She said.......
It's about the beer
                                      He said........

Gina Miller            and                Bill Keeper
GINA-

Hey Bill, this past weekend I went out for some beer hunting and found a small place that was
serving the ever elusive Goose Island Bourbon County Stout.  Maybe selling isn't the right
word, it was more like they were holding it for ransom, a king's ransom at that.  The tariff on a
9 ounce pour  was a whopping $12.  I know we've talked about high price beers before but this
set me off again.  It reminds me of the old joke about the big brown bear that went into a bar
and ordered a beer.  The bartender served him and said that will be $15.  He then said, "you
know, we don't get many big brown bears in here ordering a beer."  To which the bear replied,
"at these prices I can understand why."

Hey, understand that even at $12 for a 9 ounce pour (can't get over that) I'm getting a world
class beer whereas a world-class wine would cost me hundreds of dollars, if not $1,000-plus,”
So, I accept the fact that compared it to other spirits or wine, or other categories, really, barrel-
aged beer is a great value.  But, gee Bill, it was $12 for 9 little ounces!

I'm not the only one who is thinking twice about buying high priced beers.  I just read that
several craft breweries have seen their stock market shares bid up to a price more than 200
times earnings. With that valuation, craft brew will need to put up better numbers than the 11%
revenue growth that seems to be the industry average and it's not happening.  

When I ask craft-beer bars and producers about prices they tend to stress their product’s
artisan quality. Of course you can find some cheaper swill, their logic goes. But it’ll be made
with rice or corn instead of barley and other fine grains. Dud, who in their right mind would  opt
for a McDonald’s burger over a Kobe steak?  That's not the point.  Frankly, sanctimony about
quality will only take you so far.

I've also noticed that craft brewers often try to hide behind the coattails of Big Beer on upward
price spirals.  For example,  when the price of Blue Moon, a Coors product, goes up a buck,
many of our craft favorites suddenly suck up another one of our singles, too.

Of course, the biggest markup on beer generally takes place at the retail level—the bars,
restaurants, shops and supermarkets that sell it directly to consumers.  Case in point, food
costs tend to fluctuate more than booze. Restaurateurs often compensate by using beer (and
drink) prices to subsidize meals.  Not my problem guys, I only drink beer. Look, if people pay
high prices there is no reason for anyone in the chain to lower prices.  In fact they see a green
light to keep raising them.  Well Bill, every bubble eventually bursts. And it's we consumers
who can apply the needle.

Oh, by the way, did I tell you I paid an outrageous $12 for 9 ounces of beer?


That's it from me, chug-a-lug, Bill.....see you next time.
                                                                 BILL-

Hey Gina, can I simply say you get what you pay for and leave it at that?  Didn't think so.  Okay,
let me explain why quality craft beer is relatively expensive.  First off most of the breweries we
enjoy have to cover the not-inconsiderable costs of opening a brewery.  It is a business,
remember.  Think about things like the cost of utilities, ingredients, packaging, shipping, and
labor to the brewery.  Then there’s the alcohol excise tax.  Get the picture?  And there's more.

We both mainly drink draft beer but did you know that the kegs themselves represent a big cost,
and  a particular peril for craft (as in smaller) breweries?  Many small breweries have kegs out in
the market that come back late or not at all. It  can cost the brewery $100 per keg a week.

In my view the biggest factor in the price of the locally produced beers that we both mainly drink,
was determined before these breweries even got into the game - an existing culture of high beer
prices.  Frankly, with imports and large "craft" beers already priced at around $6 per pint or
higher, it makes little sense for any newcomer to charge less, even if that producer is local.  So
when our friend Brian in Jersey told us the price of a pint in the tasting room of his local brewery
in Fairfield went up 33% (from $3 to $4) you shouldn't have been so surprised.  

Another cause of high prices is the role of the distributor.  It’s his jjob is to get beer from the
brewery to the retailer. With this role comes the brunt of transportation and storage costs.
Transportation is already a heady investment, but it becomes more expensive as the price of gas
goes up. Beer requires refrigeration, which adds another layer of costs. Then there’s the issue of
health care.   And when you talk about transportation costs remember the first rule of beer is that
beer is heavy!  How heavy?  A case of beer weighs 36 pounds; a keg of beer is over 150 pounds.
So all these expenses (plus a profit margin, of course) add up to an average wholesale-level
markup between 30 and 35 percent above what breweries charge.

I agree with you that the biggest markup is at the retail level but remember please that those
folks have to worry  about the high costs of things like real estate and the vicissitudes of the
food/beverage economy in general.  And did I mention the astronomical cost of buying a liquor
license in most states?

Look Gina, I love great craft beer and am willing to pay for it.  I accept the fact that brewers are
using more exotic and  expensive ingredients than ever before, often  using twice the amount of
barley and up to ten times the amount of hops for some of our most favorite brews.  That's not
cheap to anyone.  By the way, remember that expensive beer I bought you (hmm, you didn't
complain about the price then) the other day, the one made with El Dorado hops?  Well, one
reason it was so pricey is that there are only 1.5 acres produced in the entire world!

Now here's my pet peeve when it comes to pricing - some retailers tried to squeeze as much
money out of every bottle as possible—literally, every bottle. There are places that will break up
a hard to find six pack and sell the bottles off individually.  For example,  that Bourbon County
Stout pftem sells at retail for around $25 or so for a four pack.  I saw it being sold as a single
bottle for $14 (sold out by the way).Somehow that's not right.

I recently saw a report on the trend to sell craft beer in 750-milliter bottles. Not because the beer
tastes better that way, but because marketers think consumers are more willing to pay more for
beer if it comes in a wine-like bottle.  

Gina I got a solution to all of this.  instead of us worrying about the increasing price of craft beer
all we have to do is ask the boss here at BeerNexus for a raise.  I'm sure well get it.  Right.


Here's looking at you, kid!   See you next month.
Round 34