dialogue, somehow the dominate ethos manages to give the impression that a woman who works outside the home rather than rising her children at home does so for selfish avaricious reasons rather than the fact that taxation, housing and transportation costs now claim a much larger percentage of family income than they did 30 years ago.

Add to that list communications device fees. I pay over $250 a month for home phone, internet, cell phone and cable TV. I could cut it but with the range of ages in the house it’s not a practical solution. I am a bit shocked at electricity hikes added to natural gas bill, too. Again over $250 a month combined. If I ever created that stand alone blog dedicated to complaining about society’s broken promises called Where the Hell is my Jet Pack??, I might write about these things or think about them more.

Why don’t I? We are fortunate and a bit unconventional as fosterers and for other reasons, I suppose, but if I thought about it, I might have expected the sort of financial status we have now to have been the lifestyle in my late 30s rather than my late 40s. But maybe I don’t care. Maybe the money or other resources go to intangibles and non-investments. Like better cheese. Like tanks of gas for wandering weekend road trips. I think I am better off. But who knows. I don’t think I think about it all that much.

Two Cautionary Tales Of Good Beer Bad Behaviour

monkey4We like to ascribe so many positive things to good beer and those who love it we often forget that we make most of it up. We pretend brewers are rock stars. We pretend thinking about beer began (and sorta stopped) in the 1970s. But most of all we pretend people who make and enjoy craft beer are the sort of people we would like to hang out with. Really? Two morality plays for your consideration. First, Zak points out the tedium that one craft beer boor has put him through recently:

This post isn’t really about Chad, it’s about the idea that you have to reach a level of ‘beerdom’ in order to be allowed to drink certain types of beers. Sure, there are some beers that benefit from a little explanation, most sour beers and rauchbiers being the primary examples. But surely beer is a democratic, egalitarian drink that can be shared by everyone? Or do you disagree?

A great point that has attracted some comments but my point is not to highjack his discussion but to compare and contrast that situation to a second one that has been reported on by Jeff:

Don McIntosh of the NW Labor Press–a worker’s rights publication that’s not exactly neutral–has a devastating article about how Rogue Brewery treats its workers. The main issue is an effort to unionize Rogue that the management has aggressively fought. They have deployed tactics familiar to anyone who has followed labor relations in the US over the last 20 years–all legal by today’s laws. But worse than that, McIntosh paints the picture of a hostile work environment where management acts capriciously to ensure full compliance.

As Jeff points out, the tactics of Rogues he points out are likely within the law and the accuser is a labour publication – but the story is still pretty distasteful. So much so that I took the opportunity to not buy Rogue beer after work today, part of the LCBO’s summer brewery feature. I would ask you to consider making the same consideration – however you decide to act afterwards.

But, really, I would ask you to consider how craft beer may sometimes brings out the bully and why. For me, it boils down to one word: passion. Jeff points out the motto “Rogue is not for everyone” but we can take that a few ways. Either it can mean many can not handle their beer or, my preferred reading, the brewery is not egalitarian, is not for all people and, apparently, not for that part of its workers who don’t fall into lock step. “Passion” has that problem of being ultimately fairly meaningless and too often code word for my way or the highway. We’ve seen this sort of “passion” at work before with the bland “hooray for everything” attitude of trade associations, defensive niche hugging consumer group executives or senior brewery buffoons who believe good marketing include condescension. Spare me the passion.

And isn’t that really what Zak has had to deal with as well? Somehow, yet another self appointed craft beer person of importance awards himself the right to denigrate others, to be not for them. We’ve seen the self-appointed boor in action before. How many of them are there? How many bad boss craft brewers? Lord, how many? Certainly not anywhere near a majority. But is there any part of the beer culture that makes us celebrate the illusionary community without point out the individual arseholes amongst us in the crowd?

Wouldn’t it be nice if beer rating sites included a way to factor in how happy the workers are as part of the over all scoring? Wouldn’t it be nice in beer rating sites punished boors with pomposity points reminding us all to take their opinions with a very large grain of salt?

Where There Is Beer There Is Peace Revisited

2832When I was growing up, Ethiopia was one of those nations with the hallmark of being incessantly near collapse. Civil war unending. The famine. Now there is beer:

The Beemnet bar is one of those places in Addis Ababa which attracts Ethiopians of all ages. Increasingly locals are going here for breakfast, lunch, dinner and drinks – a sign of the country’s increasing purchasing power. On Friday and Saturday nights, the terrace and bar is packed with people drinking beer and trying out their new dance moves before heading to a club after midnight. Beer is becoming increasingly popular among the growing Ethiopian middle class. In fact beer consumption in Ethiopia – Africa’s second-most populous country, is expected to grow by about 15 percent every year for the next five years. According to a report carried out last year by Access Capital, an Addis Ababa-based research group, this growth in consumption is very much in line with Ethiopian population levels and economic growth rates.

As in the Mid-east, in Sri Lanka and in the southern Sudan, this rise in beer production and consumption in Ethiopia is a hallmark of peace. Even as – or is it because – they seem to prefer the “jumbo” size glass.

A little oddly, the US Embassy did a study of the Ethiopian beer market in 1998 at the time the breweries were denationalized. It notes that it was the Czechs and Slovak Velvet Revolutionaries back in 1993 who created the Bedele brewery Heineken recently bought, outbidding Carlsberg. You can allegedly find the beer in Canada, a nation not known for its fondness of monkey gibbon… or lemur… well, it’s very likely a Coquerel Sifaka branded beer. [Update: unless the connection is about Zaboomafoo!]

Has An Unacceptable Level Of Drinking Been Described?

Pete Brown has run a series of posts this week and last that delve into stats being issued by various government agencies and health lobby groups in the UK. It is important work that Pete is doing as there is no stat worse than the unexamined stat. Today’s post was called “More Hilarity with Statistics” which examined claims about the level of drinking in Scotland. I made a comment over there but did some more rooting around to make sure I agreed with what I was seeing and, to avoid looking like a totally rude idiot being all finger pointy in the comments, thought I would set it out here instead. I also got thinking because even if a stat can be discredited it does not mean that the underlying facts necessarily do not exists, only that they are not well described. But, as I said in the comments, I am really bad at math so I am happy to be corrected.

The BBC story Pete began with was titled “Scots ‘Drink 46 Bottles of Vodka‘” by which they mean per person per year on average. Pete suggested that this was not particularly well researched as tourism trade taking the booze away was not figured in – but then when I ran the numbers I saw this pattern:

  • Scotland has about 8% of the UK population
  • total UK booze sales in 2007 were worth over 41 billion pounds
  • and therefore, Scotland’s booze sales can be approximated at around 4 billion pounds.

I took the numbers from this soul suckingly slow .pdf source. I read them to meaning that if every penny of the 25 million pounds spent at distillery shops was non-Scots resident alcohol sales, removing it entirely from Scottish consumption, it only represents well under 1% of total Scottish sales? If that is the case, the variation is under a bottle of vodka a year. I said that even if I was off by a whole decimal point and the distillery sales represent 10% of sales isn’t it still a little bit alarming that every Scots adult averages 41 or 42 bottles of vodka a year? By which I mean I had a gut feeling it was in fact pretty high. But is it?

A little more looking around further, found information stating that 30% of Scots adults say they do not drink – which means the drinking Scot averages 58 or so bottle a year working off the conservative 41 bottles a week stat. It is more like 65 a year if you go by the BBC’s number of 46. I got the “did not drink” percentage from this pdf. So you have 30% of Scots not drinking, 35% drinking up to the average and 35% drinking over the average.

What does that mean? 58 bottles a year on average means 1.12 x 700 ml bottles a week at 40% that means 313 ml of pure alcohol a week. By comparison, a standard Canadian 12 oz 5% beer has 341 ml. Which means that average Scots drinker’s booze consumption is the equivalent of 19 standard 5% Canadian beers a week. Sounds like a bit more than you might think is a good idea, week after week day after day. But not fatal. It’s maybe what we expect the average healthy working Joe would drink in a week. Similarly, a US 22 oz bomber has 650 ml. At 8% that is 65 ml of pure alcohol. Which means that the Scot’s drinker’s booze consumption is the equivalent of 4.8 bombers of 8% US craft beer a week. Is that going to scare off a craft beer fan? Hardly.

But it is an average and that is what I think is the real concern. It means 35% of Scots drinkers adults drink more… because 65% drinkers there drink less including the 30% who abstain. I think those numbers are troubling. They may well be wrong so please do your own a arithmetic. But if they are not wrong – is there not a valid public health concern where 35% of your population is doing that level of drinking. I don’t really care if you think there is no such thing as a public health concern from a libertarian point of view as that is not the point here. Nor does someone called “Alan Campbell McLeod” care if you think this is only a Scottish problem. I think we can all agree that there is a point beyond which alcohol is unhealthy. Is that point been identified by the BBC report?