Thursday, May 27, 2010

Domestic Beer Means Cheap Beer

Sam Adams is actually brewed in America, despite its decent taste.

I got a chuckle from a recent blog post written by Washington Post copy chief Bill Walsh. Walsh writes that Samuel Adams is often mistakenly listed on menus as "imported," because "domestic" has become such a synonym for "cheap" and "inferior" when it comes to beer.

Does this perception prove that American goods are inherently shoddy? Or that our status as a world leader is in jeopardy?

No. It's no surprise that the only foreign beers that get widely sold in the United States are the fancier ones.

Suppose that there is a German-brewed equivalent of Bud Light (I'll call it GBL, for German Bud Light). Just like GBL's American counterpart, in the trade-off between taste and price, the pendulum has swung almost all the way in favor of the latter. There's certainly a large market for bottom-of-the-line beer, but GBL cannot compete with BL in the United States because GBL faces higher transportation costs to get the product across the Atlantic.

Now, if labor were significantly cheaper in Germany and if the beer production process required a sufficiently high proportion of labor-to-capital costs, then GBL could save enough money on labor to make up for the transportation costs and thus have a shot at competing with BL. But we don't see such beers very often, suggesting that domestic brewers have an advantage when it comes to supplying the watery ale craved by broke American college students.

On the other hand, perhaps cultural acceptance is a larger hurdle than distribution costs. After Googling around for a while using phrases like "Budweiser in Japan," I found this article, which reports that Budweiser in 2000 had a minuscule share of the Japanese beer market despite hefty advertising.


Josh Hattersley said...

Issue in this case: even the cheaper beer in Europe tends to be pretty good, whereas the cheap beer here tends to be godawful. Blame is on the American macrobrew industry catering to the lowest common denominator of beer drinkers.

Our microbrew culture, on the other hand, is amazing in some areas (CA and OR are two prime examples).