Big Brewers lower prices on their craft beer brands
USA | In their attack on craft beer, the Big Brewers have brought out the big bazookas and lowered prices for their corporate craft beer brands, especially those packaged in bulky 24-packs.
They aren’t the only ones pricing down craft beers. The sales hike of Michigan’s brewer Founders (it almost tripled between 2014 and 2018) is partly due to offering its very popular All-Day IPA in 15-pack cans for the same price as a 12-pack. This was done in 2014. Today, Founders’ All-Day IPA sells at Walmart for USD 14.98 per 15-pack.
AB-InBev at the vanguard
However, no one has been as radical in down-pricing as AB-InBev. Already in June 2019, Peter Frost on the MillerCoors blog “Behind the Beer” wrote that AB-InBev, which has snapped up 13 craft brewers over the past decade (following the full takeover of Craft Brew Alliance it currently owns 21), is moving away from traditional craft beer packs ( 4-packs and 6-packs) towards larger, value-sized packs, including 12-packs, 15-packs and 18-packs. Thereby it is cutting the overall price per unit.
“The biggest declines in price per case”, says Mr Frost, “have come from some of its largest or fastest-growing craft brands”. Golden Road, Breckenridge, Blue Point and Goose Island are each selling at a discount greater than USD 2 per case compared with the prior year.
Lower prices, higher sales
The average price of its acquired craft beer brands dropped 2.5 percent to USD 37.91 per case in the 12 months to May 2019. The cuts appear to have helped fuel sales volume, says Mr Frost, with each brand up for the year. Breckenridge (+54.3 percent) and Golden Road (+52.1 percent) lead the way.
In comparison, the craft beers in MillerCoors’ Tenth and Blake portfolio – Terrapin, Revolver, Saint Archer and Hop Valley – averaged at USD 41.01 per case, down 0.5 percent.
In fact, AB-InBev’s Golden Road has gone very low. In its home market of California, Golden Road’s Fruit Cart variety 15-pack of cans was selling for an average of USD 26.75 per case in June 2019.
The down-pricing trend has focused on craft lagers, which compete with cheaper priced mainstream lagers. For example, AB-InBev’s 10 Barrel Pub Beer is selling for less than USD 21 per case, which is down USD 9.60 from last year, according to Mr Frost.
Could lower prices boost overall demand?
The decline in craft beer prices at AB-InBev is bound to hurt smaller craft brewers, whose higher cost base requires them to ask more for their beers.
It is still depressing to note that AB-InBev’s foray into craft beer is accompanied by the crudest marketing tactic: cutting prices. Most likely, they will argue that craft beer prices have been too high overall, and that lower prices will help invigorate craft beer sales. In their case, this tactic may do the trick. For the independents, we are not so sure.
