Saturday, January 7, 2012

Beer Business Daily - What's In Store For 2012?

While browsing I came across this article about one beer journalist/analyst's predictions for 2012 as it pertains to the beer industry.  It's a little lengthy, but here are some of the highlights plus my thoughts on how it might affect beer drinking down here in South Louisiana.  Well, if the predictions are correct of course.
We will see an unprecedented number of new packages and brands coming from the big brewers this year, as they seek ways to bring drinkers back into the fold. This will cause some complexity issues with wholesalers and the requisite griping as their numbers of SKUs increase and blended margins erode.
Hmmm, first off SKUs refers to Stock-Keeping Units... and basically what he thinks is that the big guys (Bud, Miller, Coors primarily) are going to try ever different ways to package their beer and come out with new similar brands.  In case you hadn't noticed, take a look at the BMC part of the beer cooler next time you're at a grocery store.  There are about 73 different ways to buy Bud Light.  You can probably buy 4 different 6-packs at most stores!  12 ounce bottles, 12 ounce cans, 10 ounce cans, 16 ounce cans!  WHICH ONE DO I WANT?? Do they really think that offering all the different packaging will influence other people to buy Bud Light instead of the next one?  Maybe a small amount of the time, but mostly it's because each different package takes up more shelf space until eventually just the Bud Light packaging options takes up a whole section of the cooler if not spilling over into the next one... which is where the Budweiser starts, or maybe the Natural Light, or perhaps the Michelob Ultra?  What this means for us though?  Not much I think... BMC will continue to dominate the shelf space but places like Calandro's and other stores that we go to for craft beer are going to keep their shelves full as long the market remains.
Craft beers will continue to driving beer growth and take share within the category, to the tune of maintaining double digit growth. However, 2012 will be the year that we see in bas relief that demand isn't the problem -- it's supply. We really are going to see capacity constraints create shortages. Sierra Nevada and New Belgium will break grounds on new eastern breweries, but they won't come online for some time. The winners will be those who can supply the beer. I suspect more breweries will withdraw from markets.
Hmmm, now this one I unfortunately agree with, although it might not really be unfortunate. Growth in the craft beer sector is a VERY good thing and all signs point to more growth but I really do think brewing companies withdrawing from markets because they are at capacity and can't even satisfy core markets is a strong possibility.  In fact it's already been happening around the country from time to time.  Some breweries are expanding, others are gaining drinkers and being forced to pull back.  In Louisiana though, what does this mean to us?  I don't see brands like Stone or Sierra Nevada going anywhere but could ones like Ommegang and Brooklyn and Jolly Pumpkin cut us out if they can't meet demand elsewhere?  It's certainly possible if the beers are sitting on shelves longer here than their other markets.
2012 will be the year of cider. As the larger craft players and even big brewers get into the cider game, and they will, not to mention current cider makers expanding and international cider makers entering the market, cider will start getting lots of press, industry attention, and a wider consumer base. I expect we'll see some regulatory issues in some states on whether cider is a wine or a beer.
Cider huh?  That would be fine by me, I enjoy a good cider from time to time and there are several brands available in Baton Rouge like Strongbow and Crispin.
We will see increased deregulation efforts at both the state and federal level. The fight to deregulate will intensify this year, with both privatization efforts, deregulation by defunding, turf wars between the FDA, FTC, and TTB, more deregulation lawsuits against states by winery interests. In addition, I think we will see a rash of new First Amendment challenges by craft brewers challenging state laws.
This has already started in Texas with the Jester King lawsuit I talked about recently.  Their success is only going to help motivate brewing groups in other states to do the same and open up the industry even further.  One of the next big hurdles is at least partially circumventing the three-tier system and allowing breweries to sell (in some fashion) directly to the public.
Craft brewers will experience more sharp elbows among each other as regional brewers expand into others' back yards, shelf space tap handles relative to the number of SKUs becomes more of an issue, and talent gets poached.
This is a big one... I can think of at least 4 new breweries on the way or in the works in South Louisiana, plus breweries like Parish, Bayou Teche, Tin Roof, and NOLA are still expanding their breweries and lineups.  So far there is far from an over-saturation of local beers and it seems like all the up and coming craft guys are more focused on a synergistic relationship than a cutthroat scenario.  Could this change as the local guys get even bigger and start fighting over tap handles and shelf space?  Absolutely, and I wouldn't be surprised if it happens in 2012 where bars in town can't carry all the local brands and have to make those choices.  Tap handles are the biggest concern, and are always at a premium. 

So there you go... the article covers many other topics if you want to read it, and I think some are very astute predictions and could hold true around us.

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