How much you should pay – the point

A really interesting discussion between Mario at Brewed For Thought and Pete from BetterBeerBlog about paying $43 for the Mayfield Iconoclast beers at Whole Foods. (I think, I hope, this is the price of a 750ml bottle.) Go read it all.

I’m too distracted to jump into this other than to suggest . . .

Chatter about why it costs $43 (or $30 or whatever) is noise. The why is relevant only in context.

Instead, here’s the bottom line. If a beer is worth $43 then consumers will buy it. Those at other breweries will notice and if they can conjure up a beer somewhat similar and as good for $42 or $38 or $2.50 then they will do that.

During the discussion portion of Beer Wars Live Greg Koch pointed out that Stone Brewing’s Arrogant Bastard Ale is the nation’s top-selling craft 22-ounce package. How’s that for a target? If Anheuser-Busch could brew that beer for less wouldn’t they? So to the line I’ve heard so often: “The big brewers could brew whatever they want if they chose to” I say “Poppycock.” I’m of the opinion they can’t brew the beer at any price. It’s not in their DNA.

I’ve begun to digress. Back to the point. I’m willing to pay “more” for the beers we want to drink. I don’t expect brewers to sell beers for less they they cost (and I understand all the costs) to brew. But I don’t buy beers based on what they cost to make. I buy them based on the experience they deliver.

The blogs involved:
- Brewed for Thought.
- BetterBeerBlog.

 

13 Responses to How much you should pay – the point

  1. Mario (Brewed For Thought) May 7, 2009 at 9:46 pm #

    Thanks for the link. Given the format we engage in, I felt I left a little on the table, so I’ll be following it up tonight or tomorrow.

    The points you make are excellent and I felt like the issue of the price seemed to dominate our discussion. I hope to address other aspects and give a more well-rounded take on the whole issue.

  2. Pivní Filosof May 8, 2009 at 2:49 am #

    Beer prices is a topic I’ve written about in my blog. Here in the Czech Republic, where beer is not only expected to be good, but also dirt cheap, the thingis even worse. Most people will not accept paying a premium price for a beer, not matter how good or special the beer might be.
    The most pathetic thing, though, is that most of the same people will gladly pay even more for a bottle of crap wine.

  3. Andy Crouch May 8, 2009 at 5:40 am #

    Blearily back from Belgium I’m expecting some serious sticker shock in local bars after growing accustomed to paying under 3 Euro for some of the country’s top beers. Paying six bucks plus for an average craft on tap just doesn’t seem fair by way of comparison…

  4. Kristen England May 8, 2009 at 7:07 am #

    Forty three bloody dollars!? Is this in Canadian dOElars? For one beer. Thats aged in oak? Wow. First, I’ve only had two petit syrah ports and they were quite rubbish. Petit syrah just doesn’t stant up to being made into port like Grenache or the like. I’ve had both Bogle and Elyse’s and neither were anything to write home about. Additionally each cost around $20. So by putting a RIS into it now makes it $43!? So the beer is so special that its only released in wine barrels and not to buy itself?

    Let me start over. I’ve been looking into getting a few used scotch casks from Scotland. It would run me about $500 for each cask when said and done. If I brewed 55gal of RIS to fill it it would cost around $250…maybe!

    Thats $750 for that bit.

    You’ll get about 280 750ml bottles but lets say I’m a mook and only get 250 b/c I screwed something up. That adds about $2 per bottle for packaging and such = $500

    So for the cask, beer and total package costs Im talking about $1250 for 250 bottles. That is about $5 a bottle. Let say gas is expensive and it costs a ton to deliever making it about $7 per bottle to put on the shelf. Then we sticker it $43 which is only a markup of ~600%. I’m not a mathalogist or a businistician but how does this possibly make sense for anyone, let alone a brewery that has no proven chops?

  5. Stephen Beaumont May 8, 2009 at 7:10 am #

    Meaning what, Andy? That Belgians are getting a bargain or Americans are paying too much? Or Belgian brewers are getting the shaft while US brewers are receiving fair price? Or taxes are less over there? Or distribution is more expensive/lucrative over here? Or retail/licensee costs are very different?

    I write rhetorically, of course, merely to point out that there are a lot of factors that figure into beer price.

  6. Andy Crouch May 8, 2009 at 7:23 am #

    Hi Steve, meaning only that I’ll be experiencing some sticker shock in coming days and will ruminate on value versus cost while thinking of the differences you raised in the respective systems. I can’t say that I am sufficiently familiar with the Belgian system (in terms of taxes, distribution, costs, etc) to contrast and compare. These issues were frequently on my mind during the trip. I did see some very unusual pricing differentials, comparing identical products, from cheap prices in Bruges (less than 3 Euro say for Orval), to more than 4 Euro in Gent and a little less in Brussels, to prices in some of the beer geek package stores significantly exceeding that which the beer was priced at retail in on-premise locations. In some cases, Belgian beers in these stores were more expensive than what we pay in the U.S. These are all interesting questions for which I will be seeking some answers.

    From my point of view, I can’t quite say whether craft beer is over or under-priced in the United States compared to the costs involved in production and distribution. I go back and forth on it. But the European/import scene throws us a curveball as we see great beers, such as Abbaye de Rocs, available for 8 or 9 bucks per 750 here (cheaper sometimes than in Belgium) while much lesser quality American craft beers often double that price. And I know that consumers have choices and don’t buy it if you don’t like the price but those asides miss a larger point. There is such great fluidity in the pricing models of beers available in the states that it is difficult if not impossible to explain them. So to answer the questions raised in the original post, I don’t frankly care whether the beer is worth $43 because there is such great value available at a fraction of the cost that it doesn’t really even cross my mind to reach for it.

    Cheers,

    Andy

  7. Mario (Brewed For Thought) May 8, 2009 at 8:14 am #

    I like how Stephen takes issue with the price of beer in a bar in Belgium (much better than the price of tea in China) instead of the shot at the old Loonie.

    By the way, we’re back on top again!

  8. Stan Hieronymus May 8, 2009 at 8:17 am #

    I’m pretty much with you, Andy, on not caring if it is worth $43 because of all the other great choices there are available to me at less.

    But my point in commenting on the discussion in Mario’s blog is that ultimately what matters is not the production cost but the value of the end product. Costs will vary from country to country, and even region of the country to region, and they do matter but a brewer doesn’t deserve my business only because he spends more on ingredients and time. He earns it based on the quality of the beer in the glass.

  9. Peter May 8, 2009 at 9:37 am #

    Just wanted to tell Stan “thanks” for joining the discussion. Price will continue to be an issue on so many levels and maybe the distinction of cost vs. value may have been lost upon me while writing contributing to the post.

    As the name of the segment suggests, Hopinions, we each have an opinion and we have a go at it.

    To clarify, yes, these were 750mL bottles.

    Thanks again to everyone who’s contributing to the discussion.

  10. Alan May 8, 2009 at 11:23 am #

    “If a beer is worth $43 then consumers will buy it.”

    We’ve had this discussion for a while, Stan, but “worth” and “value” have to take into account all factors that go into a decision to purchase and that has to take into account snob appeal, advertising, the desire to upmarket, relative scarcity, apparent scarcity and other oligopolistic pressures. As Andy indicates, if you spend 43 buck on this bottle you are missing maybe 4 to 8 eight other experiences. The unwise may make their determination in light of that differently than the wise. To quote Mr. Barnum, there is fool born every minute.

    In my former private practice, the term for such value was often called “jerk tax”.

  11. Alan May 8, 2009 at 12:52 pm #

    Interesting too is the fact that I have never seen another brewery website with “shareholder’s portal” on the front page or this sort of ripe language:

    “Just as physicists labored to decipher the perfection of a Stradivarius violin, the Mayfield Brewmaster has sought to unlock the genius of brewing traditions during Europe’s Golden Age of Brewing.”

    I’d be interested in what other brewers think of the price point and market stance for a brewery that seems to have had product on the shelves for seven weeks.

  12. Andy Crouch May 8, 2009 at 1:10 pm #

    I don’t know the gentleman behind this project but Alan’s quotation and some other choice ones from the website show the writer (presumably the owner) to be taking a brash if not pretty arrogant approach. The brewery’s products reflect “the hearty beers of England, Scotland, and the Czech Republic and Germany, but with a California flair.” That’s a pretty wide swath to cut right there. I’d say there is certainly a niche in this market to fill where uber geek beer knurds will gladly part with $43 bucks a bottle if the beer is even of passing quality (big oak, bourbon, alcohol, hops, etc). And it’s probably a good short term business model, especially where distributors are lapping up new brands. But it seems like a lot of marketing BS hooey but he’s managed to get Whole Foods to bite. I wonder whether local package stores would be willing to do the same…

  13. Mario (Brewed For Thought) May 8, 2009 at 11:45 pm #

    Alan, the Shareholder link also caught my attention. I know John has an MBA as well as a PhD in Microbiology and the site definitely shows an ability to sell an upscale experience to an upscale market.

    Maybe he has the marketing chops that some craft brewers lack, but it came off as a bit condescending to me, as did the idea that beer’s health benefits are something new. Maybe to the non-beer drinking public, but I am sure Lisa Morrison could disagree.

    Ironically, the site mentions Mayfield’s past incarnation was a Steam beer supplier. Definitely not a barrel-aged beer.

    Fittingly, I write this as I look at the last bits of a fallen Steam soldier in my glass.