Price bubble?

Discussion in 'Beer Talk' started by herrburgess, Jul 23, 2012.

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  1. herrburgess

    herrburgess Meyvn (1,010) Nov 4, 2009 South Carolina
    Industry Beer Trader

    As there seem to be quite a few threads out there at present about U.S. craft beer prices, thought I'd throw this out: is there a price bubble in the U.S. craft beer industry and when, if ever, will it pop? Thinking specifically about newer breweries charging comparatively high prices ($10.00+ for a six pack) for their year-round/regular offerings. A further question: if such breweries have based their business model on continuing to charge such prices, will they themselves become victims of a price bubble and be forced to close?
  2. VncentLIFE

    VncentLIFE Meyvn (1,417) Feb 16, 2011 North Carolina
    Beer Trader

    Theres no bubble if people are willing to pay for it.
    AntG21 likes this.
  3. peteinSD

    peteinSD Initiate (0) Apr 25, 2010 California

    you raise a good point. i'm often surprised by the low quality that many new breweries are bringing to the market when the price point on these mediocre offerings is that same as much higher quality offerings from stone or firestone walker, etc. it may not be a bubble per se, but i think that some of these folks churning out slightly better than average home brew are going to run into trouble sooner than later.
    LambicKing likes this.
  4. Arbitrator

    Arbitrator Initiate (0) Nov 26, 2008 California

    That's fundamentally ridiculous.
  5. shand

    shand Meyvn (1,416) Jul 13, 2010 Florida
    Beer Trader

    There's absolutely nothing unreasonable about that at all. It's the new breweries dropping ten dollar bombers of their regular offerings that will be in trouble.
    jlordi12 likes this.
  6. VncentLIFE

    VncentLIFE Meyvn (1,417) Feb 16, 2011 North Carolina
    Beer Trader

    people will pay whatever they think is affordable, then that bubble will burst. Then we have the stock market crash, housing market burst, etc or whatever.
  7. miketd

    miketd Zealot (520) Mar 2, 2006 Ohio
    Beer Trader

    There is a limit to what people are willing to pay but it has not been hit yet. If it was, we would see prices coming down across the board, not continuing to rise. I think some of the average to below average stuff is eventually going to see an adjustment; either that or a bunch of them are going to go broke.

    I know my limit has been reached. If beer gets much more expensive, I may find another hobby and go back to cheap macro shit exclusively. I can afford the beer(at least for now), but don't know how high I'm willing to go.
    CanMan79 and Chickenhawk9932 like this.
  8. yamar68

    yamar68 Initiate (0) Apr 1, 2011 Minnesota

    I don't think anyone could really argue that there isn't a bubble. But will it pop in the foreseeable future? I would say no.

    The 'pop' is typically sparked by concerned and apprehensive investors. The vast majority of the craft beer industry is still privately owned/controlled though.

    There may be an eventual decline in price but a pop? I'm not sure how that would even look...
  9. VncentLIFE

    VncentLIFE Meyvn (1,417) Feb 16, 2011 North Carolina
    Beer Trader

    I know that I will buy Great Lakes 6-pack lower gravity seasonals (Oktoberfest, Christmas Ale, and Holy Moses) in NC. I just bought Oktoberfest at 8.99 for a 6.
    CanMan79 and chuckstout like this.
  10. DefenCorps

    DefenCorps Poo-Bah (3,373) Jan 18, 2007 Oregon
    Beer Trader

    I fixed that for you.
  11. DefenCorps

    DefenCorps Poo-Bah (3,373) Jan 18, 2007 Oregon
    Beer Trader

    Are you ready to get into a debate as to whether markets are fair and rational?
    Beerandraiderfan likes this.
  12. miketd

    miketd Zealot (520) Mar 2, 2006 Ohio
    Beer Trader

    Wouldn't that only apply if people are investing in beer? A small fraction may be, but most people are only going to pay what their budget allows.
  13. DefenCorps

    DefenCorps Poo-Bah (3,373) Jan 18, 2007 Oregon
    Beer Trader

    Of course! I responded that way simply because his original post was logical flawed:
    An increase in prices does not automatically lead to the conclusion that there's a bubble, but the presence of people willing to pay the price does not mean that there isn't a bubble.
  14. TheRealDBCooper

    TheRealDBCooper Aspirant (208) Mar 17, 2010 Svalbard & Jan Mayen Islands
    Beer Trader

    Eventually enough capacity will be in the hands of people who can produce quality product and the $10 bottles of mediocre beers will either be at a lower relative price or the company will be out of business. (Will also need that same capacity in quality hands for the "buy (hype) mostly local" segment of the beer geek population.)
    bozodogbreath likes this.
  15. yemenmocha

    yemenmocha Poo-Bah (2,459) Jun 18, 2002 Arizona

    As prices creep up then I see people mostly sticking to what they consider "best", and there's some rather solid trends on best beers and breweries out there. The flip of this is that people will be less inclined to drink the mediocre stuff, especially if it was only fueled by motives of "buying local" and such.
    SunDevilBeer and nicnut45 like this.
  16. porkinator

    porkinator Aspirant (200) Aug 26, 2009 California
    Beer Trader

    I'm dumber than that kid you knew growing up that had a pet rock, but if EBay stopped "allowing" the sale of beer, would that help the craft price market at all?

    My pockets are stretched THIN, but I still buy what I want, and if I can afford it, I'll trade. When purchasing beers lately, I've been deciding more often than not to buy a couple to share one with friends now and cellar one for later, rather than to stock up and hoard for the future.
    kawilliams81 likes this.
  17. kawilliams81

    kawilliams81 Meyvn (1,248) Feb 27, 2009 Illinois
    Beer Trader

    I am in the same boat porkinator. 6 months ago or so I was buying as many BCBCS, Brambles, KH's, etc as I could and now I buy a bottle of something new just to try or maybe 2 if I want to cellar one.
  18. marquis

    marquis Crusader (717) Nov 20, 2005 United Kingdom (England)

    The sort of price mentioned by the OP would be considered quite cheap here.Price doesn't seem to affect sales too much.
    The supermarket I visited today was running an offer of 4 bottles of everyday beers (500 ml) for roughly $9
  19. mychalg9

    mychalg9 Champion (845) Apr 8, 2010 Illinois
    Beer Trader

    If a craft brewery offered a $5 or $6 six-pack, I would be all over it. That is about all I know about the subject.
  20. otispdriftwood

    otispdriftwood Crusader (736) Dec 9, 2011 Colorado
    Beer Trader

    From the production side, there is so much more that goes into pricing than what people are willing to pay. Price of ingredients, overhead, debt service are all factored in to what a product sells for. As far as beer is concerned, the 3-tier system also provides an additional price bump between the brewery and the consumer. It may take some time since craft beer is growing but eventually the overpriced less desirable products will sit on store shelves, in warehouses, and at the brewery. Soon enough, these breweries will either get the message or fade away. A bubble exists, I believe, for the rare seasonals and extremely limited distributed beers. But when there are plenty of people to take the place of people who will no longer pay the price, the bubble abides.
  21. coreyfmcdonald

    coreyfmcdonald Savant (953) Nov 13, 2008 Georgia
    Beer Trader

    I fail to see how a $10 six pack is too expensive for the average craft beer drinker. I'm not going to say it's something everyone can afford, but it's far cheaper than most hobbies. Even if you're putting away 2 six packs a week (which is quite a bit if you don't binge), that's only $80 a month. That's a pretty cheap hobby IMO.
  22. maltmaster420

    maltmaster420 Aspirant (289) Aug 17, 2005 Oregon
    Beer Trader

    Local competition will weed out some breweries in the more saturated markets, but that's not indicative of a bubble so much as a disparity between what they're charging and what comparable (or better) breweries are charging.

    Case in point: Butte Creek, Grand Teton, Eel River, Wolavers, and several other long-established breweries have all but disappeared from the Oregon market, and I suspect it's largely because they were all priced $1 or more above Deschutes, Widmer, Bridgeport, Sierra Nevada, and a dozen other options.

    It seems the desire/demand for $7 IPAs from Denmark has nose-dived as well. I've reached the point where I'm hesitant to order anything hoppy from Denmark (or New Zealand for that matter) because once the novelty wears off people realize they can get a 6pk of Union Jack for the same price as one bottle of Mikkeller I Beat U or 8 Wired HopWired.
  23. Beerontwowheels

    Beerontwowheels Initiate (0) Nov 22, 2009 Maryland

    That's only 1.71 beers a night, on average. If that's a lot, shit...
    jesskidden likes this.
  24. coreyfmcdonald

    coreyfmcdonald Savant (953) Nov 13, 2008 Georgia
    Beer Trader

    Maybe my drinking habits are different than most, but I rarely have more than 1 beer a night unless I'm at a party/BBQ or a bar. Having more than 2 is extremely rare.
  25. Beerontwowheels

    Beerontwowheels Initiate (0) Nov 22, 2009 Maryland

    My waistline, liver and wallet envy your drinking 'habits', if I would even call it that. :slight_smile: My tastebuds on the other hand...they feel quite loved.
    thebigredone likes this.
  26. nrs207

    nrs207 Defender (687) Sep 8, 2011 Pennsylvania
    Beer Trader

    Sorry, but how is that fundamentally ridiculous?

    By definition, there's no bubble if people will continue to pay. A bubble implies that we're on the verge of people getting fed up with the prices, and they'll stop paying them if they continue to be let down by new offerings at a price point they deem to be too high.
  27. herrburgess

    herrburgess Meyvn (1,010) Nov 4, 2009 South Carolina
    Industry Beer Trader

    Well, the reason I posted this was because there seemed to be quite a few "X beer is really expensive" threads popping up -- as well as a lot of BAs posting in them to say that, yes, many beers are too expensive for them.
  28. coreyfmcdonald

    coreyfmcdonald Savant (953) Nov 13, 2008 Georgia
    Beer Trader

    My Friday and Saturday nights out are a bit of a different story. I also tend to buy single bottles for $5+. Believe me, I spend my fair share. I guess my point was if my drinking was limited to $10 six packs and only drinking at home, I would not spend a lot of money.
  29. coreyfmcdonald

    coreyfmcdonald Savant (953) Nov 13, 2008 Georgia
    Beer Trader

    It's true, there are beers that have gotten very expensive. A $30 750ml bottle of really anything is very expensive and becoming more popular. A $10 six pack of world class beer is a great deal, IMO.
  30. herrburgess

    herrburgess Meyvn (1,010) Nov 4, 2009 South Carolina
    Industry Beer Trader

    Well, that's the thing. The $11.99 six pack of "local craft IPA" is not, IMO, world-class, whereas a $6.99 six pack of, say, Sierra Nevada is, much closer to world-class.
    chuckstout likes this.
  31. nrs207

    nrs207 Defender (687) Sep 8, 2011 Pennsylvania
    Beer Trader

    Understandable. I'm not saying there is no bubble. However, saying that there is no bubble if people will continue to pay is not fundamentally ridiculous. That was the point of my statement. I actually agree there probably is a bubble. New breweries with unproven products or subpar products won't be able to continue to charge as much as proven breweries IMO.
  32. tjensen3618

    tjensen3618 Initiate (0) Mar 23, 2008 California

    If there's a beer on the shelf in a bomber, I can almost always find a similar quality substitute in a six or four pack.
    Barrel-aged beers and sours are the exceptions where I still spring for bombers, that and new beers I gotta try that aren't in 6 packs, but very rarely will I repeat purchase those bombers.
  33. Lutter

    Lutter Initiate (0) Jun 30, 2010 Texas

    Price is not a problem if it's a quality product and there's a market for it.
  34. coreyfmcdonald

    coreyfmcdonald Savant (953) Nov 13, 2008 Georgia
    Beer Trader

    Fair enough. I guess I try to drink local but only do so when I think the product is very good. I wouldn't buy a B- rated local IPA (assuming I agree with the B- rating) even if it was $5 a six pack. I expect the local beer to be a bit pricier (due to economies of scale), but I expect it to be fresher and very good before I'll buy it no matter the price.
  35. Longstaff

    Longstaff Initiate (0) May 23, 2002 Massachusetts

    I think we are nearly there with most craft six packs hovering around the $10 mark.. The latest increase by sam adams puts their six packs over $10 at most of the stores in my area - which is where I think the average craft buyer (who is also a macro drinker too according to SA's research) starts thinking about alternatives.

    All it takes is the rate of increases to start coming in under 10% before some media outlets crows about craft beer being dead (again), which will lead to all sorts of bandwagon jumpking by other media, and then its on. Once one major craft brewery lowers price, it kind of forces other breweries hand.
  36. otispdriftwood

    otispdriftwood Crusader (736) Dec 9, 2011 Colorado
    Beer Trader

    Considering the price of a good bottle of wine nowadays, whether at a store or especially at a restaurant, craft beer is cheap. And as long as we BAs believe that beer is or should be on a par with wine, we should be resigned to pay the price.
  37. Lutter

    Lutter Initiate (0) Jun 30, 2010 Texas

    I'm still glad that Sierra Nevada manages to keep their year-round line-up in the $7-$8 range. Occasionally $12.99 per 12-pack on sale. Can't beat a Torpedo at that price. That's the best deal in craft beer right now and keeps my fridge stocked.

    Sam Adams is at the $10PP? Really? I saw it the other day at the grocery store for $7.99 for Latitude and Boston Lager.
    chuckstout likes this.
  38. Beerandraiderfan

    Beerandraiderfan Initiate (0) Apr 14, 2009 Nevada

    I dunno. I walked out of the liquor store yesterday spending $100 when all I went in for was a 12pk of SNPA cans.

    10 years ago, the thought of a $20 bottle of Freut would have never crossed my mind (too expensive). Yesterday, I'm like, oh wow, that seems really cheap, I should stock up. . .

    Are we in a bubble? Some signs say yes.

    Then again, when I passed on those 2008 4 packs of BCS/piapt/2td for only $14, I was like, bubble's gonna pop only a fool would buy/buy multiples of those. . .

    So who knows. Its like all commodities, anything could happen and there's evidence to support any conclusion you want to arrive at.
  39. miketd

    miketd Zealot (520) Mar 2, 2006 Ohio
    Beer Trader

    Depends on your "local IPA". I'm lucky enough to have three world class IPAs brewed within 150 miles, but I do suppose the price is getting a bit high even if the quality is some of the best around.
  40. FATC1TY

    FATC1TY Moderator (1,228) Feb 12, 2012 Georgia
    Subscriber Beer Trader

    I think the boom in the market for all things "craft" has taken off. Much like "organic", "craft" has taken a spike up. Well, not a spike, but all the reports show a decline in spending in beer for the BMC's, but an uptick in the whole micro-craft scene.

    With everyone jumping in, and wanting to get their shot at the golden ticket, prices have risen, with the masses atleast experimenting with new beers, and such.

    Prices have risen, but also understand that prices for almost everything has ticked up, in about the same fashion that beer prices have. With the whole limited and hugely hyped beers aside, I think the market, personally, is pretty close to it's top end. Anything more than $13 for a 4/6 pack of something for me, is enough to slow my roll and pull my hand back and think about it a bit. At that point, I'm looking for it to be seasonal/exclusive, or pretty much high ABV style, or something different.

    I think as long as people have the means, and the wants, there will be breweries that will charge whatever they can get. That said... I doubt BA's have a ton of room to piss and moan about prices, as we as a collective whole, give the breweries the ammo to charge what the prices have become in short fashion. We also manage to hype up releases of beers, which cause places to gouge, or hoard, and then people end up selling them for 5-8 times what the beer was sold for. Just sayin'.
    porkinator likes this.
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