Apr 052016
 

ReadingThe ebb and flow of the beer industry has always been tied to the annual seasons.  The summer months have typically been the season when beer flows profusely, but even during the summer months, the holiday weeks truly can make or break the year’s sales numbers.  Over the decades, the beer industry parlayed non-summer holidays into big events with St. Patrick’s Day first being, followed by Cinco de Mayo, which is an important holiday for the Mexican beers.

Holidays became even more important as companies were working to increase sales.   Halloween now has become a big beer promotion, and more imports are taking advantage of certain key dates where a particular culture is celebrated, for example, Oktoberfest with the Germans. There is also German American Day and Veterans Day, both of which can be holiday-focused promotional sales events.

And of course, the industry has typically relied on sporting events to enhance sales.  The culmination of March Madness saw the usual packed bars with customers supporting their teams to win the NCAA basketball championship.  Every New Year begins with the Super Bowl, definitely a high point for beer sales, and the industry laments that football season is only last half the year.  Fortunately, the World Cup, which occurs every four years, is a huge volume producer for the industry.  Recycling the World Cup kegs sales is no fun.

Annual planning by all beer companies focuses on the above special events in addition to other events where these companies concentrate resources and dollars on getting beer to the customer.

One key platform behind all their efforts is pricing. Price promotions are the one crucial element used to drive volume and consumer sampling by almost all beer vendors. Promotions are timed during the holidays when sales are at their peak.

FMCG are just now starting to implement a pricing model originally used by the airlines.  That model is surge pricing.  Uber, too, also adopted the model. When demand for rides is at a peak, Uber will triple their rates.  As we all know, airlines for years have raised their rates during peak holidays like Christmas and Thanksgiving.  Conversely, airlines discount seats when there is little demand.  Years ago Brazil increased prices on Coca Cola in their vending machines during their warmer months and the public expressed their dissatisfaction. Just like Americans react negatively to increased airline prices during the holidays.

One wonders what the beer industry would look like if this surge pricing were adopted.  What if prices were raised during the week of the 4th of July and discounted the week after?  How would sales be affected?  Better yet, how would surge pricing affect margins on all tiers within the industry?

While surge pricing has been the pricing model for the airline industry for many years, and now perhaps other companies including Uber, it is safe to say that as long as there is competition there will be no surge pricing in beer.  Unless one brewery can obtain 90%+ market share, which will not happen, beer will continue to be discounted during peak periods.

If we look at pricing holistically, we’ll create a more solid business…

 

 

 

 

 

 Posted by at 6:00 am

  One Response to “If we look at pricing holistically, we’ll create a more solid business.”

  1. Tourist markets would work out with surge pricing throughout the season but other markets would create much different buying patterns. I have always been amazed through the years why we lower our pricing in the tourist markets during the season when every other industry is increasing their pricing Hotels, Airlines et el… Especially since it takes 30% more labor to execute sales, delivery and merchandising services in tourist markets………………….Keep up the good work with your writing

    Thanks,

    Byron

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