10/06/2004

Beef up, Beer down

With the recent over-emphasis on low-carb diets, beef sales are good. They are really good as most would expect. Yet, one idustry that is feeling the effects of the high demand in low carb foods is the beer industry, as well as spirits and liquour. After a steady growth over the past seven years, they have seen a steady decline since 2003.

To relate this scenario to what we've been talking about in class, it would appear that beef and beer are substitute goods in a sense. More specifically, low-carb foods and high-carb foods are reacting oppositely to a change in the publics' preferences. As the demand for low-carb foods goes up, naturally the demand for high-carb foods such as beer goes down.

It would be interesting to research prices and see how they have been affected over the past two years or so. It is interesting how certain things can become trends and then have an affect on something we might not consider to be related. Of course, now beer companies are developing low-carb versions so that they can adjust to tastes and preferences.

7 comments:

John West said...

Americans are finally doing something about the extremely high obesity rates that our society is currently facing. The low-carb diet seems to be here to stay and companies must find a way to incorporate their products into this category of food that is seen as beneficial. One may think the beer industry is hurting, but would you like to be in the bread or pasta industry? Go ask the makers of Twinkies this question right now. Beer companies shouldn't worry because in the beer is a great product that basically sales itself. People in society drink when their happy or sad, during war or peace times, to celebrate a wedding or a bad divorce.

Rufio said...

Maybe people are drinking less beer because they are realizing that it is just not a healthy drink. Beer is an addictive product though so I don't think the Beer Industry needs to worry about losing its consumers. The consumers of beer may just start drink less beer so in order for the Beer Industry to stay successful they will need to entice more people into drinking beer. The best way the Beer Industry can entice more people to drink is to advertise more heavily.

peter_parker said...

I agree that there is no immediate worry for a dramatic decline in beer consumption. As mentioned, producers are already marketing low-carb beers to adjust to trends. Knowing how health trends go, we might find the public going after a high carb diet next week. Beer would be on top of the list as a "healthy drink".

miles said...

I never would consider that beef and beer are actually substitutes. If anything, I could see them as compliments because beer and bbq's seem to go hand in hand. It is interesting that fads and trends can compare two items against each other and make the unrealated items substitutes. Another thing to think about, do people actually choose beef instead of beer? Or is it the trend that makes beef look better and beer look worse? In this case, pasta and beef would be substitutes because either they will have beef or pasta for diner.

Maudi said...

Low carb diets are hot and I agree the price of beef is up only becaus of these low carb diets. People tend to control the price of things. Fads are the things the push sales up and make things popular such as the beef industry.

Maudi said...

Low carb diets are hot and I agree the price of beef is up only becaus of these low carb diets. People tend to control the price of things. Fads are the things the push sales up and make things popular such as the beef industry.

Dr. Tufte said...

This is a really insightful post, and a good application of Chapter 3 in the text. With respect to Miles' comment, it is possible for fads to change the cross-price elasticities between products.

But ... I'm sitting here snickering thinking of all the hog farmers that have fed their pigs beer through the years and wondering if ranchers are considering the same option. ;)>

BTW: beer has often been touted as a healthy drink - typically the very dark and heavy stouts and porters. They actually used to ration Guinness out in orphanages because in small amounts it was a good source of minerals and B vitamins (before they really knew what those were, or how to put them in tablets). I don't have the cite handy, but 5-10 years ago this long gone technique was supported in a major medical journal.

BTW 2: there is also considerable anthropological evidence that teetotaling is a luxury that was only sustainable in dry climates prior to chlorination. Making beer was a standard way to make a safe liquid to drink - essentially you're growing a desirable microbe in an evironment where it can outcompete pathogens.