ADVENTURES IN BEERLAND
Vince Capano
is an award winning
member of the North
American Guild of Beer
Writers.  His blog
Adventures in Beerland
is now a regular feature of
BeerNexus.com
Riddle Me This
Riddle me this - how can the exact same beer be sold at three different places with nearly a 40% difference in
prices?  Hey, I just ask the questions; knowing the answers is totally different.   Fortunately I’ve never let ignorance
stop me before so I’ll take a shot at answering that great (even if I do say so myself) question .

I know you’re thinking that there’s got to be a range of prices between different areas.  It’s the same  reason that $20
gets you a limp salad and a small tepid bottle of water in a midtown Manhattan restaurant and $1.2 million barely
covers a 1 bedroom 1 bath condo on the West Side while the same money brings a complete meal (plus tip) at the
best restaurant in town and a Ponderosa sized ranch complete with a functioning moonshine still in Anytown, Wy. .

Chalk the difference up to cost of living you are probably saying.   Well, wait a second. I appreciate the fact that cost
of living differs around the country and that retailers and small business are subject to it just like we average citizens.  
Prevailing wages, rent, leasing costs, taxes, utilities are surely higher in New York than Wyoming so a local beer
merchant there can fairly charge more there under the well known economic law,"if you want to live in the the Big
Apple you pay Big Apple prices.  But that's not the story here. No, each of the three bars are walking distance of
each other.  

The beer in question is one of my favorites, the outstanding Kane Overhead DIPA.  One place priced it at $5 for a
pint, another charged $8 for a 13 oz. pour (yes the menu said 13 oz.) and the last demanded $9 for a 12 oz. pour.  

I doubt if I’m giving away any state secrets so let me tell you that – spoiler alert – bars target an average  markup in
beer somewhere around 80%, or as they phrase it, a 20% beverage cost. The average margin for beer distributors
nationwide is 27% and the average “off-premise” retailer (supermarket, liquor store) mark up for beer is around
~50% (did the editor redact any of that because of pressure from the bar lobby?).  

The final cost of your beer generally includes the margins of the retailer (34%), distributor (21%),  brewer (8%),
shipping (6%) and taxes (21%).   Needless to say, your cost is 100%. Here’s another way to look at it.  A standard
craft-type IPA costs about $85-$110 per 31-gallon barrel to brew, produce and package. That’s includes everything
that goes into it: ingredients, energy, all costs of labor, equipment and maintenance.  An exceptionally hoppy and
strong IPA will cost more as might a craft lager due to longer cold aging.  A session beer, with less malt, may be a bit
lower while special projects that require bonus ingredients will obviously increase costs.  A keg of IPA is going to
realize $840 for a bar when it is sold at $7 a pint.  Wait, did I say pint??  Needless to say, a bar's profit increases
when the serving size decreases which is the main reason  it’s getting harder and harder to find  high quality craft
beer served in a full 16 oz. glass.  Downsizing the pour while keeping the price the same (or actually raising it) follows
an ironclad truism – less for us means more for them.

In speaking to brewers and bar owners about escalating prices they often complain that their distributors’ fee is the
real culprit.  Distributors are a creation of the three-tier distribution for alcoholic beverages (suppliers, distributors,
and retailers).   If you’re unfamiliar with the system here’s a link to film that tells you all you really need to know on the
subject – T
hree Little Beers staring , most appropriately,The Three Stooges- https://www.youtube.com/watch?v=K-
jyLtty9cg).  

The three tiered system was first was put into law by most states following the end of Prohibition in an effort to protect
consumers (seriously).   It mandated that the distribution of alcoholic beverages (particularly beer) be through
independent distributors to avoid undue influence on pricing and competition by the big brewers. The “tied house” –
bars, stores, distribution centers owned by one entity – was essentially outlawed. Thus, a brewer couldn’t own an
interest in a distributor or a retail outlet, and a distributor couldn’t own an interest in a brewer or a retailer.
The system did bring diversity to the shelves but in every market, distribution was inevitably dominated by two major
wholesalers: one affiliated with Anheuser-Busch InBev and the other affiliated with SABMilller. Today the vast majority
of all beer moves through these kinds of large-scale, velocity-driven distributors—including lots and lots of craft
brands.  

“Look here Mr. Distributor, if you want to carry our big selling, high profit (swill) then cut back on sales of (pick any
beer you like). Hey, this is business not Tiddlywinks -  
an indoor game played on a flat felt mat with sets of small discs
called "winks", a pot, which is the target, and a collection of squidgers, which are also discs.

The distributors disagree of course.  They say their markup is modest for the service they perform.  They transport
the beer, keep it cold, rotate supply, and make sure fresh beer gets to the consumer.  Above all they say their
presence has brought a multiplicity of styles to the marketplace, encouraged the growth of new breweries, maintained
a consistent supply for retailers and consumers, and protected bars and pubs from the predatory practices of the big
breweries. They also claim that Santa is real.

Craft brewers extend the blame for higher prices beyond distributors and retailers to their suppliers.  They say its
simple math.  Because they are purchasing at smaller scale they pay more for ingredients. The beer styles that they
make use more of those ingredients - hops, malt, etc. – so price increases of necessity have to follow suit.   

Having said all of that I’m still confused as to why those bars charged me such different prices for such different
quantities.  I often go to the first bar, Elm City, for Kane Overhead since they always have it on tap.  To me it’s easily
one of best beers around though
it's under appreciated by many who haven’t tasted it recently. I believe Kane
tweaked the original recipe making
it into a terrific New England DIPA but they won't admit it.. Despite the serious
8.2% ABV of the beer Elm City, serves it in pints making t
heir $5 price a really happy Happy Hour.  In doing research
for this article I was going to interview the bar manager and ask just why the relatively low price and pint pours but
then realized any questions just might bring a change in their policy. No research is worth that.    

Only 400 meters uphill from Elm is the Silver Tavern.  Their prices live up to their name and lofty location.  There the
same Overhead is $9 and in comes in a 12 oz glass.  Despite their high tariff for beer and just about everything else
the place is usually crowded.  One reason is their great location.  The  place is less than a stone’s throw (not that far
considering a stone equals 14 pounds) from the town’s performing arts center w
hich is on a street with multiple
millennial hot spot watering holes.  Furthermore, after doing some serious  people watching at the Silver and
eavesdropping
on a few conversations it is likely this place’s clientele would be totally insulted at having to pay a
lower price for beer, food, or even water.  .

Less than a third of a mile away, on the same street, is Hop's Place.   There Overhead is served in 13 oz pours.  You
at least have to commend them for being honest since when most places say they are serving beer in a pint pour the
only thing you get that size is the glass; the liquid is invariably less, much less. I had hoped to ask the manger there
about the differences but it was my third stop and the impact of multiple Overheads was taking over my head.

Hello Uber.

So after all of this is it fair to conclude that some pubs are involved in price gouging?  I’m sure that’s often true
somewhere but in this particular case I’m not so sure.  If people gladly pay for something when less expensive
options are readily available then it’s their personal decision.  If it that works for them so be it.  However I really don’t
get it. After all It doesn’t take much effort to leave Hops or Silver and enjoy more of the same for less at Elm.

Even better, the walk to Elm is all downhill.




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click to contact vince
Oct.t. 2018
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