just On Call: Craft beer is the new wine - Boston Beer Co

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  • Young adults drive craft beer sales
  • Competition for shelf space to intensify
  • Beer sector could gain $3bn in efficiencies

The rise of craft beer in the US mirrors the growing popularity of wine in the 1960s and 70s, but competition for shelf space is to become more intense, the founder of Boston Beer Co has said.


Sales of small-volume, 'craft' beers will continue to outpace the US beer market as a whole over the next few years, Boston Beer's Jim Koch told analysts at the Barclays Back-To-School Conference today (8 September). However, growth could be increasingly constrained to leading brands as retailers "weed out" poor performers.

Craft beer sales rose by 12% in value and by 9% in volume in the first half of 2010, against a US beer market down by around 3% over the same period.

Koch likened the craft beer movement in the US to the emergence of wine several decades ago. "Twenty-somethings are adopting craft beer in the same that their millenial parents adopted wine. For them, craft beer is the new wine," he said.

He added that the rise of craft beer fits with a general premiumisation trend in US beer over the last 40 years, but that consumers have changed their values. "The high-end is migrating from an old model, which is brands got prestige and image status from being from somewhere else," he said. "It is possible that people are shifting that paradigm from global brands to local brands, to craft brands."

However, Koch warned that craft brewers are set to find life a lot tougher in the off-trade after experiencing a boom in shelf space. "Right now, craft beers have more space than their share of dollar volume would warrant," said Koch. "My guess is the explosion of new brands and styles available at retail will slow, and maybe end, within the next six to 12 months."

Not that the leading branded players, such as Boston Beer, should find this a serious cause for concern. "Despite this explosion of shelf space, the leading [craft] brands have increased their share. Retailers will weed out the slow selling brands and focus on a handful of lead brands that are going to sell 75% of the volume." Koch added.

Boston Beer, thanks to its Samuel Adams brand, is three times as big in terms of volume as its nearest competitor, Sierra Nevada, and around as large as the next five companies combined. It has around a 1% share of the US beer market by volume.  

Koch said that the group would have no problem in meeting higher demand. "We believe we could grow another 10% [volume] without a whole lot of capital. There are contracts with third party brewers that we could activate if we had an explosion of growth."

Boston Beer reported a drop in volume sales in the first half of 2010, to 1.089m barrels versus 1.144m barrels in the same period of 2009. Yet, net sales rose by around 12% to $223.6m, in-line with the craft beer average. Koch said that the group will continue to invest heavily behind its Samuel Adams brand.

He repeated a previous claim that the US beer supply chain could yield around $3bn in efficiency savings for the industry as a whole. "I believe there is about a dollar a case of efficiencies to be gained from the US beer distribution network, even in its current configuration. So that's about $3bn," he told analysts.

"There's a lot of wholesalers out there and a lot of them are family businesses, so it's not going to happen in one fell swoop. It's more like a lifetime's work, but it's there," he said.

To access the webcasts from the conference, click here.

Sectors: Beer & cider

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