Beer Wine Industry Parallels

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If you want to understand how the beer industry in America might develop over the next couple of decades, there’s a book you should read: American Vintage: The Rise of American Wine, by Paul Lukacs. Read it with a beer in your hand, something like a Weyerbacher Double Simcoe I.P.A., which is so hoppy, it’s almost hallucinogenic. You’ll soon see the uncanny parallels between the wine world of 30 years ago and the beer business today.

Back then, a few big producers dominated U.S. winemaking with cheap, well-made, and unexciting jug wines. Imported wines that were similar to domestic products sold strongly as well: Lancers, Mateus, Riunite. Wine was perceived as a drink for snobs or dipsomaniacs. (Drunks used to be called winos, remember?) Then came the shock of the Judgment of Paris, the 1976 wine-tasting event where, for the first time, wines from small American producers publicly trumped those from Old World makers.

Fast-forward to now, and consider beer: Anheuser-Busch, SABMiller, and Molson Coors own about 80 percent of the market with commodity-priced light lagers. Brews like Corona and Heineken—similar to domestic offerings—hold about 15 percent, and the specialty brewers have less than 4 percent of the market. Meanwhile, higher-end import and craft beers are wowing critics, but proponents of keg-registration laws and beer-tax increases seem to hold beer responsible for underage binge drinking. To cap the comparison, American-brewed beers are besting European beers in international competitions in a variety of categories.

Two different drinks, two different markets, similar enough to be intriguing. If beer follows the path that wine did, what developments might we see in the next 20 years?

Market Composition Will Change

It may seem ludicrous at this point to think of light beer being overthrown by pale ale. But it would have been an equally outlandish call to pick chardonnay over undifferentiated jug Chablis in the 1970s. The wine market, in the course of about 15 years, went from being dominated by cheap jug wines and fortified wines like Thunderbird to focusing on varietals and the character of the grapes rather than their yield of juice and sugar (and, therefore, alcohol).

A similar change may be underway for beer. Craft and specialty beers are showing the strongest growth in the alcohol beverage market, with sales in supermarkets expanding by 17.8 percent last year, compared with growth of 10 percent for wine, 6.6 percent for spirits, and only 2.4 percent for beer overall. Craft beers are also gaining the attention of food writers and chefs, just as the American varietal wines did in the 1970s and 1980s. It’s a change that will accelerate as more establishments see the chance for increased sales and expand their beer selection, exposing drinkers to a wider variety.

Prices Will Rise

One reason you should expect to pay extra for craft beers is they tend to use more hops or malt—or both. But there’s more than simple ingredient costs at work. Craft beer—or “worthmore beer,” as SABMiller’s marketers have taken to calling it—sells for more simply because people are willing to pay more for it. Consumers regard it as something special relative to mainstream beer, so its perceived value is higher. As with wine sellers before them, no one in the beer sales chain wants to see that perception change.

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