Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Tuesday, May 03, 2005

The Declining Demand for Beer

Unlike Phil Miller, I am anything but a beer afficinado. In a blind taste test, I would be hard pressed to tell the difference between Coor's Light and Guiness.

Nevertheless, I am intrigued by the apparent downward trend in the demand for beer. Daniel Gross, writing in Slate, offers two general reasons [thought not exactly in these words] for the decline:

  1. The income elasticity of demand for foreign beers is much higher than for domestic beers, and with rising incomes, people are switching to imports. At current income levels, domestic beers are inferior goods.
  2. Also, people are switching to hard liquor (and probably for similar reasons).
Here is his explanation:

In the 1980s, beer-drinking yuppies, just as they did with automobiles, turned away from domestic brands and toward imports. That has continued. The Beer Institute reported that total beer imports in the first nine months of 2004 rose a solid 3.7 percent. But that's not enough to take the fizz out of Bud and Miller's growth.

The real problem is that Americans increasingly tipple with wine and hard liquor. Health-conscious baby-boomers, fretting about waistlines and heart murmurs, are eschewing high-carb beer for cardiac-friendly merlot (or, post-Sideways, pinot noir). According to the Wine Institute, U.S. wine sales have risen smartly in recent years, from 558 million gallons in 2000 to 627 million gallons in 2003.

Meanwhile, the young and hip—traditionally the biggest consumers of beer—are looking for harder stuff. Club-goers want less Molson Ice and more Maker's Mark. The spirits crowd has become better at marketing, too, especially to younger consumers. That is one of the reasons a bidding war may be erupting over Allied-Domecq (Courvoisier, Kahlua, Stolichnaya), which recently agreed to be bought by Pernod Ricard.

I would offer a third, complementary, explanation. The growth in the consumption of coolers, especially by young females, has replaced beer sales to a great extent (according to the proprietor at the local beer store). Many young women who used to drink beer now drink rum or vodka coolers instead of beer.
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