Do people drink more beer during a recession because they're stressed out — or less because they can't afford it?
Photo by: Don LaVange
That depends on which beer you're talking about.
The recession has taken a toll on some of the biggest names in domestic beer but the craft beer segment continues to see double-digit percent increases, including an increase of 14 percent by sales volume the first half of 2012.
For Jim Koch, the founder of Boston Beer Company and its flagship brand Samuel Adams Boston Lager, the reason is simple.
“It really is just people trading up and it's kind of, I think, when times are bad, people are willing to treat themselves to small luxuries,” Koch told CNBC's "Squawk Box."
Craft beer is still a small segment of the overall beer market at just over five percent, small enough that Koch says he doesn’t consider himself fighting for the same consumer as Anheuser-Busch InBev or MillerCoors , which account for 90% of the U.S. domestic beer market.
“Sam Adams isn't competing with Budweiser and Miller and Coors” said Koch. “They're sort of like the McDonald's and Burger King and Wendy's. We're fine dining and not really in the same business in a lot of ways.”
No matter the size, though, Koch said they're just now starting to feel the impact of higher grain prices due to the drought.
“The drought has affected all the agricultural products including barley, so beer prices are probably going to be seeing some upward pressure, like any other food. Beer is food. So grain prices affect it,” Koch said.
In the 28 years since starting the Boston Beer Company and working tirelessly to put the craft beer movement on the map, Koch has connected with some of the most influential people in business and politics — the result of being in the right place at the right time.
When he was at Harvard getting a joint law and MBA degree, one of his classmates turned out to be none other than 2012 GOP presidential nominee Mitt Romney.
“I remember meeting him and thinking gosh if this is the quality of people going into politics, I'd better stick with beer!” Koch said.
Their paths would cross again upon graduation, with Romney and Koch ending up working at the same company post-graduation, Boston Consulting Group. But if having a future presidential nominee as a co-worker wasn’t enough, the group at BCG at the time also included future prime minister of Israel Benjamin Netanyahu and John Paulson, who would go on to start a hedge fund resulting in a personal net worth of $11 billion dollars.
Paulson had an eye for business talent early, investing $13,000 in his friend’s brewing start-up in 1984.
“It was John's first, big hit!” laughs Koch. “Things turned out okay for him.”
-By Tom Rotunno, CNBC Senior Editor
Questions? Comments? Email us at consumernation@cnbc.com. Follow Tom Rotunno on Twitter @tomrotunno.
