Tuesday, 5 October 2010

Premiumisation

Phil has recently made some interesting comments about Pete Brown’s Cask Report on his Oh Good Ale blog here and here. One of the points he addresses is that raised by Pete that cask beer should be able to command a price premium over kegs and lagers (or at least not sell at a discount to them) as it is a higher quality product. On the face of it, that seems a reasonable enough proposition, and something that applies in many other consumer markets. However, it is likely to run into a number of practical difficulties.

The first problem, of course, is that “cask” is merely a method of storage, maturation and dispense, which says nothing about the inherent qualities of a beer. The idea that cask beer is lovingly crafted from traditional, natural ingredients, while keg is made from chemicals in somewhere resembling an oil refinery has always been largely a myth, and is no less so in 2010 than it was in 1972, despite the Cask Report describing it as an “artisanal” product. Many individual cask beers are of much higher quality than most kegs, but cask as a generic category isn’t. There are plenty of cask beers such as Pedigree and Old Speckled Hen that are also available in keg form. While serving them as cask is likely to result in more depth and complexity of flavour, at least when well-kept, they’re still basically the same stuff.

We also shouldn’t forget the long tail of fly-by-night micro-breweries who often haven’t fully mastered the art of brewing and produce wildly inconsistent and often revolting slop. If you went in a pub and saw a pumpclip for Old Scrotum from some brewery you had never heard of, would you really be happy to pay a price premium for it? In contrast, if you saw a Thornbridge beer on keg, you might.

When keg beers and lagers were first introduced in the 1960s, they sold at a higher price than cask beers as they were something new and different, required an investment in refrigeration equipment and CO2 cylinders, and held out the prospect of more consistent quality. That pretty much remains the same today, even though the marketplace has changed beyond recognition. Even bog-standard cooking lager like Carling is 20 or 30p a pint more than cask bitter. There is a lot of history to overturn.

It is also still the case that, where keg ales are sold alongside cask of a comparable strength, the keg generally sells for more. Clearly the keg drinkers see it as worth paying a price premium for over cask, not the other way round. We have also seen in recent years the growth of “smooth” as a distinct category, whereas in the past there would just be “bitter”, which could be either cask or keg. I’ve seen groups come into Holts, Hydes and Robinsons pubs and ask “have they got any smooth?” Does cask premiumisation ultimately lead to it becoming an entirely separate, and more expensive, beer category from keg – and thus inevitably one perceived as a middle-class drink?

Traditionally, price premiums in the on-trade have been associated with specific pubs and areas, not specific beers. If you are in a prosperous area, offer a smart atmosphere and want to keep out the riff-raff, then you may feel justified in charging more for your beer. But in the individual pub the pricing structure across the draught beer range remains much the same, typically with Draught Guinness at the top of the tree in terms of pence per unit, and cask down at the bottom. There is still little evidence of particular beers being able to command a price premium within their own category, although maybe Beck’s Vier and Stella 4% do to some degree over Carling and Fosters. The culture of seasonal ales and rotating guest beers also tends to militate against any cask beers gaining the long-term reputation that may justify paying more in the customer’s mind.

And, of course, there is the “quality lottery” that I have alluded to before here. By definition, cask beer is a product that will vary somewhat from pint to pint due to the stage of secondary fermentation it has reached, and various factors in cellarmanship. Even in the very best outlets, you will occasionally get a pint that is no better than indifferent; if you drink it in random pubs at least one in ten is likely to be pretty poor. That factor alone makes it harder to justify charging more for it, and probably always will – in a sense it’s part of its appeal.

Some establishments will continue to seek to charge a premium over others for draught beer that reflects their location, ambiance and aspirations. But there is a very long way to go in terms of both public perception and consistent quality before cask beer can command a premium over kegs, and that of course begs the question as to whether that’s a desirable aim in the first place. To my mind, the concept reflects a somewhat half-baked and perhaps rather London-centric view of the draught beer market.

If you are a brewer of cask beer and want to establish a premium perception in the marketplace, you need to gain more control over the distribution chain by determining where it is sold and how it is presented. Not to mention having a high-quality product in the first place. The history of business is littered with companies who have tried to go for a premium image and pricing but haven’t had the quality or consistency to back it up. Securing a price premium depends on long-term reputation – the challenge is how to build that up.

14 comments:

  1. "while keg is made from chemicals in somewhere resembling an oil refinery has always been largely a myth"

    Is someone gonna tell Dicky English?

    As for price, your pongy gut rot is already premium priced versus lovely cheap lout down at Tesco.

    Are Tesco leading the way in the premium beer revolution?

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  2. I read your earlier 'stony ground' post, and it chimed with what was bothering me about some of the conclusions of the Cask Report. Cookie's post about education also resonated, and it's still bugging me having read 'Oh Good Ale'.

    I dunno, this point - "Does cask premiumisation ultimately lead to it becoming an entirely separate, and more expensive, beer category from keg – and thus inevitably one perceived as a middle-class drink?" - is at the middle of my muddied thinking...

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  3. Price snobbery is for beer snobs. Most beer drinkers are not beer snobs and would not welcome having to pay more to satisfy the pretentions of those who are. I certainly wouldn't, and I don't know anyone around here who would.

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  4. Where I come from is that I'm a Guardian-reading university lecturer, but I don't want to drink Guardian-reader beer in a Guardian-reader pub; I want to drink good ordinary beer that's available to everyone, in a good ordinary pub ditto. I'm starting to worry now that good ordinary beer in good ordinary pubs is becoming a thing of the past - and for an advocate of good beer to say that the future lies in premium beer in upmarket pubs really doesn't help.

    Or maybe that just is the future, and Pete's simply telling it like it is.

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  5. Sadly, I think we are heading towards "Guardian-reader pubs" in places like Chorlton, and "Telegraph-reader pubs" such as the Brunning & Price chain. I do wonder whether over the next twenty years, cask beer will totally take flight from its "ordinary beer" roots and leave the working classes, when they drink in pubs at all, stuck with Carling and Extra Smooth.

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  6. We're not there yet, though. One of the four (Chorlton) pubs I reviewed recently is very definitely a "Guardian-reader pub" (or possibly bar), but only one. My young daughter is actually nervous of going past one of the local pubs when the lunchtime crowd is out - not that that's a good thing in itself, but it does make the point that there's still a level of old-style raucousness in some of the pubs round here.

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  7. Some really interesting points here - but I think the point about paying more for cask is often misunderstood. The report shows that cask drinkers already think their beer is more expensive than standard lager, even though it's cheaper. It also shows that cask sells more where it's priced equivalent to lager rather than cheaper.

    The main target of the cask report is the pub trade. Many landlords who don't stock cask cite the fact that it has lower margin as a reason - why would they want to sell more cheaper real ale instead of more expensive lager? It would reduce their profits.

    All we're saying is that there's no reason at all why cask should be cheaper, and if ti was priced in line with lager publicans would make more money from cask, which means they'd stock more of it, which means there'd be more cask ale in more pubs for any cask drinker, regardless of what newspaper they read.

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  8. Tell you what, Pete. Rather than put up the price of pub based pong, why not lower the price of lovely lout?

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  9. I'm not convinced that, around here at least, relative margins have anything to do with pubs not serving cask – it's because it's seen as too much trouble, and licensees don't think there's the demand for it.

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  10. I think you're right, Curmudgeon, and some of those licensees are also correct ~ there isn't enough demand for real ale in many pubs. I don't agree with the CAMRA notion that we should be pressing all licensees to stock real ale. One pub where I go to once a month for an open mike night doesn't serve real ale, and I have discussed this with the licensee. He said he'd like to put on real ale but suspects, probably rightly, that he'd end up pouring half full casks away all the time.

    I think Cooking Lager is correct: pub lager is overpriced, and making real ales overpriced too isn't the solution, especially not with escalating punitive beer taxes.

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  11. It's also significant that the one big success story in the pub trade in recent years - Wetherspoons - have built that success around beer prices well below the average in other pubs. For most pubs, putting cask up by another 30p a pint would simply lose a lot more customers to Spoons or Tesco. How that would result in more cask ale in pubs seems to violate the basic principles of economics.

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  12. Pete, the report shows that under-35 cask drinkers already think they'll be charged more for cask than for lager; the figures for the other age groups are all within hailing distance of £2.50, and in one or two cases they're actually lower. And, outside Wetherspoons, £2.50 is on the low side for a pint of anything these days; it's not at all surprising that the answers should cluster just above £2.50 rather than just below.

    I can see what you're doing in that section of the report, and I grudgingly approve of it - if the perception that cask has got to be cheaper than lager is a barrier to landlords putting it on, then it's probably a good thing on balance to change that perception. But I really don't think the figures support it.

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  13. The table in the Cask Report also compares Carling - a "standard" lager - with Pedigree and London Pride - two "premium" cask beers - so it isn't comparing like with like, and it might be a reasonable expectation that you'd pay a bit more for those two. Greene King IPA, which the older drinkers thought should be cheaper, is a better comparison.

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  14. I think there is a lot of ammunition here for me on Saturday when I propose Motion 3 at CAMRA'S Annual Conference. Trust me I won't be arguing for higher price. It all about reducing the quality lottery.

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