One of the pleasures of doing a podcast with an economist is that occasionally he surprises you. We have long planned to do an episode on the the value of superstar brewers--those folks who have created some of the indelible beers that sell hundreds of thousands of barrels of beer each year. We used local legend John Harris as our example, who brewed some of the first beers at the McMenamins empire, then the classic line at Deschutes, went on to elevate Full Sail, and finally founded his own brewery Ecliptic. How would we calculate his value?
That's an interesting question on its face, but Patrick introduced me to a fascinating concept through which to look at this question: winner-take-all markets. These are situations in which the money flows disproportionately to the winners. Patrick gave a couple of examples, starting with sports. You have thousands of exceptional athletes playing at the collegiate level, but only several hundred playing in the NBA. The talent difference between an excellent college player and a great is slight, but the rewards are gigantic. In music we see a similar phenomenon; artists like Adele earn tens of millions while working bands have to drag their equipment around the countryside to scrape out a living.
In beer, there's a similar phenomenon. Even within craft, the top six percent of breweries make 84% of the beer (The overall beer market is even more top-heavy.) So the question: is beer a winner-take-all-market? The question of the brewer's value is a subsequent one, and also fascinating. I didn't have a whole lot to do with making this conversation interesting, but interesting it was. To learn the answers, of course, you have to listen to the pod (find on iTunes and Google Play as well). We also do a bit of year-end wrap-up and start-of-the-year forecasting.
Incidentally, we refer to a video clip in the podcast in which John recounts his start as a brewer. It was filmed at the celebration of his 30 years as a brewer last spring, and if you freeze frame the picture during the cheers at the end, you'll see some of the working brewers John inspired. And as a charming bonus, the young woman behind him is his daughter.
Showing posts with label beeronomics. Show all posts
Showing posts with label beeronomics. Show all posts
Monday, January 09, 2017
Wednesday, December 07, 2016
Dancing at the Margins of Ignorance
Every job has its plusses and minuses. I usually joke that everything about writing is great except the salary, but there's actually another downside that freaks me out nearly as much. A reasonable working definition could be: "writing about things you don't understand." The next story is always something intriguing, something you'd like to explore further. That generally means wandering off into some subject on which you have tenuous grasp. Knowing, of course, that the successful outcome of this little foray is an article that will go out to many people who know more than you do on the subject. (Along with, thankfully, many who know less. Blessed are the uninitiated, for they do leave angry comments.)
We have come to a phase in the realm of beer where interest is highest in the business rather than the product. Thanks to eye-popping numbers, intervention by multinational corporations, rivalries and sniping, the business of selling beer now entertains us much as the drinking of it. Well, at least where blog posts are concerned.
This is all well and good except the part where I know nothing about it. I have spent many hours doing things that make me feel incompetent: trying to translate old foreign-language texts, slogging through technical science papers, navigating the absurd address in the UK (Hook Norton's address, for example, consists of "Brewery Lane" and nothing more), attempting to understand weissbier mashing regimes, but in no area was I more unprepared than business.
I have never worked a day in a business that had more than ten employees. I've been self-employed (several times), worked at universities (lots), and done odd jobs for small businesses (a long time ago). I studied religion and developed an active allergy to corporate life. None of that was a good preparation for writing about beer, a big part of which is always a story about business. If you refuse to engage the business elements of brewing, you are basically not covering beer because nothing is free of it in those sixteen delicious ounces of IPA we regularly hoist.
This came into sharp focus when I interviewed Nicole Fry recently for the Beervana Podcast. Nicole is a managing partner for First Beverage Group, a a company that invests in and advises beverage companies, and which has been involved in several of the recent major brewery acquisitions. She's one of the people at the center of the business side of things, and she probably knows more about how beer is made and sold in America than just about anyone. I hope I did an adequate job.
Fortunately, Patrick was on hand to shore up my knowledge--and yours. In addition to my discussion with Nicole, we talked about what reaching the 5,000-brewery threshold means and why certain beers are so damn scarce in some markets. In other words, another in our regular podcasts on the economics of beer. Give it a listen:
I'll probably give it another listen, too, because this is a subject I really need to get a handle on! As always, it's available on iTunes as well as Soundcloud.
We have come to a phase in the realm of beer where interest is highest in the business rather than the product. Thanks to eye-popping numbers, intervention by multinational corporations, rivalries and sniping, the business of selling beer now entertains us much as the drinking of it. Well, at least where blog posts are concerned.
This is all well and good except the part where I know nothing about it. I have spent many hours doing things that make me feel incompetent: trying to translate old foreign-language texts, slogging through technical science papers, navigating the absurd address in the UK (Hook Norton's address, for example, consists of "Brewery Lane" and nothing more), attempting to understand weissbier mashing regimes, but in no area was I more unprepared than business.
I have never worked a day in a business that had more than ten employees. I've been self-employed (several times), worked at universities (lots), and done odd jobs for small businesses (a long time ago). I studied religion and developed an active allergy to corporate life. None of that was a good preparation for writing about beer, a big part of which is always a story about business. If you refuse to engage the business elements of brewing, you are basically not covering beer because nothing is free of it in those sixteen delicious ounces of IPA we regularly hoist.
This came into sharp focus when I interviewed Nicole Fry recently for the Beervana Podcast. Nicole is a managing partner for First Beverage Group, a a company that invests in and advises beverage companies, and which has been involved in several of the recent major brewery acquisitions. She's one of the people at the center of the business side of things, and she probably knows more about how beer is made and sold in America than just about anyone. I hope I did an adequate job.
Fortunately, Patrick was on hand to shore up my knowledge--and yours. In addition to my discussion with Nicole, we talked about what reaching the 5,000-brewery threshold means and why certain beers are so damn scarce in some markets. In other words, another in our regular podcasts on the economics of beer. Give it a listen:
I'll probably give it another listen, too, because this is a subject I really need to get a handle on! As always, it's available on iTunes as well as Soundcloud.
Wednesday, May 15, 2013
Price of a Sixer, Adjusted for Inflation
The Brewers Almanac is quite a lot of fun if you love arcane statistics. (Excise taxes broken down by state and by beer strength? Check. Percentage of beer sold in cans in 1962? Check.) This one was especially interesting: the estimated price of a six-pack of beer using BLS consumer price index figures. "Six pack" here means national brands (those selling for around $5 now). They used actual prices, so I ran them through the BLS's inflation calculator and came up with the following figures, based on current 2013 dollars.
Except for short blips where the price was essentially flat, beer prices dropped an average of about 70 cents a decade between 1955 and 1990 and have been flat since then. The big question is whether Bill's adjusting his Portland Beer Price Index for inflation.
1955: $7.73
1960: $7.39 (-.39)
1965: $7.17 (-.22)
1970: $6.54 (-.63)
1975: $6.23 (-.31)
1980: $5.57 (-.66)
1985: $5.43 (-.14)
1990: $5.22 (-.21)
1995: $5.28 (+.06)
2000: $5.11 (-.17)
2005: $5.09 (-.02)
2010: $5.21 (+.12)
2011: $5.12 (-.09) (last available year)
Except for short blips where the price was essentially flat, beer prices dropped an average of about 70 cents a decade between 1955 and 1990 and have been flat since then. The big question is whether Bill's adjusting his Portland Beer Price Index for inflation.
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