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Cheap Beer

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November 14, 2008 – Comments (9) | RELATED TICKERS: DEO

Hey, if a headline like cheap beer doesn't get your attention on a Friday, I don't know what will.  I came across two interesting stories on the subject this morning.  Both pieces share the same theme, people all over the world are still drinking alcohol, but they are drinking more at home and drinking cheaper stuff.

According to the first article, five British pubs are close down every single day.  The British Beer & Pub Association says that cost conscious Brits are drinking more at home than going out. This is bad news for beer companies, like Heineken (HINKY.PK hey I never noticed that its ticker symbol was "hinky" HA), and SAB Miller because they generate the majority of their U.K. sales at bars, where sales are twice as profitable as they are at liquor stores.  Analysts believe that distillers, such as Diageo (DEO) will be impacted less by the shift which rely upon selling their products in stores more than in pubs.

Beer sales at pubs in Britain dropped 8.1% during the third quarter, amounting to a staggering 1.1 million fewer pints drunk per day.  This will likely pressure the profit margins for many beer companies.  Britain accounts for approximately 3% of the global beer market and nearly 10% of the European beer market.

It's not surprising that British consumers are cutting back.  Britain's economy contracted for the first time in 16 years last quarter.

Brits Booze Without Beer, Mix Drinks at Home as Recession Looms

The second article talks about drinkers are lowering their standards and are purchasing cheaper brands of beer than they have been.  According to SABMiller's CEO, the rate at which European consumers are are moving away from specialty and microbrews towards mainstream beer brands, like Miller, Coors, and Budweiser, is "surprising."

Over the past several years, beer companies have benefited from consumers "trading up" to more expensive premium brands, however this trend appears to be shifting quickly.  This again is bad news for beer companies.

Even more interesting than the shift to mainstream brands in developed markets is the change to home-made alcohol in developing markets like Latin America. 

Hmmm, I personally find this trend very disturbing because I live in a developed country yet I already drink a mainstream beer in Miller Light.  Does this mean that I will have to start brewing some sort of strange hooch in my basement to use to drown my sorrows?  Yuck.

Drinkers are returning to cheap brands, says SAB

Deej

Long beer

9 Comments – Post Your Own

#1) On November 14, 2008 at 12:45 PM, leohaas (32.26) wrote:

Interesting stuff. But if you drink Miller light, you are not long beer :)

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#2) On November 14, 2008 at 12:48 PM, hansthered0 (< 20) wrote:

Well written and insightfull as usual; good work Deej!

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#3) On November 14, 2008 at 1:09 PM, Imperial1964 (97.76) wrote:

I'm long some cheep beer, but it's Friday and I'm getting shorter by the minute.

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#4) On November 14, 2008 at 1:11 PM, amoldov (31.35) wrote:

I absolutely loved it!

I'm still with the microbrews, and I like to drink them at the source (go out to the brewery), when possible. Miller Light? I haven't had one since my college student days. Those days may be coming back ... Yes during the darkest days back in Eastern Europe I remember my father brewing stuff in the kitchen of the apartment; it tasted like medicine. And the equipment looked very similar to the one in the picture.

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#5) On November 14, 2008 at 2:38 PM, madcowmonkey (< 20) wrote:

Worst part of the home brew is looking at the remnandts in the bottom of the bottle. Always a turn off, yet I still find it fun.

Speaking of cheap beer. I am heading up to the U P for opening day and the Casino in Brimley is taking Vegas bound. Free drinks while you gamble. That means I can lose about $200 and still come out even.......I am not talking PBR though.....I hope the dice are good to me. I think there is probably less risk in the casino than shorting the good beers of our world. Newcastle or Guiness anybody?

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#6) On November 14, 2008 at 3:16 PM, abitare (34.59) wrote:

Miller Light is not technically Beer anymore, now that the US has real beer like Sam Adams etc...  

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#7) On November 14, 2008 at 3:34 PM, eldemonio (98.88) wrote:

Beer.......I have been homebrewing for awhile now.  Nothing like getting drunk on something you've made, know what I mean?

I can see microbrews taking a the biggest hit during the next year or so.  With the recent hops shortages, coupled with grain prices, most brewers, big and small, have been struggling.

madcow - you know what kind of nutritional punch those floaters can give you?  Good luck and happy drinking.    

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#8) On November 14, 2008 at 4:04 PM, madcowmonkey (< 20) wrote:

demonio- methane too:) Thanks for the well wishes

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#9) On November 14, 2008 at 8:09 PM, GeneralDemon (20.66) wrote:

Beer good. Beer is food. You want great beer??? Shiner 98 limited edition was as good as it gets. I loaded it up by the case in San Antonio and carted it back to Cali (you can't buy it in Cali)- but it was so good it lasted only one week!! This year it will be Shiner 99 - hope it's as good.

On an investing note, the great brands (like Guiness) will probably do fine - people in bad times tend to want to celebrate life with the 'good stuff' - but the mid-tier brands will be hurt.

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