Monday, September 20, 2010

Beer distribution, a final thought from St. Cloud

Well folks, here's my final post from St. Cloud, MN. On Thursday my wife and I will be moving to Mason City, IA. Once there I hope to keep going with the blog on a more regular basis and continue to try and introduce more food and non-beer beverage posts. But first I want to get my head and hands around what's available in IA, which got me thinking about distribution of beer. So here's one last post about beer. I'll have something in a few weeks about where you can find me.

Boston Beer Company and Sierra Nevada are the two largest craft brewers in the country, and the only two craft brewers with 100% U.S. distribution. New Belgium and Spoeztl are next in size, both of whom have large distribution that are in no way "regional". There are a good number of regional or semi-regional brews up high on the list, companies with 8-12 state distributions, but New Glarus (#22 craft, #32 overall) is the only small footprint beer that gets anywhere near the top.

So my question is, if a brewer wants to be truly widely recognized and considered a big player in beer, do they (or will they soon) have to be a nearly nationally available brand? I mean of course there will always be room for regionals, there are beers that will only do good in a certain region and brewers who just don't want to spread themselves out that much. But are we getting to a point where brewers who want to go big will have to cover everywhere? How long before not just the top 2, but the top 10 or 15 brewers will have 100% national coverage? Do people think that's a good thing? A bad thing? Nothing?

And in addition to that, what will that mean for beer selection at non-beer bars? Sam Adams and Sierra Nevada are pretty easy to come across, even in more rural areas, will we eventually stumble across Deschutes, Bells or Stone in the same way?

Would that allow (or could it be pushed by) a company dedicated to transporting beer a long way? Essentially work the same system Budweiser works, moving large volumes long distances to reduce unit costs, a fact that some brewers (read Craft Brewers Alliance) have taken advantage of to get their beer out there (CBA is #8 overall brewery). Could someone start a beer trucking service specifically to contract distribute craft beers?

Friday, September 3, 2010

The growth of craft beer and Rural Markets, a "Tipping Point" response

As many of you know, recently did a series of stories on the growth of Craft Beer and the trends therein. (Part 1, Part 2, Part 3) Great pieces. One of the larger issues brought up in this argument is can Craft Beer keep up the ridiculous growth pace of 10% a year? Will people grow tired of it? Will Bud/Miller/Coors push back and "make a stand"?

I'm guessing, if anything, it will take a mix of those two events, and pushing back will involve introducing/buying up more "craft" brands like Blue Moon and Leinenkugel's. But, I still think there is hope, at least for a while, to continue growth. A sort of afterburner that can push Craft Beers a little harder now that they've mostly picked all of the low hanging fruit of trendy urban spots and affluent suburbs.

If you haven't figured out where I'm going with this, let me introduce one more peice of information, about the concentration of the population in the United States. The following "chart" shows what percentage of Americans live in Urban Areas of varying sizes, with the cumulative percentage in parenthesis:

Urban Areas over 200,000 : 58.274%
Urban Areas 50,000 to 199,999: 10.372% (68.619%)
Urban Clusters 5,000 to 49,999: 8.918% (77.537%)
Urban Clusters 2,500 to 4,999: 1.654% (79.191%)

Basically, 20% of people live in truly rural America, and there are a lot of people who live outside of metro areas at all. However, beyond a few local/regional crafts and the biggest craft brewers (Sam Adams, Sierra Nevada), the lot of which aren't even a given in some places, Craft Beer and Craft Beer Culture is absent from the stores of 20%-25% of the population. That is a lot of room for growth. And you can add to that, not only are those people not drinking Craft Beer on the farm, but those are the people migrating to the cities and taking their love of Bud with them.

I'm not saying that every liquor store in Cherry Nebraska or Bluefield, WV needs to have 700 different craft beer labels. But with a little effort they could have 50 or 100, far more than they have now.

And I know, some of you will say that would be expensive and inefficient. To take those in reverse order, I can tell you it's not inefficient to enter a market until the market is saturated, and rural America is no saturated with craft beer. This is especially true when most beer is distributed from at least a minor metro area, and adding that distributor or telling them to push more in the rural areas is really no new cost to the brewery.

As for being expensive to actually have to push your product or send out a sales rep, that's what we call in Economics diminishing marginal returns to cost. It was easy for word of mouth to spread the news about your brews in Chicago and Boston, pretty much free advertising. That can't and won't last forever, and the last 10 barrels are going to be a lot harder sell than the first 10 were.

So, in conclusion, I'm not saying small town America is where the next 10% share of the beer market is going to come from for Craft. But I do think it's foolish to think that it shouldn't be a bigger part of it than it has been.

Thursday, September 2, 2010

Oh, Urbanites and Local Food, how fun!

I am not a country boy, or a farm boy or anything like that, and I don't pretend to be. I grew up in Chicago (albeit nearly suburban, but my address was Chicago!), took the train, the bus. I didn't get my drivers license until I was 19. I ate at many different restaurants of varying quality and ethnic origin. And then I went to college in rural Minnesota, got into local foods, married a farm girl, and live in a town of 65,000, for now.

I still read the Chicago Tribune, and occasionally it has articles on local foods that interest me, like this one:,0,3015712.story?page=2 . This article today though got me thinking: What on earth are we doing listening to Urbanites to much about our "Local, farm fresh food". Apart from a few urban CSAs and City Farm type operations, this food isn't really all that local. Yes, it's as local as it can possibly be, and I commend city people for shopping at Farmer's Markets and getting out to the country once a year for a Harvest Festival. All that is really great. But I agree with the naysayers who say that Local Food may not be the most environmentally beneficial thing for city dwellers to eat. If you live in LA, that kiwi shipped across the Pacific in a mega-ship might have a lower per-bite carbon footprint than the apple driven in a pick-up from NorCal.

But, believe it or not, not all Americans live in Urban Areas. The US Census says that about 79% of Americans live in Urban areas. Urban being defined as - get this - 2500 people or more. Here's a little chart to help you decide how many Americans live in Urban Areas, by category percent and (the cumulative percent):

Urban Areas over 200,000 : 58.274%
Urban Areas 50,000 to 199,999: 10.372% (68.619%)
Urban Clusters 5,000 to 49,999: 8.918% (77.537%)
Urban Clusters 2,500 to 4,999: 1.654% (79.191%)

Sorry about not knowing how to make a chart, but back to the topic at hand. Having lived in or spent time in many different places, I can say that for most cultural purposes, Urban Areas, with real amenities, culture and markets don't start until 50,000 at best, and there are plenty of wastelands that approach 200,000. But for our purposes, we're going to look at the 31.5% of the population that lives in Urban Clusters of 49,999 people and less. And by look at them I mean: These are the people for whom Local Foods really make sense. Towns in Rural Iowa, Montana, Georgia. This is where we should be developing our local food cultures, helping to start Farmers' Markets and Business to Business food networks.

These are the places it makes Economic, Environmental and Social sense to develop a local food industry because can be cheaper than mega-agriculture, non-elitist, and help form community in places that are bleeding population. I'm sorry, but Queens, NY doesn't need much help with it's "sense of place" and "community identity," but Algona, IA might be a different story.