Brewers Association

Craft Retail Pricing Grows in October 2nd Scans

Craft beer retail pricing strengthened in the latest 4-week period compared to the August/September numbers. For the scan period ending October 2 pricing gains were at a level of 52 cents per case, up from 14 cents per case growth the during the scan period before. All beer retail pricing grew at 42 cents per case in the 4-week period, down from 55 cents per case the previous period. So we have a bit of a switcheroo from the prevailing trends of the past few months--craft retail pricing growth was higher than the all beer pricing growth, not by percentage, but by real money.

There may be some impact of the amount of feature and display craft is getting at retail relative to other high-end beers. While craft appears to be succeeding in getting shelf space, it remains difficult for craft to get the feature and display that it may merit in the marketplace. It is fortunate for craft brewers that the quality has remained high across nearly all brewers, encouraging trial for the category and that beer drinkers continue to move toward craft.

Craft volume growth continues to impress. Craft volume was up 17.2% against the previous month's growth of 20.7%. The past several months we have seen that volume growth and pricing growth appear to be closely related.

Last month I focused on the recent decline of the companies that reformulated their caffeinated 12% ABV products last fall. Phusion Products was down 30% and United Brands down over 60% this scan period. Did the presence of caffeine make that much of a difference for these products?

Other companies down in volumes in the latest scan period included Anheuser-Busch InBev, MillerCoors, Heineken USA and Diageo, which has started marketing a new product in the U.S. 19 of the top 25 companies grew volumes in scan data. The largest private label contract company, World Brews/Winery Exchange, saw 130% growth in beer volumes, showing that private label for grocery and drug channels is getting more traction in beer. Many in the beer industry do not think this trend bodes well for overall industry volumes as it could lead to the perception among some of commoditization of beer and that beer succeeds with strong brands.

Craft Pricing

4 Weeks to October 2, 2011--up 52 cents per case.

Year to Date 2011--up 44 cents per case

52 Weeks (October 2010-early October 2011)--up 43 cents per case.

Here's a rundown of some of the other craft figures from the SIG report for food/drug and convenience stores.

4 Weeks to October 2, 2011--17.2% volume growth; 19.1% dollar growth. (All beer -0.1/+2.0)

Year to Date 2011--14.3% volume growth; 15.9% dollar growth. (All beer -0.7/+1.8)

52 Weeks (October 2010-early October 2011)--14.6% volume growth; 16.2% dollar growth. (All beer -0.9/+1.6)

Craft gained 0.5 share points over the scan period by volume and 0.7 share points of dollars. Imports and domestic superpremium also gained 0.5 share points in volume. So the low and middle sections of the beer industry are losing 1.5 share points to the high end right now.

The beer drinkers love for hops and the march toward India pale ale remains a solid trend. IPAs gained 2.3 share points in craft  and showed 42 percent growth as a style in scans. Variety packs also re-emerged as growing over 1 share as the calendar hit autumn. There is also something very interesting going on with the stout style bucket. I know stouts don't drive a huge amount of volume (at least in this period of beer drinker taste evolution) and are usually not consumed in multiple bottles in an evening. While stouts are up over 25% in volumes, the retail dollar price per case is up $5.55. That is a huge jump, most likely explained by growing sales in the stronger stout styles that traditionally have commanded a higher price--imperial stout, Russian imperial stout and barrel-aged stouts. As the weather turns colder, this seems to be a stylistic area that has significant growth potential for craft brewers, distributors and retailers, and the source of great enjoyment for beer drinkers.

Paul Gatza

October 13, 2011

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