Pile it high and sell it cheap

As craft beer grows in popularity, it gets into a wider range of outlets. And, in the off-trade, that inevitably means that it moves out of the specialist bottle shops and into the supermarkets. Now, supermarkets are known for engaging in intensive price competition with each other and driving a hard bargain with suppliers, two things that don’t perhaps sit entirely easily with the craft ethos.

The photo above shows the range of craft beers in my local Tesco, all available at £1.80 each or 4 for £6. It’s not the absolute bleeding edge of craft, but even so it’s a pretty respectable selection, including the likes of Vocation, Magic Rock, Thornbridge, Five Points, Crate, Toast and Camden. It’s interesting that pretty much all of these beers now seem to have moved from bottles to cans. The German discounters, Aldi and Lidl, have introduced their own-brand “craft-a-likes” at even lower prices.

This has attracted a certain amount of wailing and gnashing of teeth from the craft influencers, complaining that such low prices will devalue the concept and won’t give brewers a decent return. However, I can’t help thinking they’re protesting a bit too much. There’s always going to be a limit to craft’s popularity unless it can achieve a price point rather closer to that of mainstream beers. Most drinkers just want something that delivers a particular flavour and conveys a certain image, and aren’t interested in paying over the odds to “support” specific breweries. If these beers were priced at £2.50 or £3 in Tesco, they wouldn’t sell much of them, and indeed probably wouldn’t stock them at all. If those brewers weren’t making any money from selling to Tesco, they wouldn't do it, just as nobody has to sell to Wetherspoon’s.

It’s also something of a myth that craft beers are vastly more expensive to produce, as I explained here. Even if the ingredients cost half as much again (which is doubtful) the total cost still only makes up a small proportion of the final price. If anything, the higher costs are more likely to come from less efficient energy usage and administration and distribution processes. And they’re still commanding a substantial price premium over other beers – 50% above the 500ml premium bottled ales, which are in the same offer, and more than twice as much as a 4x440ml pack of Stella. This is probably at least as big as the price premium enjoyed by the major craft brands in the US.

If you want to be able to sell beer for £3 a can, you have to stay ahead of the pack and brew something that is prized by enthusiasts and isn’t on Tesco’s shelves. But, in the overall scheme of things, you won’t sell very much of it. You can either be popular, or premium and exclusive, but you can’t be both. You do have to wonder how successful some of these enthusiasts actually want the craft sector to be. It’s rather like music fans feeling sold out because their favourite indie band has appeared on Top of the Pops and had a track included on Now That’s What I Call Music.