Is Craft Beer Underpriced

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dlester

dlester

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In a recent blog post (and commented on by Craft Beer and Brewing) by Nathan Miller, he suggests that craft beer is under priced. Using a basic supply/demand chart, he explains that craft beer hasn't reached the magical “equilibrium” point where supply matches demand. I'm sure that breweries would like to see their bottom line increase. And, I am a proponent of keeping good breweries profitable. Because that means we will have a continual supply of great craft beer.

However, I'm interested in your opinion? Are craft brewers trying to be competitive with the big brewers? Is this a successful business plan, or should they go for it and price their beers based on demand, especially those great beers like Pliny the Elder from Russian River, which means higher prices?


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This is no easy answer and there are a number of factors.

Is it underpriced? Maybe.

I don't necessarily think so. I can't afford a $9.50 6 pack from a brewery only 2 hours away.

Is it overpriced? No.

It costs a assload to operate a brewery and a packaging, shipping facility. Plus marketing, etc. but a $9.50 6 pack.

If craft breweries want to price their beer higher, they expect less buyers. This is already the case now (due to the expensive-marketing and shelf space, regulations, etc.). Most people can't afford to try craft beers so they don't.

There is no easy solution or answer in my opinion.
 
I wish big breweries would pay a ton of money for craft Brewer's recipes than make them on a huge scale and pass the savings of said scale on to the consumers who love craft beers and not their prices.
 
I think six packs are underpriced in craft beer. Bombers aren't typically. I can get a sixer of stone for 8-10 or a sixer of bud light lime for 7-8. That seems like a very small disparity when you look at the kinds of liquid that is in those bottles.

Though now that I think about it I wonder if maybe the big 3 are just overpriced. I would drink more Coors if it was 5 bucks a six pack. But no way I would drink it over craft at the same or very similar prices.
 
BrewWNC said:
This is no easy answer and there are a number of factors.

Is it underpriced? Maybe.

I don't necessarily think so. I can't afford a $9.50 6 pack from a brewery only 2 hours away.

Is it overpriced? No.

It costs a assload to operate a brewery and a packaging, shipping facility. Plus marketing, etc. but a $9.50 6 pack.

If craft breweries want to price their beer higher, they expect less buyers. This is already the case now (due to the expensive-marketing and shelf space, regulations, etc.). Most people can't afford to try craft beers so they don't.

There is no easy solution or answer in my opinion.
Click to expand...

Except that what you're describing most likely has to do with distributor and retailer mark up and not the brewery itself.
 
You're getting stuck if you are paying near $8 for a six of anything from Bud.
 
Underpriced? F No. I know for a fact that the materials cost per pint of organic beer from a major name Portland brewery is $0.18. That's $0.18 per pint, and that's 100% organic ingredients. This retails for $5-9/22 oz bottle. It seems like more and more breweries are going to Rogue's school of marketing.
 
I think that a macro brand that is not heavily marketed would be a better basis for comparison that bud lime. Say Olympia for example. I know I've seen that for 4.99 a 12er not too long ago.

The bomber price has skyrocketed in recent years. I know that the average contents are more costly to produce now, owing to the general trend for more hops and more abv, but the increase is beyond that. Bombers used to be $1.99-2.99 just 4-5 years ago. You pay a bit more than the six-pack price (per volume of beer) because you are buying less than that. That makes sense. But $6.99 for a bomber of 5.2%abv pale ale seems crazy to me. I generally don't buy them anymore. It seemed to coincide with the 4-pack thing.

I can't say if the general micro beers are over or under priced. But I will say that I've been much more price wary in recent years (and not bought a lot of beer that I would have blindly done before), so I can say that I'm contributing to the statistic of reduced sales due to higher prices. I'm more likely now than I was to take advantage of specials on six packs. Last year there were numerous $5.99 six packs at the market I shop at, including Mendocino (not my favorite) and Deschutes (a favorite!).
 
StMarcos said:
Last year there were numerous $5.99 six packs at the market I shop at, including Mendocino (not my favorite) and Deschutes (a favorite!).
Click to expand...

Oliver's doesn't count, they have a special deal with both breweries.

I have a guideline for 22s: $1 per ABV% is the max.
Sessions still apply, thus why I will not buy Lagunitas Daytime, ~4% for $12/6er when I can get their IPA for $8/6er and drink some water between (my rule is different for 6ers but something like to $2/ABV% at the high end, closer to $1.50/ABV%).

Underpriced? no. Becoming overpriced? soon if not yes (not a fan of barrel aged stuff)
 
I don't think craft beer is underpriced. I get excited when I find a four pack of Old Rasputin for under $9.00. I also don't think it's overpriced, you get what you pay for. It takes a lot of hops and grains to make most craft beers, especially high gravity ones. I'm perfectly fine paying a premium price for a premium product.


Sent from my iPhone using Home Brew
 
It's certainly not underpriced in Australia. We can pay up to nine dollars a bottle here for imported beers.
 
I'd think so. Most people who get sticker shock these days aren't making the proper associations with price. In other words, we want bud light prices but fantastic hand-crafted beer. There is a disconnect.

I'd also say yes if we compare it to other types of liquor, especially wine. Cheap wine might be $8-10, but that would even be considered expensive as a 40 of cheap beer. On the other hand, fine wine could be $40-60 easy. Not many bombers out there that you pick up two and see those prices. There are some, but some of the best craft beers out there are still $10-20 a bomber.

I look at a company like Jack's Abbey and scratch my head. They make award winning beer, basically revolutionized lager beers over the last decade, and yet are the cheapest around (going from $4.50-$8 for slightly over a pint.) Don't get me wrong, I love picking up an amazing beer and handing the cashier a $5. But making lagers is an expensive endeavor and I wouldn't even mind paying more if it ensured their success and possible expansion to increase their line-up.

I think that the barrel aged stuff is probably about right. Compare a world class stout barrel aged for 2 years to a world class bourbon aged for 7. Bourbon may be triple the price but so is their storage and overhead costs.
 
Mongrel said:
Underpriced? F No. I know for a fact that the materials cost per pint of organic beer from a major name Portland brewery is $0.18. That's $0.18 per pint, and that's 100% organic ingredients. This retails for $5-9/22 oz bottle. It seems like more and more breweries are going to Rogue's school of marketing.
Click to expand...

I have no doubt that $0.18 cost of materials per pint is probably fairly accurate; however, the 18 cents you're referring to is only part of the raw materials cost - which is only part of the total cost of manufacturing, packaging, shipping, storing, and displaying a pint of beer.

The margins are a lot slimmer that you might imagine.
 
Mongrel said:
Underpriced? F No. I know for a fact that the materials cost per pint of organic beer from a major name Portland brewery is $0.18. That's $0.18 per pint, and that's 100% organic ingredients. This retails for $5-9/22 oz bottle. It seems like more and more breweries are going to Rogue's school of marketing.
Click to expand...
LOL. A lot more goes into making anything than just the materials.
 
it really doesn't matter what we think. the market is what the market is.

the breweries are maybe trying to push the idea that it is underpriced. new breweries have just invested a ton of money in all new equipment, they want to get out from under the thumb of their initial investors, if they're in chicago or another big city, they've just paid god-knows-what a square foot for construction. so yeah, they would love for an average bomber to cost $12!

on the other hand, look at the germans. you can get very excellent beer for a euro per pint bottle. compare that with $9 for a bomber of some craft stout.
 
If a beer sells out in a day, it's underpriced. Well Hopslam and KBS sell out in a day, Heady Topper sells out very quickly every week and people line up for hours for Dark Lord, Hunahpu and PtY, they could easily raise the price and people would still buy it. I'm not sure how high they would have to raise before they wouldn't sell it all. The brewery is losing money by not charging more for those beers.
 
mtnagel said:
If a beer sells out in a day, it's underpriced. Well Hopslam and KBS sell out in a day, Heady Topper sells out very quickly every week and people line up for hours for Dark Lord, Hunahpu and PtY, they could easily raise the price and people would still buy it. I'm not sure how high they would have to raise before they wouldn't sell it all. The brewery is losing money by not charging more for those beers.
Click to expand...

Dark Lord is NOT underpriced...if anything, they might fit the mold of what craft beer COULD cost on the market.
 
I think the quest should be, at what price would you not buy a beer? Personally I would have to hear a lot of hype to by a 6 pack or a bomber for $12 plus dollars. Also at that price I might only buy it once. I’m curious what is the most people have paid for a beer and do you buy it often?
 
I spend a decent amount on beer each week. Luckily, I have a few really nice craft beer stores. One in particular lets you take any singe from a 6-pack for 1/6th the price. So even with a $11 6 pack, I get one for $1.80ish.

I pick up $10 bombers all the time. $15 is really when I pause for thought, I'm only buying something rare/known for good quality. I picked up Trillium's Fort Point yesterday for like $11 or $12 a bomber. I knew they were good quality and it turned out to be one of the best pale ales I've ever had.

I drop about $30 a visit at the store. $12 12-pack of something, hopefully a sampler. A bomber at around $8-10, and a mix-six around $10
 
The one thing to keep in mind is that the big beer companies practice vertical manufacturing. They either make or have an ownership share in everything from grain to bottle manufacturing, which cuts their costs enough to keep their prices lower. There are already micro brewers growing their own grain. I think it's only a matter of time before microbreweries follow the big beer companies business model.

At the end of the day, it's important that we support our microbreweries so that we don't lose them. I would really hate to go back to BMC beers as the only choice. Ughh.


Cheers
 
dlester said:
I think it's only a matter of time before microbreweries follow the big beer companies business model.
Click to expand...

The vertical integration you're describing can only work for enormous breweries taking advantage of economies of scale. A brewery that big is by definition not a microbrewery.
 
Craft beer sounds well underpriced in America, I would kill for $10 6 packs in Australia, to give an example, Sierra Nevada pale is around $25 a 6 pack, a carton in about $80.

Even the local breweries charge about the same so it's not even an import thing.
 
Last year Roundy's (Midwest grocery chain) started making beer and had it on sale for $5/6 pack. At that price it was a no brainer. They had 4-5 different styles and they were all quite drinkable.

I'm pretty price conscious and have trouble justifying $8+ for a sixer. Were that price $5-$6 I'd allow myself to try many more beers. Does that mean most craft breweries overprice themselves? Probably not. I'm just a cheap bastard.
 
i used to be concerned about their prices then i learned how to brew. They can now charge whatever they want. In fact, I tried Three Philosophers one night then a Chimay the next. They are each over $5/bottle and I thought to myself I love these beers but I can't afford the hobby of being a craft beer drinker...I wonder if I can make 'em. BOOM
 
I'm somewhat thrifty myself. I generally purchase a 12 pack, and possibly even swayed by what's on sale unless I see something I just really want.

I still buy 6 packs too, and have no problem with the ones that cost $8. But those that cost $8 for 4 or $10 and up just don't get much of my business. And not to say that they don't, but it's just not typical for me to spend that much.

I did buy 2 375ml bottles of Ranger Creek's Small Batch Series English barley wines as I needed them to finish filling the 12 pack carton I have. They cost something like $6 a piece. Certainly good, but a bit too pricey for me on a normal day.

The bulk of my bottles are from Boulevard, Sierra Nevada, New Belgium, Alaskan, and Sam Adams.

The expensive beers are generally bought when she has me go out to eat at some place she's been wanting to go to. It's her punishment!
 
sputnam said:
i used to be concerned about their prices then i learned how to brew. They can now charge whatever they want. In fact, I tried Three Philosophers one night then a Chimay the next. They are each over $5/bottle and I thought to myself I love these beers but I can't afford the hobby of being a craft beer drinker...I wonder if I can make 'em. BOOM
Click to expand...

Yes, Yes you can! BOOM!
 
If craft beer is going to gain marketshare they will be forced to drop their prices. Most people aren't going to pay 10 bucks for a six pack on a regular basis. Of course only the big craft breweries will be able to do this and still make money. The price of craft beer was one of the reasons why I started brewing....more beer ( at least the same quality) and less money. I rarely buy beer at the stores anymore....too expensive. If I do it will be something simple like Sierra Nevada or whatever craft beer is deeply discounted.
 
BrewWNC said:
This is no easy answer and there are a number of factors.



Is it underpriced? Maybe.



I don't necessarily think so. I can't afford a $9.50 6 pack from a brewery only 2 hours away.



Is it overpriced? No.



It costs a assload to operate a brewery and a packaging, shipping facility. Plus marketing, etc. but a $9.50 6 pack.



If craft breweries want to price their beer higher, they expect less buyers. This is already the case now (due to the expensive-marketing and shelf space, regulations, etc.). Most people can't afford to try craft beers so they don't.



There is no easy solution or answer in my opinion.
Click to expand...


I agree with you, would you like to sell A LOT of beer for little price, or sell a little bit because it's to over priced? it's under priced and a lot of people will get it for the low, they are making profit or they wouldn't still be selling.. I hope anyways haha. Don't be to greedy :) but if you were to sell beer your self I would have to say do price it high because most here are a one man to two man crew making so many gallons.. So you do bust your ass and you really want the pay for the labor you done back.. And of course you want the money back from the hops and grains you had to buy..


Sent from my iPhone using Home Brew
 
Calichusetts said:
I pick up $10 bombers all the time. $15 is really when I pause for thought, I'm only buying something rare/known for good quality.
Click to expand...

This is why I brew at home. I can brew a pretty decent bomber for about $1.
 
I am kinda on the fence about this topic. If anybody knows the slogan, "It's not yucky, it's Icky", please tell me why a pint at the bar is $6.00, and a six pack is $8.99? Personally, I don't really care for any of their beers, as their IPA's are not well balanced, and their porter to me was like brown water. Am I willing to pay $36.00 for the equivalent of a sixer at the bar for that beer or any other, not likely. My wife and I recently went to BJ's, and their nitrogen porters, were not pleasing to me. Am I am a$$ hole, well maybe. I like to take my wife out once in a while and go to a "new" place and see for ourselves, what we think. I guess I got a little off track here, yes, I know it costs a whole lot less to get a six pack to the retailer, than it does to get it served at the bar, but, let's be reasonable... At the Brew Brothers, Reno, a 15oz draft is $4.99, and before we get into a casino makes their money on gambling and everything else is gravy, it is a classy place, with great entertainment, and trust me, they could sell their handcrafted for more, and people would pay it, without blinking an eye, as they have won national awards for their beer.
I have no problem paying $6.99 for an Imperial pint of Samuel Smith's Organic Apricot Ale, as I have tried to make an apricot ale that amazing, and gave up trying. Magic Hat #9, to me is crap. No mouth feel, no smooth apricot flavor, and almost the same price! I make a close relative of Samuel Smith's Taddy Porter, as my house Brown Porter, and not only is it a beer that my beer friends like ( especially my wife), but it won a contest too. Charge what the public will bear is being sustained by supply and demand on beer's like Pliny's. Have I had a pliny's?, no I have not, but they help set the standard of bomber pricing in my opinion. I could almost guarantee if their were more Pliny's produced during the year, their price would not be so offensive as it is now. I brew my own beer because, I can afford to use the best quality ingredients in every recipe, and I never get near $5.99 a bomber to produce it. Will I ever be able to produce an exact clone of any of my favorite ales? No, I won't, that would against the laws of phsyics.

End of rant. If I have offended anyone, I will apologize now.
 
MindenMan said:
My wife and I recently went to BJ's, and their nitrogen porters, were not pleasing to me. Am I am a$$ hole, well maybe.

End of rant. If I have offended anyone, I will apologize now.
Click to expand...

We only make one porter so I'm not sure how you tried "Porters" at BJ's. Great Basin does a fantastic job and like us, wins many a medal at GABF, NABA, and the World Beer Cup so I think it may just be you. Obviously you are entitled to your opinion and I fully respect that.
 
High price or low price is relative, if not subjective. A guy getting by at 10 or 15 bucks an hour, especially with a family to care for, will think eight or nine bucks is about right for a 12 pack of brew maybe once every other month. Yes, I typed "12 pack"... A guy or gal making 100-grand a year for simply look'n good and talk'n to people will think nine bucks is just fine for a sixer of craft brew. One man's dollar is another man's ten bucks.
 

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