Venezuela is going through a major economic crisis.
While the country is oil rich, it is struggling for cash.
Refugees fleeing to neighbouring Colombia say the country is a mess.
There are major shortages.
There is no food…no medicine…and the country is rationing water and energy. In fact, according to interviews of refugees from Euronews, a litre of water costs five times more than a litre of petrol.
The International Monetary Fund (IMF) expects the gross domestic product (GDP) to contract by 15% and inflation to spike to 13,000% this year. Yep, this is not a typo.
The Bolivar — Venezuela’s currency — has suffered massive devaluations. According to Bloomberg, the US dollar in the black market, the place where Venezuelans can purchase dollars, was at 103,000 bolivares in December 2017. Back in July, it was trading at 10,000 bolivares.
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Things are so bad that Venezuelans have stopped carrying money in wallets. Instead, they use bags. And instead of counting it, they weigh it. Cashiers don’t have tills…but scales.
With such a weak currency, Venezuela has had to reduce imports, as they are way too expensive. The decrease in imports has meant an increased demand for local products. That is, Venezuelans are going for cheaper items ‘made in Venezuela’.
Surviving as a business through all this economic turmoil can be tough. Yet there are a few sectors that are not only surviving, but in fact thriving because of the crisis.
One in particular is the rum sector.
Venezuelans like their whisky, yet most of it comes from abroad…which means it is currently too expensive.
According to the Brazilian news website Valor, the rum market has grown by 13% in the first semester of 2017. Companies like Santa Teresa, which is privately owned, have increased their local market share to 48%. They are now even looking to expand abroad.
Craft beer sector growing rapidly
Another thriving sector is beer or, to be specific, craft beer. Beer is easy to produce. Even with food shortages Venezuelans are flooding to local craft beer breweries.
Yet Venezuela is not the only country undergoing a crisis that has seen craft beer sales thrive. It has become quite popular in a country renowned for its wine — Spain.
According to Forbes, as the global financial crisis kicked off, Spain only had 21 microbreweries. By 2015, that number had reached 361. That’s around 1,600% increase in the seven years following the crisis.
In Argentina, the country that seems to be in permanent crisis, craft beer has become a great anti-crisis business. There, beer represents 50% of the total alcohol market and, in 2015 alone, craft beer sales doubled.
It is true that craft beer has become a massive global trend around the world, even in Australia. Consumers are looking for more choice and selection in beer, and they’re looking at craft beer to satisfy that need.
As reported by Beer & Brewer, while traditional consumption of beer per capita is decreasing in Australia, craft beer consumption is growing. According to Euromonitor International, in the flavoured/mixed lager category, off-premise retail sales were up by 23% in 2015.
Yet, even with craft beer being a growing trend, craft beer and crisis seem to be related. How?
Well, during a crisis, people have less disposable money for entertainment. And, while it’s true that traditional beer sales seem to lower during a crisis, home alcohol consumption increases.
Having less money to consume on entertainment means drinking more alcohol at home. People will then look for more quality than quantity, and for products that will give you an experience at home.
Craft beers can do this.
Breweries can change the conditions on how the beer is produced, which will vary the taste, and provide the user with very different experiences.
Plus, in a crisis, exports usually become too expensive as currencies devalue, so national demand for locally produced items increase.
The thing is, producing beer is relatively easy. There is no need for land, huge infrastructure or sophisticated equipment. You can sell beer through distributors, online or directly to the public from the brewery.
Plus, in the last few years, there has been a growing trend for healthier and locally produced goods.
It’s a growing trend, but also a business thriving during economic turmoil.
See you next week,
Editor, Markets & Money
PS: Editor Vern Gowdie thinks we are heading for a crisis…a big one. That’s why he has drafted this step-by-step guide to help you protect yourself from the impeding crash. You can access it here.