What’s a recession really but an excuse to drink more right? What’s ANYTHING but an excuse to drink more? Great day, have a beer. Bad day, have a beer! Ever since college started turning 21 I’ve really enjoyed beer. I like all kinds, from the cheap (Miller High Life) to the premium brands (Sam Adams) and even some super high grade $8 a bottle imports.
Not surprisingly though beer sales are more resistant to the spending cuts associated with a recession. With this one it looked like they were more sensitive than previously thought but those fears have subsided. The interesting thing is that craft beers have seen a 10% increase in sales despite the recession. In an industry where 1% yearly increases are expected this one group has exploded like an over-pressurized brewery tank. A craft beer is manufactured in smaller amounts than your Bud Lights and Miller Lites. Imagine craft beers like larger micro-breweries. They have mostly regional distribution but can be owned by larger beer companies. Blue Moon is a craft beer, as is Samuel Adams and Dogfish Head.
Craft beers are noticeably more expensive than traditionally cheap beers. A 6-pack of Miller Lite might set you back $5 whereas Sam Adams is twice as much. Forget all this talk about giving up Starbucks to save money, switch to Miller High Life from your expensive beers!
In a recession we should all expect sales of cheaper beer to increase compared to the expensive craft brews. Save money buy purchasing complementary substitute* goods at a cheaper price. That’s the rational choice of course and economists have predicted 7 of the last 3 recessions based on rational expectations. The problem with this of course is that people aren’t rational. When we cut back spending in one area we sometimes increase spending in others. So we may not be buying cars, houses, and elaborate vacations but we are upgrading some smaller things in life. This can account for premium beer sales, increased movie attendance, and the runaway success of Apple’s iPhone.
This is where behavioral economics rocks my socks. To a student that’s a product of economics and psychology this really wouldn’t be surprising. We should expect our spending to increase in some areas. Think about your own life, there is something you’re spending more on as a result of the recession. It’s easy to think about where we’ve all cut back, going out to eat, driving, and shopping. Personally, one area where my spending has increased because of the recession is at self-service restaurants (as I call them). These restaurants let your order up front and then you pick up the food when it’s ready. The savings over sit-down restaurants come in cheaper prices and the lack of a waiter/waitress to tip. This is anything from Chick-fil-A to Panera Bread. If you don’t believe people are spending more in this area see Chick-fil-A’s recent sales spike.
Posts like this aren’t really about the subject in the headline of course. Beer is fantastic and it’s great to see the sales increase of these companies because they are real American companies that employ real Americans. It’s about opening your eyes to irrational expectations. We don’t live in a rational world; if we did, you wouldn’t need to look both ways before crossing the street in a crosswalk. Good luck with that.
*correction made after initial publishing
Photo: a4gpa
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My take on it is that I only go out for beer once a month. And when I do that, I’m not going to buy a Bud Light, I’m going to get something more fun and exciting. I don’t usually buy $10 beers either, but I’ll buy something $5 or $8 and be ok with it. I also only drink one (lightweight) so I can afford to get quality.
As for other people, I dunno—it’s good beer?
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