Monday, 23 January 2017

You get what you pay for

Following the news that Cloudwater were abandoning cask brewing, there’s been a lot of talk about whether brewers of cask beer were getting a fair return for their efforts, and whether cask was priced too cheaply in pubs. I know I’ve said it all before, but to my mind this argument is a load of nonsense, and the case against it deserves repeating.

  • For a start, it shows a total lack of understanding of how markets work. You won’t get a higher price for a product simply because you keep bleating about how it’s worth more. Premium pricing is only achieved after a long slog of ensuring quality and cultivating public perception, and tends to be done by individual brands, not whole categories.

  • Most drinkers already feel that beer in pubs is too expensive, and in fact over the years it has risen more quickly than the general rate of inflation. If there’s a problem with brewers not being properly rewarded, it’s a matter of how the margins are split down the supply chain, not the price paid by the final consumer. Put a brewers’ tip jar next to your handpumps, and see how much money you raise when you’re already charging £3.70 a pint.

  • Cask beer by its very nature is an inconsistent product. Even with the best cellarmanship in the world, you can’t guarantee that it will be the same every time. And, in a sense, the fact that you tend to pay less for it than for keg reflects the likelihood of occasionally getting a poor-quality pint.

  • Unlike any other product in the pub, cask is critically dependent on throughput for quality. It can’t linger in the cellar waiting for a few high-rolling customers to turn up at the weekend. It has to be “priced to go” to ensure that the whole cask is sold before it goes off.

  • And, probably the most important point of all, cask beer has historically been the ordinary, everyday drink of the working man and woman. Plenty of people today are “just about managing” and can’t simply take it in their stride if the price of a pint is arbitrarily increased. Pensioners, who make up a significant and ever-growing proportion of pub customers, have no hope of ever seeing an increase in their income above inflation. Plus, cask fails as an élite product as you lose the turnover that makes it worth drinking in the first place. This argument has seldom been put better than by Phil in Paragraph 5 of this blogpost.
In summary, the whole idea is unrealistic, snobbish nonsense and deserves to be laughed out of court. Maybe those who advocate it should be invited to argue the case in a West Yorkshire free house and see what kind of reaction they get. Yes, there is a case for *some* cask beers seeking and achieving a premium price. But absolutely not the whole sector.

38 comments:

  1. You are right about achieving premium pricing via long-term brand building - and that's usually done on the back of one or two beers which then create a cachet for the whole range - hence breweries like Taylors, Thornbridge and Marble for example are able to charge more for their beers at a wholesale level as publicans know that their customers will pay more for beers from those breweries.

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    1. Yes, Landlord is a prime example of a beer that *does* command a price premium - ironically often in food-led pubs that don't look after it too well.

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  2. Cask beer may have once been the everyday drink of the working man but that was a least a generation go.

    The current everyday drink of the working man is mainstream keg lager and sold in pubs for £1 a pint more than cask beer and despite this it is more popular.

    Supermarkets have long recognised ale has a more middle class demographic and prices it as such.

    Why not just accept cask beer is a niche product of middle class affectation and accept paying top dollar for it in CAMRA safe spaces rather than continue to justify being a cheap skate with a spurious argument of defending a social class to which you do not belong and which have little interest in consuming said product?

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    1. Most cask beer is still drunk by non-enthusiasts, though.

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    2. If cask beer truly is the pinnacle of the brewers art as CAMRA wallas like to claim, there should be no fear of £5 pints of cask beer competing with £2 fosters all day everyday.

      Priced at what it's worth, either the market is not functioning to recognise the superior nature of cask beer or priced at what it's worth, cask beer is an inferior product.

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    3. I am working class along with my wife and we both drink real ale and have done so for well over 30 years,but we are do look at prices in local pubs and the wife tends to look more,so if in the local Wetherspoons we are paying £2.15 for a guest ale,i like another pub up the road that has a good selection of well kept real ales,but the cheapest is about £2.70 and the prices rise on other beers,my wifes argument is why go there when we can have more drinks in the wetherspoons for the same amount of money spent,i car'nt really argue with that,so we stay where we are drinking a decent guest beer for £2.15.

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    4. As a working class person, Alan, you are best to clarify this

      How much more could working class people spend on fine craft beer if they spent less on bread & dripping, bingo, fags, & meat raffles?

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    5. Nothing,i do not like fine craft beers and prefer proper cask ales,i love bread and dripping and dripping on toast,never been to bingo yet and never smoked.

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  3. The key point for me is the that beer has to sell quick, it can't wait for a few enthusiasts who appreciate it to tip up at a Stockport free house when it's been on the bar all week.

    On the other hand, if Cloudwater had their own bar selling their cask to high standards, I'd have been happy to requent it and pay an extra 30p over the price of Unicorn. But, unlike Black Jack and Mallinsons, they don't.

    Martin Taylor

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    1. Premiums tend to exist much more between different pubs than between different beers. I give you Port Street Beer House...

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  4. You need to be careful in your characterisations of middle and working class spending patterns, there is evidence that the middle classes are actually significantly tighter when it comes to relatively small purchasing decisions like which beer to buy - hence the relative popularity of comparably expensive lager amongst the working class.

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    1. You do have a point there - I'd say working-class people are much more relaxed about splashing out on everyday pleasures than many middle-class folks. The widespread prejudice of the middle-class "CAMRA types" against using taxis is an example of that.

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    2. When I first got to know a few CAMRA people a feature that stood out to me that surprised me was how few had cars.

      I have no explanation for this, as many tend to have bus passes, maybe taxi fares represent paying for something they already think they have paid for?

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    3. Interesting point - I'd say car ownership is considerably lower amongst CAMRA members than it would be in a typical group of similar income and social status, although those that don't are mostly single men without family responsibilities. For many, it no doubt makes life much simpler if they're not constantly having to do that balancing act between drinking and driving. If you don't drive, you never have to worry about the breathalyser. I'm sure I did a poll in the past about driving - I'll try to dig it out.

      I'd also say the anti-taxi prejudice is much stronger amongst public transport enthusiasts, who are also disproportionately represented amongst CAMRA members.

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  5. Yes, it is worth repeating. The "cask is too cheap" argument is much loved by the London-centric blogging brethren but carries no traction outside of the beer bubble. I admit to chuckling
    when Tandleman (being diplomatic no doubt) said Matt Curtis had made a case for it. Sorry but merely repeating a mantra does not make it any more valid.

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    1. You can't blame the brewers and their paid publicists for trying it on. I'm sure a lot of manufacturers dearly wish we'd all pay voluntarily more for their goods.

      But obviously, it should be met with laughter. The role of a consumers champion (which camra allegedly is, despite its kowtowing to wetherspoons) should be to consistently argue for higher quality, better variety, and lower prices.

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    2. When asked at the end of the debate if people would be willing to pay 20p more for a pint if it meant that profit then trickled back to the brewer 90% of the audience voted yes. Unsure why that fact has been ignored in the original post.

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    3. But what people say and what people actually do are often entirely different things - look up "revealed preference". And that audience was hardly representative of cask ale drinkers as a whole.

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  6. Good piece, until the pensioner point. Government has favoured them with the 'triple lock' - they have done far better than other age groups in recent years, too well in some people's view. It's the middle income groups with weaker earnings growth for whom the rising real price of beer out of home has been more pronounced, and so the market continues to move more premium - towards those that can still afford it without a care.

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    1. The "triple lock" only applies to State pensions, and I can see the earnings link going in the next Parliament. Occupational pensions will only be uprated in line with inflation, and most people who have taken annuities from money purchase pensions will have opted for a flat rate rather than having it inflation-linked. So, in general, my point still holds. Most pensioners will not see any real-terms increase in their income, and a sustained period of inflation over 5% would cause them serious pain.

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    2. When I did a speed awareness course, 95% of participants voted that they would never speed again at the end of the course. Whether they were genuinely briefly brainwashed or were just saying what they thought was expected of them, I don't know. I expect the same phenomenon occurred in Manchester

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  7. Ta for the plug. As I said in my follow-up post, I think pubs and bars can also drive prices up, where a bar's local and/or specialist market will bear it; we can't deny that there is a relatively well-heeled market out there for 'craft beer'. But what's true of that market can't be generalised to the much larger and better-established cask market.

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  8. I agree with what CM has written in this post. Using the Bank of England inflation calculator, the 13p I was paying for a pint of standard bitter in 1972 would now be £1.58. Even Wetherspoons isn't anywhere near that price. To argue that a product that had increased in price at nearly double the rate of inflation in 45 years is underpriced makes little sense. If real ale was increased to a price that some wealthy beer snobs think it should be, then we'd simply lose loads of small breweries.

    On another blog, I have argued that members of a consumer organisation who demand higher prices are setting themselves for a pratfall; this includes prosperous drinkers who think CAMRA members shouldn't get Spoons tokens. I can see the headlines: "Beer drinkers' champion says 'charge us more!'"

    Picking up on other points, I'm pleased I'm not a CAMRA stereotype: I own a car, but leave it at home when drinking; and I have no aversion to taxis. I also have no beard and don't wear sandals.

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    1. Rents and wages (at the bottom end) have also increased beyond the rate of inflation. Has beer duty also risen disproportionately perhaps?

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  9. I don't think the argument is that all cask beer should be more expensive, more that some beers (usually better ones) are a lot more expensive to produce than others and therefore should command a premium, which typically cask drinkers are not prepared to pay, and therein lies the problem facing (good) breweries.

    Wine drinkers accept and understand that a bottle of Chateauneuf du Pape will cost substantially more than a bottle of house red. Keg drinkers accept and understand that a pint of Kernel will cost more than a pint of Fosters. But cask drinkers, for the most part, can't seem to get their head around one 4.5% cask beer being worth 50p more than another.

    A brew run involving 5 kg of imported Citra hops will result in a beer costing more than if it contained half a kilo of Fuggles. This is nothing to do with positioning it as a 'premium' product, it's the simple economic reality of brewing the stuff.

    I don't want to live in a world where all the good beers go into keg only and cheap, boring, nasty beer goes into cask because no fucker is prepared to pay for something better.

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    1. A beer is worth what people are willing to pay for it. If punters are only willing to pay the same price for beer x as beer y, then beer x is not a better beer at all.
      Just because a beer is more expensive to produce does not make it better or somehow worth more.

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    2. No, I'd say the argument very much IS that cask beer in general should be more expensive, as currently it is viewed as a cheap, interchangeable commodity product. As I've said before, no problem with *some* cask beers commanding a price premium, but it has to be earned.

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    3. I think Cloudwater's problem was that there cask beer didn't earn as much of a price premium than they thought it deserved, or that they required to cover their inefficient production methods.

      Keg beer, temporarily, carries a higher price premium due to their fashionable nature, although you can't help but think that firms who are reliant on that premium to survive are asking for trouble further down the line.

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    4. Py, Cloudwater were never destined to make a success of cask beer anyway because of their decision not to have any regular beers. Look at successful cask breweries - the majority of their sales will be of a golden ale and some sort of bitter, both at around 4%.

      Yes they will also have stronger beers, other styles, seasonals, experimental beers etc., but the majority of their sales will come from those two core beers because that is what the majority of pubs want to buy week in week out. That doesn't fit with the craft beer scene, where people go each week to try new and experimental things, which is where Cloudwater fit into the picture.

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    5. That's what the majority of all punters want to drink, week in, week out. You look at most of the successful craft beer outfits, like Brewdog, Thornbridge, Oakham, Beavertown etc, and the vast majority of their sales will be on a completely standard range of beers (Pale Ale, Amber Ale, IPA, Saison, Porter etc) in the ordinary to premium range between 4% and 6%. Experimental or strong stuff is just a means of generating publicity.


      I am quite happy to try new craft beers each week - but like most craft beer drinkers, I still want them to be between 4 and 6% and taste like beer.

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  10. Graph showing the disposable income by age over the last 30 years https://dl.dropboxusercontent.com/u/36684956/CAMRA/disposable-income.png

    Sort of related this this discussion about who's willing to pay what. The Millennials have had a tough start to this decade.

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    1. Yes, but movements in the average income for population cohorts is a very different thing from movements in individuals' income. If a large number of people with decent occupational pensions move into the 60+ group, and replace ones with little or no additional pension who have died, then the average income of that group will rise. But it doesn't mean that individuals within that group experience rising incomes. And, with the destruction of final salary pensions, eventually we're likely to see that particular trend reversing.

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  11. Premium pricing is only achieved after a long slog of ensuring quality and cultivating public perception, and tends to be done by individual brands, not whole categories.

    Yes and the inconsistency was legendary with Theakstons. The landlord always had others on tap and told regulars.

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  12. Good points, well made.
    I would add that cask and keg or indeed smoothflow drinkers can't all be easily separated. People drink a mixture, in a variety of places for different prices.

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    1. Yes, many in CAMRA fail to appreciate that most drinkers, even those who mainly drink cask, are to some extent "repertoire drinkers", and don't stick rigidly to one category. I'd probably drink more craft keg if I went in more places that sold it.

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  13. A bit of a dead thread, but here goes. I have been tracking this pricing conversation a bit and it made me look at my local pub's prices more closely. In this one Minneapolis pub cask is indeed a premium product. Two beers, both offered on keg and cask on my last visit, are $1.25 more on cask. Since cask is rare here. I can think of less than 10 hand pulls across a metro area of 3 million people. The keg would be called "craft" by the Crafteratti. The only beers that exceed cask in cost are unique seasonals. Infused or high ABV.

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    1. Cask in the US occupies a completely different market position than it does in the UK, so you can't really read across from one to the other. And is that premium-priced US cask really shifting in three or four days?

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    2. Likely not shifting fast enough:) Unless it is highly hopped. I agree it is the market that determines this pricing difference. I just don't think any blanket statement can be made about A should be more expensive than B.

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