the emerging hard cider industry: a market analysis of the mid- … · 2017-04-04 · hard cider...

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Gustavo Ferreira, Ph.D. Assistant Professor & Extension Economist Virginia Tech, Dept. of Agricultural & Applied Economics Blacksburg, VA 24061 [email protected] 540.231.4730 The Emerging Hard Cider Industry: A Market Analysis of the Mid- Atlantic Region Introduction to Hard Cider Production

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Page 1: The Emerging Hard Cider Industry: A Market Analysis of the Mid- … · 2017-04-04 · Hard Cider Industry Six interesting facts about hard cider: 1. The first recorded production

Gustavo Ferreira, Ph.D.

Assistant Professor & Extension Economist

Virginia Tech,

Dept. of Agricultural & Applied Economics

Blacksburg, VA 24061

[email protected]

540.231.4730

The Emerging Hard Cider Industry:

A Market Analysis of the Mid-

Atlantic Region Introduction to Hard Cider

Production

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Agenda

General review of the hard cider industry in

the Mid-Atlantic and New England regions.

Tasting rooms

Regulation

Product Sales & Distribution

Product Characteristics

Inputs Procurement

Future of the cider industry

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Hard Cider Industry

Six interesting facts about hard cider:

1. The first recorded production of hard cider dates back to

55 B.C., when the Roman’s noticed the British Celtic

people producing alcohol using crabapples.

2. During Prohibition there were many orchards that were

burned and destroyed while the existing ones were used to

produce non-cider apples.

3. In terms of fruits used in hard cider production, the

market is 94 percent apples, 4 percent pears and 2 percent

other flavors

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Hard Cider Industry

4. The consumer profile of U.S. hard cider consumers is

very similar to craft beer consumers, but hard cider

constitutes less than 1 percent of the U.S. beer market.

5. Currently there are an estimated 335 cideries located in

38 states in the United States - most of these operations

have been stablish in the last six years.

6. According to TTB, hard cider production increased

substantially from 0.6 million gallons in 2008 to 5.2 million

gallons in 2012.

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Hard Cider Industry in the

Northeast Many producers are concentrated in both west and east

coast, and the current study analyzes hard cider

producers in the Mid-Atlantic and New England regions

of the United States.

Data was collected from each of the producer’s

respective websites, as well as, additional related

articles and online publications.

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Hard Cider Industry in the

Northeast

Mid-Atlantic States Number of

Producers New England States

Number of

Producers

Virginia 9 Massachusetts 15

North Carolina* 9 New Hampshire 3

Maryland 3 Vermont 14

Pennsylvania 12 Rhode Island 1

Total 33 Connecticut 5

New York** 40

Total 78

* Cider Bros. no information on their website, but included in number of NC producers

** Gravity Ciders coming soon, but included in number of NY producers

Source: Own work - Mid Atlantic-New England Hard Cider Producer Database 2014

Table 1. Number of Hard Cider Producers in the Mid-Atlantic & New

England Regions

Table 1A Table 1B

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Hard Cider Industry in the

Northeast

82%

18%

2007 and Earlier 2008 and After

Figure 1. Year of Establishment for Hard Cider Producers

in both the Mid-Atlantic & New England Regions

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Hard Cider Industry in the

Northeast

Mid-Atlantic States Number of

Producers New England States

Number of

Producers

2007 and Earlier 7

2007 and Earlier 21

2008 and After 0

2008 and After 6

Total 7

Total 27

Table 2. Year of Establishment for Hard Cider Producers in the Mid-

Atlantic & New England

Table 2A Table 2B

Source: Authors’ own estimations based Mid Atlantic-New England Hard Cider

Producer Database 2014.

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Cider tasting rooms in the

Mid-Atlantic & New England

Free tasting or tasting fee?

How much should I charge for a tasting fee?

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Cider tasting rooms in the

Mid-Atlantic & New England

Mid-Atlantic States

Producers and

offering tasting

rooms

New England States Producers offering

tasting rooms

Virginia 78% Massachusetts** 73%

North Carolina* 44% New Hampshire 100%

Maryland 100% Vermont*** 57%

Pennsylvania 83% Rhode Island 100%

Total 73% Connecticut 60%

New York**** 73%

Total 72%

* One is a bar but recorded as a tasting room, and three were not confirmed as open to the public

** One has off-site tasting room, One may be off-site

*** One requires a call-ahead for the tasting room, and One may be open to the public

**** Two have off-site tasting rooms

Source: Authors’ own estimations based Mid Atlantic-New England Hard Cider

Producer Database 2014.

Table 3: Mid-Atlantic & New England Hard Cider Producers

with a Tasting Room

Table 3A Table 3B

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Cider tasting rooms in the

Mid-Atlantic & New England

$2.90 $3.03

$3.50

$4.38

$-

$0.50

$1.00

$1.50

$2.00

$2.50

$3.00

$3.50

$4.00

$4.50

$5.00

Mid-Atlantic Low New England Low Mid-Atlantic High New England High

Average Tasting Fee

Figure 2: Average Tasting Fee for Mid-Atlantic & New

England Hard Cider Producers.

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Regulation

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Regulation

Current hard cider federal tax law enforces

$0.226/gallon assuming it is less than 7 percent

alcohol.

Cider with an alcohol percentage beyond 7 percent

is to be taxed as wine at $1.07/gallon.

Cider may be charged an additional so-called

“champagne tax” - of up to $3.30/gallon if it

contains more than 39 percent carbon dioxide per

volume.

No new legislation has been put in place to tax

hard cider as its own individual product.

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Regulation

State

Direct Shipping

Allowed Direct Shipping Not Allowed Direct Shipping Not Occurring

Virginia X

North Carolina X

Maryland X

Pennsylvania X

Massachusetts X

New Hampshire X

Vermont X

Rhode Island X

Connecticut X

New York X

Table 4: Direct Shipping to Other States Legislation By State For Hard

Cider Producers

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Regulation

State Control State License State

Exclusive State

Licensing

Exclusive Local

Licensing

Virginia X X

North Carolina X X

Maryland X X X

Pennsylvania X X

Massachusetts X X

New Hampshire X X

Vermont X X

Rhode Island X X

Connecticut X X

New York X X

Table 5: Law Enforcement by Alcoholic Beverage Agencies by State

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Product Sales & Distribution

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Product Sales & Distribution

Figure 3: Cider Distribution in United States by

Channel (2012)

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Product Sales & Distribution

Online 19%

Wine/Beer Shop 19%

Restaurant/ Café 21%

Bar/Brewery/ Winery

17%

Grocery/Convenient

Store, Market 13%

Other 11%

Figure 4: Off-Site Hard Cider

Distribution in the Mid-Atlantic Region

Online 16%

Wine/Beer Shop 28%

Restaurant/ Café 23%

Bar/Brewery/ Winery

15%

Grocery/Convenient Store, Market

16%

Other 2%

Figure 5: Off-Site Hard Cider Distribution

in the New England Region

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Product Sales & Distribution

Region

Hard Cider Distribution (number of producers)

Within the

State

Outside of

the State Total

Mid-

Atlantic 17 (65%) 9 (35%) 26

New

England 46 (71%) 19 (29%) 65

* Some under "Within the State" may distribute outside of their state, but

was not confirmed via research of website and additional sources

Source: Authors’ own estimations based Mid Atlantic-New England Hard

Cider Producer Database 2014.

Table 6: States of Hard Cider

Distribution for Mid-Atlantic & New

England Producers

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Product Characteristics

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Product Characteristics

Bottle - 23

Growler - 1

Keg - 6

Bottle - 59

Growler - 7

On Tap - 4

Can - 3

Keg - 4 Mason Jar - 1

Figure 6: Types of Containers Used

By Hard Cider Producers in

the Mid-Atlantic Region.

Figure 7: Types of Containers Used

By Hard Cider Producers in

the New England Region.

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Product Characteristics

0 2 4 6 8 10 12

12 oz.

16 oz. (0)

22 oz.

64 oz.

375 mL (0)

500 mL

750 mL

Other (8 sizes)

# ofProducers UsingContainer Size

0 10 20 30

12 oz.

16 oz.

22 oz.

64 oz.

375 mL

500 mL

750 mL

Other (8 sizes)

# ofProducersUsingContainerSize

Figure 9: Container Sizes Used To

Distribute Hard Cider in New England

Figure 8: Container Sizes Used To

Distribute Hard Cider in the Mid-Atlantic

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Product Characteristics

Container Size Average Price Per Product (in $)

Number of

Products

12 oz. 5.30 2

22 oz. 8.85 3

375 mL N/A 0

750 mL 16.29 14

1 L N/A 0

Container Size Average Price Per Product (in $)

Number of

Products

12 oz. 1.98 5

22 oz. 8.39 16

375 mL 28.11 7

750 mL 13.63 47

1 L 16.80 5

Table 7: Average Price per Hard Cider Product

Container Size in the Mid-Atlantic Region.

Table 8: Average Price per Hard Cider Product

Container Size in the New England Region.

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Inputs Procurement

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Inputs Procurement

0 5 10 15 20 25 30

On-Site

"Local"

Other

Number of Producers Using Inputs From a Given Origin

Hard

Cid

er

Inp

ut

Ori

gin

s

New England

Mid-Atlantic

Figure 10: Origin of Hard Cider Inputs (Apples, Juices, Etc.) for New

England & Mid-Atlantic Producers

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Inputs Procurement

0 5 10 15 20 25 30 35 40 45 50

Other Products

Only Hard Cider

Number of Businesses Producing Cider and Other Products

Hard

Cid

er

Pro

du

ct

Wit

h/W

ith

ou

t A

ltern

ati

ve P

rod

ucts

New England

Mid-Atlantic

Figure 11: Hard Cider Producers Making Only Hard Cider or

Other Products

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Future of the industry

Is this growing demand for cider a fad?

Will the cider industry follow the same path of

the craft beer sector?

How can we increase apple production to

supply the cider industry?

Page 28: The Emerging Hard Cider Industry: A Market Analysis of the Mid- … · 2017-04-04 · Hard Cider Industry Six interesting facts about hard cider: 1. The first recorded production

Thank you!

Questions?

THANK YOU!

QUESTIONS?