Economy  
comments_image Comments

Can Beer Save America?

How the battle between the macrobrew behemoths and the craftbrew insurgents reflects a path for America's troubled economy.
 
 
Share
 
 
 
 

The grand unifying theory of the American consumer has been that we are, first and foremost, low price fetishists. There’s ample evidence supporting this view: From Wal-Mart’s prominence to the fast food industry’s ongoing success, vast swaths of the economy are indeed built on the premise that buyers will prioritize discounts and quantity over premium prices and quality.

But ever so quietly, we are starting to see the rise and success of a competing vision, one that turns the old assumption on its head. In the technology arena, for instance, Apple is successfully challenging the PC world with a business model that convinces consumers to pay higher prices in exchange for better reliability, durability, efficiency and customer service. Likewise in the transportation world, more and more consumers are willing to pay higher prices upfront for hybrid and electric vehicles in exchange for the promise of lower long-term energy costs. This has encouraged companies like Philips to introduce  more expensive light bulbs, in hopes that consumers will pay more for illumination that promises to use less electricity and last 20 years.

Nowhere, though, is the battle between the low-price/quantity business model and the higher-price/quality business model more clear than in the world of beer. In the fevered battle between the macrobrew behemoths and the craftbrew insurgents, both sides are digging in for an epic confrontation.

The history of the face-off is illustrative. For decades, the big brewers (Anheuser Busch, MillerCoors, etc.) have marketed their products less on the basis of taste or quality than on identity branding. What you drank subsequently became a statement not necessarily of what your taste buds enjoyed, but of your self-image. The Miller versus Budweiser wars and  Old Milwaukee ads, for instance, were so often a pitch to guys looking for working-class street cred. Meanwhile, Pabst Blue Ribbon lately has been  pitched as a retro-themed statement of hipster style.

This kind of marketing made a certain sense, because while macrobrew brands are certainly appealing, the actual beers in question are basically terrible. Produced through the macrobrews’ low-price, high-volume process, they don’t contain high-quality ingredients, they don’t contain much alcohol and, thus, they simply don’t taste good. Knowing this, the macrobrews have logically designed their marketing campaigns to focus on everything (the can, the type of people who drink it, the logo, etc.) but the actual product. Indeed, if there’s one ubiquitous reference that macrobrewing companies make to the beer itself, it’s usually one telling you  how cold the beer is or should be — a temperature that, quite deliberately, helps  hide just how bad the beer actually is.

The obvious assumption in this business model is that Americans generally reward low price over everything else, and specifically preference beer that is cost-effective to drink in mass quantities, rather than beer that delivers more alcohol or taste in less volume of liquid. In other words, the model assumes consumers see beer as a homogenized, undifferentiated commodity and that therefore less can never be more. In this view, more is always more, and since cheaper means more, cheaper is inherently better.

This is not a silly assumption, of course, in a country whose college binge-drinking culture teaches kids to prefer quantity at an early age. However, it ignored a potentially profitable market of beer drinkers with a different set of priorities. That’s where the craft brew industry came in.

In the last few years, small brewers have filled the vacuum left by macrobrewers, specifically marketing higher-priced products based on premium quality and taste. It’s been a wildly successful endeavor. 2011’s sales results tell that story: In a year that saw an overall decline in the beer market, the craft brewing industry  increased its year-to-year sales by 15 percent and substantially grew its share of the total market. And here’s the key stat: according to the  Brewer’s Association, “craft brewing sales share in 2011 was 5.7 percent (of the total beer market) by volume and 9.1 percent by dollars.”

 
See more stories tagged with: