Friday, March 15, 2013

The price of beer.

Beer's not a particularly "cheap" product. Indeed, there's a case to be made that it's perhaps the most expensive way that an alcoholic beverage is routinely produced. The ingredients are costly, the labour (particularly for small outfits) is a big element. There's a high power requirement, and (again, particularly for the little guys) the overheads can be high. It's heavy and bulky to transport. It needs to be produced under clean conditions that would tax most small, shed-based businesses. And there's the duty - and the VAT on the duty. VAT is a bit of a bugbear. Since we're turning agricultural (no VAT) malt and hops into industrial beer (20% VAT) we have to collect a lot of VAT, and send it off to the government so that they can pay it to the banks.

All that said, there's a wide price range seen for what, on the face of it, are quite similar products. In some cases, an arguably better product can be had for substantially less than you might pay for something from some trendy brand. *

So, are these high prices a rip-off? Is this gouging? Profiteering? Taking the piss? No, of course not. Thing is, we have an enormous amount of power as consumers here. And by "here" I don't mean "on the Interwebs". We can choose not to pay the price asked and buy something else, cheaper. That we don't (or at least some of us don't, or at least enough of us so that people can make a business selling this pricey beer), tells us that objectively these beers aren't overpriced. Drinkers (some, enough), are making the judgement that these products offer enough value to make them a good buy at that price.

Those of us who do feel like we're in danger of being ripped-off, gouged, or having the piss taken can avoid that hazard by simply walking away.  Un-stung. No worries.

On the other hand, what does it mean to say a beer is being sold too cheap?

If I'm making lovely beer that my customers really like but I don't charge enough to cover my costs, pay the bank and the government (so that they can pay the banks some more), feed the family and replace our tattered clothes periodically, while making enough to invest in my business going forward - I'll go bust. I won't be able to make any more beer and my customers will be deprived of the opportunity to buy it. That's too cheap. I'm stupid. We all lose.

I know some brewers do make "cheap" beer. Often it's not very good. That's one way of doing it. Sometimes the price reflects the cost-saving strategy of not paying suppliers or the Excise by dipping in and out of cunning pre-pack administration arrangements.  The rest of us lose out by having to pay more for malt and in taxes to cover the shortfall owed by these bad actors.  That's too cheap.

Bottom line:  If you think it's too expensive (i.e. doesn't offer the value to justify the price) don't buy it.  Don't whine about it. You'll just make yourself unhappy.  And if you think it seems "cheap", ask yourself why that might be.

But if it looks like a good buy, if the price is worth it. Buy and enjoy cheerfully. You did a good thing.

*I'm not making a value judgment when I use the word "trendy", it's just an observation that some brands are, while others aren't


Cooking Lager said...

I love it. A cracking argument for individual freedom of choice. No arguments whatsoever.

Even love the process view that brewing as an established industrial process for adding value to agricultural commodities. Far more honest than all that crap about artisan craftsmanship as if you guys see the statue within the block of marble or summat.

No rubbish about campaigning to get others to drink what you approve of. No pejorative view taken on those that choose something you may disapprove of. No rubbish about asking the government to set a floor price to scupper those at the value/cheap end of the market.

If I see your grog in the Spoons, I'll treat myself and no whining and I'll be glad my pint has allowed you a trip to Primark to replace your rags.

StringersBeer said...

Thanks, Cookie. I couldn't think of any good arguments against freedom in this context. The air's a bit thin up here on the moral high ground.

py0 said...

No argument here.

Of course just because you can maximise your short run profits by charging the maximum amount that people are willing to pay it doesn't necessarily make it the right pricing strategy in the long run. Might want to consider a) goodwill, and b) expanding your market and brand awareness outside of beer geeks, both of which might lead you to conclude that a price somewhere between the profit maximising point and cost would be the optimum strategy.

That'll be £100 consultation fee please. :-D

StringersBeer said...

Don't tell me, pyo. Tell them. Send yr bill to Thornbridge.

StringersBeer said...

referring only to this discussion, of course.

Ed said...

If I see a beer I've been looking forward to drinking on sale for more than I can afford I feel a whinge is in order. And as a good whinge is part of my culture, I see no reason to stop. ;-)

StringersBeer said...

Ah, but whinging is what we do instead of changing things. You, Ed, can go brew something just as good, then sell it cheaper (if you like).

Ed said...

Well, in the case of Courage Imperial Russian Stout that's exactly what I did. But I was keen to see how Thornbridge's Imperial Russian Stout compared to mine until I saw how bleedin' expensive it was.

Doing things AND whinging aren't mutually exclusive!

StringersBeer said...

Winge away Ed. Where can we buy yours?

Ed said...

You'll have to wait til the next batch is ready I'm afraid but I'll get some sent up to you when it is.