Jul 292014
 

Cheers 2Up until the early 1970s, categorizing beer was simple.  At the top were imports, with the highest PTC. By far the leading brand was Heineken.  As in most categories, the different imports were priced approximately the same.  Slightly lower were super premiums, dominated by Michelob.  In fact, in many markets, it was only Michelob in this segment.  Then came the biggest category: national premiums.

In this category were the “big” boys:  Budweiser, Schlitz, Coors, and in many markets, Pabst, Falstaff, and Miller.  Of the last three pricing could vary slightly.  Trailing the end were the regionals lead by Old Milwaukee and Busch (where available), followed by local beers including Lone Star, Pearl, Jax, Hamm’s, Rainer, Olympia, and Henry’s, Schaefer, Narragansett, and many others.

Each category had its own pricing structure.  There was no variance within these pricing structures.  It was simply based on price and one immediately knew where and what position the beer would be viewed by the consumer and retailer.

When Miller Lite was introduced by Miller, it was priced slightly higher than the national premiums.  Miller had created a whole new category and pricing structure.  As the light volume grew along with new brands from AB and Coors, the breweries decided to line- price their lights with their regular beers.  This made sense, however, by now pricing across categories began to blur.

First, more imports began to land in the US and then breweries introduced “price beers” to run production at, or close to capacity.  Regionals began to move their pricing closer to AB and Coors, which soon sealed their fate as the consumer began to shift more and more from regionals to nationals.

Craft beers, starting with Boston Beer, began to rearrange the categories and the pricing structures within each segment.  Breweries, which had in the past, priced beer based on their knowledge of the price point, began to apply their strategies around margin requirements of their wholesalers and national chains including Walmart.  Instead of pricing from the “ground up”, it was now “top down” pricing based by market.  Pricing analysts or business analysts were in high demand, and remain so today.

Pricing categories began to have levels within the category.  As an example, German imports within that segment began to have three levels of pricing:  first, an upper end, followed by middle end, and finally the lower end.  Again working pricing backwards, importers could position their beer to best fit their strategy.

With the massive growth and influx of crafts, pricing ranges from around premium to some bottles approaching high end wine and spirits.  To position any beer now is more along the price point base on marketing strategy than by category.

The Brewers Association and its members, however, continue to want to define, or in this case redefine, the definition of craft brewer.  Now based on annual volume, a craft brewer must be less than six million bbls.  No one in the industry expects that beer segments or categories are going to merge into just one definition, but perhaps the consumer does not care what the beer might be.  It is not what you look at that matters, it is what you see!

 

This weeks link:

http://stlpublicradio.github.io/beer-gif/index.html

 

 Posted by at 6:00 am

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