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Monday, July 11, 2016

How Far Will Mass Market Lagers Fall?

There's a (surprisingly weak) piece on the online New Yorker that includes this remarkable comment:
Over the past decade, varieties once thought of as boutique beers, such as I.P.A.s, have exploded in the United States, thanks to the locavore movement. Craft brewing is now doubling in sales, by volume, every five years; today, craft-beer sales make up twenty-one per cent of the beer market, and twelve per cent of the volume. The Brewers Association, a craft-brewing trade group, expects craft beers to have a fifty-per-cent market share in a decade. Since craft brewers use about ten times more hops than megabrewers, the trend has been a bonanza for Hopsteiner and the other big hops companies. [emphasis added]
Let's leave aside that unsubstantiated (and untrue) intro sentence about the locavore movement. The bolded sentence is the real whopper. It's not clear whether he's talking volume or dollars when he refers to the market--even predicting that the craft market will more than double in ten years is a pretty staggering prediction. That would require 10% year-over-year growth for the entire period. For volume to hit that mark, craft would have to grow more than four-fold in ten years time--and someone better at calculating compound growth can run those numbers. [Update. In a tweet, Brewers Association economist Bart Watson confirmed he was misquoted. "No. I think I said something like the high end could get to 50% of dollar sales eventually."]

It is interesting to consider where the floor for mass market lagers is. Rather than just guess at random, let's look at a similar product category: coffee. Much like beer, it was an industry once dominated by a single kind of product and a few large national players. Like beer, a "craft" movement arrived in the 1980s and began gobbling up market share. Like beer, consumption habits vary for younger folks than older folks. Like beer, total consumption is declining even as consumption of good coffee increases. And finally, like beer, people drinking outside the home is on the rise. And what's happening in coffee?
Only about 8 percent of the coffee beans Americans buy are fresh whole beans, which upscale coffee brewers, like Blue Bottle, will tell you is the much better way to buy coffee beans. And ground coffee isn't just outpacing whole bean coffee — it's increasing its lead, each and every year. 
I couldn't find solid stats on coffee, which has no equivalent to the Brewers Association. Coffee is also fragmented in a way beer isn't (espresso vs ground vs whole bean vs pod). But this one teaser graph from Statista is illuminating:

Folger's and Maxwell House are objectively inferior products. They're made with inferior beans and produce coffee I think most people would agree is marked by harsher flavor notes. This, too, is different from beer. Mass market lagers may be less interesting, but they're not made from inferior ingredients. The difference is subjective. And yet, Folger's and Maxwell House are still rocking it. Why?
But just the opposite is true: People in this country, on the whole, are actually drinking worse coffee today than they have in the past. And the reason appears to be that they value cheapness over quality — and convenience over everything.
This is certainly going to be the case with beer. There will always be a large market for cheap beer, because there will always be a large group who prize value over flavor. (Or, more accurately, a group that prizes value at least part of the time.)

My rough guess, based on business news from the past couple years, is that about 50% of the coffee sold in America is "cheap"--the equivalent of mass market lager. That seems about right. I suspect the number might tick up or down depending on trends, but the low-end market is never going away, no matter how ubiquitous Starbucks seem. At some point in the future, we'll settle on a definition for mass market beer, and it will probably include some flavors and styles we currently call "craft." (Witbier is cheap and easy to make in volume, as one emerging example demonstrates.) By the time the market matures and we have settled on that definition, most of us will think of mass market beer about as often as we think of three-pound cans of Maxwell House now.


  1. I guess one similarity with coffee is that for every latte-sipping hipster at the corner coffee house - much more prolific here than most other places, btw - there are ~20 poor schmucks who have to commute to work and that old Mr. Coffee machine has a Folgers it is. The same is true with a dirty 30 of PBR or XXXLITE or - one of my favorite cheap 'beers' on the market - Kirkland Signature from cosco. Strolling through the big-box super grocery store in most of the rest of the country you will not see an entire refrigerated wall with craft 6 packs, but you WILL absolutely see an entire isle of cases or 30 packs with mass-market 'lager'. For the average middle-America weekend bbqing dad, that's one important item off the checklist. They're not messing around with 6 packs of fancy bottles with two screaming kids in much as I support the craft brew industry, 50% market share in the next 20 years is a supremely laughable projection, if only because of production capacity - to match current consumption levels of mass lager my favorite small breweries' output would have to grow at, frankly, unimaginable levels per year. The only way that will happen is if the industry is flooded with capital - so an unlikely scenario at best.

  2. "... There will always be a large market for cheap beer, because there will always be a large group who prize value over flavor..."
    Please don't equate cheapness with value. Value is a balance of cost and quality. Cheap is cheap.
    A local supermarket sells some popular craft beer at $15/12 and mass market beer at $19/30. The former is a value proposition, the later is cheap.
    In a bigger sense don't confuse cost with quality. I joke with friends about my $60 "12 pack" from the beer store, but more money doesn't equal higher quality.
    Dave S

  3. Dave, you touch on the meaning of words here. Cheap typically means inexpensive, buy you're using the meaning of low-grade, poor quality. I would challenge you and say that there's nothing "cheap" in this sense about mass market lagers. There are some that are cut-rate cheapos, and they are lower quality. But the name-brand mass market brands (Bud, Miller, Coors and their Light incarnations) are not cheap in that sense. Any product category may have cheap products. But the idea that mass market lagers as a category are cheap is wrong.