Thursday, 18 August 2016

Is the price right?

The subject of whether we undervalue good beer in the price we’re prepared to pay for it has cropped up again in the past couple of days. The debate was well summed up in this blogpost by Boak & Bailey, and the subsequent debate in the comments, but I thought it would be worth adding a few thoughts of my own on the subject, in no particular order:
  • The world doesn’t owe anyone a living. No product is worth more than the price customers are willing to pay for it.

  • In general, cask beer in the UK is far from cheap. Outside Wetherspoon’s, the going rate is well over £3 a pint in most areas; in London £4 or more. If the brewers aren’t getting much of that, don’t blame drinkers for being skinflints.

  • The people drinking beer at £2 a pint in Sam’s and Spoons wouldn’t be there at all if it was a quid dearer.

  • As in most other markets, there’s room for a mixed economy of discount, mainstream and premium retailers. Think Aldi, Tesco and Waitrose.

  • High duty levels tend to reduce the returns to producers, as consumers only have so much money in total to spend on beer.

  • To some extent, the benefits of progressive beer duty have been used to offer lower prices rather than a better return to small brewers.

  • Many small brewers do not rely on brewing to provide a decent full-time income, because they are retired, have another job, a rich daddy, or a working partner. This means they can afford to take a more relaxed attitude to pricing. For the avoidance of doubt, it does not mean they are any less competent or dedicated as brewers.

  • There is a wide variety of potential wholesale purchasers of beer. If you don’t like Wetherspoons’ prices, don’t sell to them. It’s not an oligopsony like supermarket purchasers of milk.

  • If you want your products to command a price premium, you have to earn it. Look at BrewDog and Thornbridge. Or Peroni, for that matter.

  • The rotating guest beer culture in pubs militates against brewers achieving a price premium. Pubs tend to either charge a flat rate or price in strength bands.

  • For historical reasons, cask beer sells at a discount to kegs and lagers. You may well think it’s a better product and deserves a higher price, but that’s always going to be the case while it remains so variable in quality at the point of sale.

  • If artisanal beer was dearer, more people would drink industrial beer.

  • If you really can’t make a decent living at brewing, there are plenty of other careers out there. There doesn’t seem to be a shortage of people willing to try their hand at it.
Incidentally, I donated all of this year’s Spoons tokens to Simon Everitt of BRAPA fame, who I’m sure will make better use of them than me. I generally only go in Spoons for the meal deals anyway, on which they’re not valid.

14 comments:

  1. "If you really can’t make a decent living at brewing, there are plenty of other careers out there. There doesn’t seem to be a shortage of people willing to try their hand at it."

    Seriously tempted.

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    Replies
    1. And you're one of those often put forward as relatively successful brewers with strong name recognition :-(

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  2. Going to the pub is still cheaper than the flicks. (Unless you drink v. fast or the film is v. long).

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  3. See this tweet from Loddon Brewery:

    "It's a complicated issue, but Spoons really is an excellent, vital supporter of independent breweries."

    The relationship obviously works well for some.

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    Replies
    1. I don't blame Spoons. I do blame CAMRA for effectively commoditising beer by being extremely negative about anything that might be seen as a slightly higher price-point.

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    2. I don't really see CAMRA as being in any way opposed to higher prices, in fact more the opposite. In many areas, CAMRA seem far keener to support the higher-priced pubs offering guest beers than the family brewer tied houses with lower prices but a more limited range. Show me any kind of official CAMRA campaign, whether local or national, against high beer prices.

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  4. As you probably know Mudgie, I'm broadly a supporter of the free market. From my perspective it is getting harder and harder to command the price we need to make it worth brewing. We are at the point of having to make some really serious decisions.

    I think there are issues surrounding quality, which only comes with experience and investment, versus a "novelty" factor that new breweries enjoy.

    The one thing that keeps me going is the fact that we have put a lot of investment in, both in terms of money, and in terms of time and effort to develop our skills , knowledge and experience.

    How to make a million pounds? In brewing find at least £10m I'd say. And even then you need lots of hard work and a healthy amount of good luck.

    I think the names you mention that have been successful either started out with large amounts available (Thornbridge for instance) or had interesting methods of getting it later (BrewDog) - and some possibly a combination of the two.

    For us how do we monetise our wealth of skills and experience? Right now I'm buggered if I know.

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    Replies
    1. I think there's a bit of shakeout due. Too many brewers chasing too little business and making very little money.

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    2. I've been forecasting such a thing for a few years now. It isn't a case of if, but just when and exactly how it will manifest itself.

      I'm hopeful for some mergers and takeovers so we can keep those in the industry who have the skills and experience. But there is a need for a few larger (not huge) leaner, more competitive enterprises, but whilst retaining the flexibility and zeal of micro-brewing.

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  5. Yes certainly too many so called craft breweries brewing very inferior beer.

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  6. How did BD 'earn' their price premium - or Peroni?

    Bit of a generalisation about the Spoons clientele, too - they're not all strapped by any means (and I'm not just talking about visiting CAMRA members).

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    Replies
    1. Certainly not tarring all Spoons or Sam's customers with the same brush, but it's undoubtedly true that a fair proportion of them would not be in pubs at all if they couldn't get a pint for under three quid.

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  7. What I can't understand is why my local Greene King pub has to charge £4 a pint for Abbot in order to make a reasonable profit (he says), whereas a free house down the road can sell it for £3.25

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  8. It's pretty simple, if one is paying a Pubco wholesale price and the other is buying in the free market.

    ReplyDelete

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