Barley Mowat 

The Cost of Beer

with 3 comments

Occasionally while talking about my recent beer acquisitions with friends, the subject of price comes up. I mention what a particular high-end or limited-production beer costs and often get a look of concentrated confusion followed by “We’re talking about beer here, right?”

The price of beer is a sensitive topic. Years of advertising by the major labels have drilled into our heads that beer is the drink of the hard-working everyman and, therefore, should be cheap and unsophisticated. In fact, price is often the major consideration for many beer purchase decisions. The notion of “very expensive” or “luxury” beer is almost ludicrous to most people. So when someone mentions a beer that costs, say $20 a bottle (less than the vast majority of wine) the result is often confusion.

I mean, it’s gotta be a huge bottle… right?

If I asked you to put the following things in order of least expensive to most expensive (Macro Beer, Craft Beer, Wine), you would almost certainly echo my list as presented because, well, that’s what we’ve been taught to think. The reality of the matter is really rather different. Macro beer, astonishingly, is not cheap–often priced within a dollar of similar micro beers. While there absolutely is a price war for macro lager, it is only between macro brands. Pennies and free random crap have huge impacts on sales but, even with a gun to their head, macro consumers won’t branch out to something they don’t see on TV, so this reality is moot.

Darnit. I’ve gone and blown your mind.

The truth is that you’re actually paying for the brand, and more TV commercials (sadly) means that the word “Molson” is worth a whole lot more on the outside of a can than “Central City” despite the complete opposite being true for what’s inside. (Also note that “Molson” seems to get you a picture on the LDB site, or maybe it’s because the CC logo is a scantily clad redhead).

So it’s settled, craft beer costs the same and is better, right? Um, no. Sure, small producers can compete in the lager market by cutting their margins to razor thin levels, but more complex beers have that nasty habit of requiring more ingredients. You want higher alcohol or more body? Well, you need to buy more barley malt, and let it ferment much longer. With the malt goes a lot more hops, because malt is basically sugar and you have to balance it out with bitterness. Fail to do that and congratulations, you’ve produced something as sickly sweet as apple juice. I mean, sure, it’s apple juice that’ll get you loaded, but what kind of market is there for that?

An adorable market, that’s what kind.

But here’s the rub: all these things have the stubborn indecency to cost money. More barley malt costs money. More time to ferment costs money. More time to mature costs money. More hops especially costs money (and some hoppy IPAs have as many as 20x the hops of their less hoppy brethren). And the worst part is that sometimes these highly expensive brews wind up going off, and need to be poured down the drain (or maybe given out to employees as a “bonus.”

Rather than valiantly absorbing this cost themselves (and thus valiantly going out of business), breweries pass this added expense on to the consumer. And we wind up with bottles of beer that cost $15-$25 (see below) and sometimes even more. Once beers starts poking its head into wine territory, fermented-grape aficionados start getting concerned. After all, if that $19 bottle of Argentinian Malbec table wine is cheaper than beer, well, that just means beer must be better, doesn’t it? And if there’s one thing we all know, wine is better (and thus more expensive) than beer.

When asked to defend this perception, the answers I get rarely delve any deeper than “well, it’s wine!” as if that was all the explanation we needed. Beer costs less than wine, dummy, everyone knows that! Does wine cost any more to produce? Well, yeah, it does. Perhaps even twice as much as a budget beer ($2 vs $1 for a 26oz bottle), but at higher quality levels things get a bit more muddled, as we start to include barrel aging and warehouse space on both sides. So why do people flinch and recoil at a $25 bottle of beer but drool in anticipation of a $100 bottle of wine? I’ll give you a hint, it has a lot to do with our lesson about “Molson” above.

Yup, “wine” is a brand, just as much so as “Coors” or “Bud” and definitely at least as much as “beer.” Don’t get me wrong, the “Châteauneuf-du-Pape” part of the label is certainly largely responsible for the $100 price tag, but don’t believe even for a second that you could replace the “wine” part with “beer” and still keep things in three figures (or heck, even slide the word “white” in there, since white wine has lower brand support than red). Common culture has trained us to simply not support this notion.

Where am I going with all this? Well, this resistance is making the profit proposition hard for craft brewers wanting to branch out into the higher end of ales. Microbreweries are absolutely feeling the pressure to keep prices down to support sales, even if it means cutting back on quality, and always if it means cutting into already-tight margins. Very cheap beer is a lovely concept in the short term, but in the long term it discourages new entrants to the market because the margins are just not there. When margins on good beer are low (because it’s pricey to produce), things start sliding downhill and we wind up with cheap, bad beer. When you refuse to pay for the beer you want, you get the beer you deserve.

The mind recoils in horror.

Things are getting better, as folk like you and I are showing interest in higher end beer products, and proving that interest at the till, but the broader market is still stuck counting pennies on lager.

/Aside: When I talk about $15-25 beer, I’m not talking about something like $32 Deschutes Abyss: née $12, but now with $20 of import tax! I’m more referring to delightful rarer brews like North Coast Old Rasputin XII, Brooklyn Black Ops, and the higher-end Driftwoods whose prices reflect quality and ingredients rather than government tax grabs on import.

Written by chuck

February 15th, 2011 at 10:57 am

Posted in Beer and You

3 Responses to 'The Cost of Beer'

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  1. Interesting article. I do think its fascinating the way we view the pricing of beer so differently than we do wine. Be careful though, as part of the beauty of being a beer drinker is that you can get the best (or near enough to) for under $10. If you are too successful at equating price with quality you may end up having to pay hundreds for a quality pint, and while this may be good for a couple of brewers, I am not sure drinkers would appreciate it.


    16 Feb 11 at 16:11

  2. @odysseyales Oh, don’t get me wrong, I don’t advocate paying more than something’s relatively worth. Fine everyday beer can absolutely be had for sub-$10 (eg Driftwood’s daily beers), but the truly outrageous best beers in the world cost much more than that to actually make, and we need to acknowledge that rather than get in a huff when a 2 year bourbon aged Imp Stout isn’t also sub $10.


    16 Feb 11 at 16:23

  3. […] very rarely will they have anything to say about the beer itself. That’s fine; as we’ve discussed before, macros are selling their product on brand value alone, and that’s a marketing strategy as […]

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