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STRATEGY

Is the Beer Business Recession-Proof?

For some small brewers, maybe. While big names like Anheuser-Busch InBev are seeing a dip in sales, business is booming for craft beer makers.
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Facing higher material costs and lower sales volume, large beer manufacturers like Anheuser-Busch InBev, MillerCoors, and Heineken recently announced that they will raise prices. For many small craft breweries, however, sales are skyrocketing, as recession-weary consumers seek out small luxuries during tough times.

Although craft beers are often pricier than their mainstream counterparts, the economic downturn appears to be bolstering their sales. "There seems to be a consumer trend where there is more entertaining at home going on, so a lot of people are thinking about the beers that their friends might like" and aiming to impress them, says Paul Gatza, director of the Brewers Association.

According to statistics compiled by the Boulder, Colorado-based trade group, in the first half of 2009, craft beer consumption is up 5 percent by volume and 9 percent by dollars compared to the same period last year.

While Anheuser-Busch's sales by volume were down 1.5 percent in the second quarter, Smuttynose Brewing Company's sales are up 20 percent from this time last year, for example.

"I think consumers are actually putting some intention and some thought into where and how they're spending their money," says Peter Egelston, founder and president of the Portsmouth, New Hampshire brewery. In addition, he says, a segment of the wine and spirit market is migrating to comparatively less expensive craft beers, opting for a $9 six-pack over a $20 bottle of wine.

The beer industry has a history of large companies warring over the lowest price and Egelston sees the craft segment of the industry as a resurgence of the "correlation of price to value, which is something that the wine industry has understood for a long time."

Last updated: Sep 4, 2009




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