Economics Of

The Economics of Craft Beer

main The Economics of Craft Beer

Craft brewing, or more specifically home brewed craft beer has long been associated with beer nerds. You know, the kinds of people who spend a little too much time coiffing their mustaches, and breaking down the finer points of hops. For the longest time they were the ones at the very bottom of your dinner party invitation list.

That is in until craft brewing became cool and exploded into a multi-billion dollar subset of America’s beer infatuation. The above is, of course, false- beer nerds have always been cool. Rather it’s the tastes of American beer consumers that have changed leading to a mass revolt against the tyranny of blandness sold by two titanic beer conglomerates: AB InBev and SAB Miller.

Related Article: Craft Without the Cost: Budget-friendly Brews

Americans love beer and they consume it in egregious quantities. In 2012 over 55.1 billion gallons of beer were sold across the United States, and 14.1012 billion pints were sold in April 2013 alone. 12.61 billion of which was brewed and bottled by just two companies: Annheusuer Busch InBev and SAB Miller.

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However this ability to consume mass quantities of beer doesn’t exactly correlate to an appreciation of beer. In fact AB InBev is currently fighting a lawsuit against accusations of deliberately diluting its products. This is great news for smaller craft breweries. While beer drinkers have grown disillusioned with mass produced beers craft breweries have witnessed as much as 32% growth per year. In the same time while the two heavyweights have seen their market share wither by 7%. This largely attributed to an evolving palates and an increased appreciation of American beer in general.

Craft beer business 101

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In 2012, the Brewers Association reported that were 2,715 breweries compared to just 50 in 1980. This isn’t the first time this has happened either. American brewing experienced its first boom back in 1880 and we may be in the middle of a return to normalcy thanks to relaxed regulations, and the internet.

Leading the charge back to the future are two companies: Boston Beer Company (who you may know as Samuel Adams, Twisted Tea and Angry Orchard), and Craft Brewing Alliance (Redhook Brewery, Widmer Brothers Brewing, Kona Brewing Company and Omission Beer). Alongside Sierra Nevada and Belgium Brewing, Boston Beer Company and Craft Brewing Alliance dominate the $10 billion per year craft beer segment.

Boston Beer Company, aka Samuel Adams, has been a part of the craft brewing explosion for close to 30 years. It began in 1984 when its founder Jim Koch literally walked door to door across Boston selling a version of his family’s home brew to local bars owners. In the process he made a lot of friends and built the most profitable company in the craft beer segment. Boston Beer Company was among the first craft brewers to go to public in the 1990’s. It was first initially offered on the New York Stock Exchange at $15 per share. Boston Beer Company (ticker: SAM) currently trades at over $165 per share (6/12/2013).

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In 2012 the Boston based brewing company brought in over $580.2 million in revenue and is expected to bring in $664.4 million in 2013. That translates roughly to a per barrel revenue of $213.9 according to Deutsche Bank analysts. After everything is said and done Boston Brewing should take in a total of $59.5 million in profits, all in the name of high quality beer.

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