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Does price equal quality?

A story by Paul de Grauwe in the Financial Times last week included this interesting study on the effects of pricing:

A few weeks ago an interesting experiment was undertaken at the Brussels food fair, a yearly affair where food lovers wander around among the many stalls stuffed with all imaginable delicacies. A stall was put up selling boxes of Belgian chocolates. The first day the price was set at Euros 9 for each box. Sales went well. The next day the price was raised to Euros 15 per box. Steeped in economic theory, you might think that demand now declined. Wrong. Demand doubled. On the third day the price was lowered to Euros 2 for each box. Demand for chocolates collapsed. What went wrong with the law of demand?

The explanation is given by psychologists. It is very difficult, if not impossible, for the consumer to find out the quality of chocolates by just looking at their appearance in the shop. When confronted with such uncertainty about the intrinsic value of things, consumers use simple rules of thumb that they understand. Psychologists call these “heuristics.” In this case, the price of the chocolates provides the rule of thumb.

Most consumers have some experience that allows them to associate high price with high quality. It is not always like that, but on average it probably is. Thus when looking at the Euros 15 box the consumers infer that the high price reflects high quality and they buy the chocolates. Consumers who see the boxes priced at Euros 2 infer that the quality of these chocolates is not to be trusted, and they do not buy them. The law of demand is turned upside down.

Stephen Beaumont made this same point in a story I wrote for All About Beer Magazine last summer – How much should you pay for beer?, saying:

“To the American consumer in particular, price tends to equal quality. Charging higher prices for beer is a) a means of garnering respect from the average consumer; b) a path out of the cheap six-pack ghetto of mainstream beers and a point of differentiation; and c) a way to reflect the quality of ingredients, rarity and amount of knowledge, effort and risk that goes into the creation of some beers.”

I agree that many better quality beers are underpriced, but I can’t agree that price is a reliable indicator of the quality of a beer.

So what’s a beer drinker to do? Sometimes you can turn to critics before buying a more expensive beer, if you trust them and they’ve had the particular beer you are considering. (Note, I occasionally fill the role of critic, but we’re only talking about tasting four beers every other month of All About Beer Magazine.)

Or you can look at online beer rating sites, the largest being Beer Advocate and Rate Beer.

But what happens when . . . you open a 750ml bottle that cost $10, as we did last week, and totally inappropriate diacytel (butterscotch) is apparent? Part one is easy: We know what’s in our glass isn’t a good beer. What we want to know is if this is true of other bottles, if we should consider trying it again.

So I look online and don’t find a “trusted critic” who has notes on the beer. Meanwhile, it gets generally high marks on the beer rating sites – and those who don’t like it don’t mention diacytel. However, in an e-mail discussion with a local friend he mentions he bought a bottle and found the diacytel overwhelming. Thinking it might be a local problem I checked in with a friend on the East Coast. Whoops – he had the same experience.

Where’s this going? Nowhere, I’m afraid. Except to note that if this beer reappears on local shelves costing $2 more I won’t be assuming the brewer has cleaned up the diacytel issue.

In defense of hops: Part I

Dear Abby:
I love hops, but my local brewpub is currently serving an IPA dry hopped with Simcoe and I’m wondering if it is polite to tell the brewer his beer smells a bit too much like a litter box badly in need of cleaning.
Yours truly,
A Hophead

I didn’t mail the letter. Not only because I made the part up about the local brewpub, but because there’s already enough hops bashing going on these days.

In November Lew Bryson wrote:

But there’s just so much more to the whole beer palate than the variety of flavors available from hops, and the enthusiasts, the people who should be reaching out to the future craft beer drinkers, largely aren’t getting it. They’re impassioned about the one flavor/aroma component of beer that is least likely to entrance newcomers: bitterness. Their passion is beautiful, but so narrow. Love beer, not just hops.

And this month, in his predictions for 2006, Stephen Beaumont began:

Although hops, hops and more hops will continue to be the dominant theme in American craft brewing, I suspect that by September or so, a mild case of “repetitive bitterness disorder” will set in, bringing with it a new appreciation for less “extreme” styles of beer, like British-style best bitter, suitably hopped with Challenger, Fuggles and/or Goldings hops, and Bavarian helles and weisse.

hopsThese aren’t some crazy hop-fearing wimps – they’ve been seen in public enjoying an over-the-top hoppy beer. (Beaumont wrote this about Russian River’s Pliny the Younger: “If this is a triple IPA, then I’m all for the further development for the style. Hell, let’s start a I3PA beer fest!”) They are reasonable and well-read commentators standing up for balance in beer.

Their points are well made, particularly when Bryson begins with a defense of the Bryan Pearson’s malt-accented beers at Church Brew Works. But I’m not ready to jump on the less-hops-is-better bandwagon for the simple reason that hop obsession has been one of the cornerstones of the American beer renaissance.

American brewers used hops – starting with Anchor Brewing more than 30 years ago – to make it clear their beers would be something other than imitative of European classics.

But they haven’t received as much credit for innovation as American wineries. Paul Lukacs frequently praises American innovation in The Great Wines of America, for instance writing this about John Alban of Alban Vineyards in California:

“Like so many American winemakers of his generation, he has learned to do more than mimic the practices observed abroad, so as to be able to fashion wines that taste individualistic rather than imitative.”

It’s not only that American brewers are willing to make beers more bitter than ever they’ve explored what happens to flavor and aroma when they use new varieties of hops and different methods in brewing with hops.

They’ve done this at a time when the German Hop Trade Association calculates the average amount of hops used in each hectoliter of beer produced worldwide continues to decrease. Blame the brewers of international lagers for much of that, but it’s happening to more beers than just the ones we label industrial.

For instance, other German brewers rushed “gold” beers to the market after Beck’s Gold proved to be a roaring success. All are sold in trendy clear bottles and are lighter than traditional Munchner Helles. For instance Paulaner Hell Gold is 4.5% abv and the bitterness units (IBU) are measured at 15, while the Paulaner Original Munchner Hell (known as Premium Lager in the U.S) is 4.9% and 20 IBU.

Spaten even lowered the bittering for its Munchner Hell (known as Spaten Premium Lager in the states) from 25 IBU to 20. “People come to Munich expecting a smoother beer,” said Josef Ernst, who was in charge of brewing at Spaten until recently.

Hopping levels are diminishing in beers we don’t even consider hoppy, like the “abbey” styles of Belgium. “The style has gotten smoother and/or sweet,” said Belgian beer enthusiast Carl Kins, who judged at the last two Great American Beer Festivals. “Actually, most breweries try to follow the market leader (Leffe) and make a beer that has less character so as to appeal to a larger market.”

LimetMarc Limet (pictured) of Brouwerij Kerkom, a farmhouse brewery in the countryside south and east of Brussels, is more outspoken. “There used to be 50 beers that made you go, like, ‘Whoa!’ and now you can count them on two hands,” he said. “Everybody brews beer to sell. We have to sell beer, but my problem I have with some other brewers is they are brewing nine to ten beers, and everything is the same. The good things all get thrown overboard, and the bad stays. That is what has happened with hops. I miss that little bitterness that makes it a beer.”

Limet took the opportunity to make a statement when he brewed a special beer for a local cafe, calling it Boecht van den Afgrond. “It means ‘rubbish from the abyss,’ “ Limet said, and the name designed to taunt drinkers who don’t care for hops. He calculates the beer’s IBUs at 50.

“It’s meant to fight the sweet beers,” he said.

This is not to imply Limet is the only continental brewer willing to experiment with hops, or to just plain experiment. For instance, we can hardly wait to taste what Cantillon does with the large package of Amarillo hops Sam Calagione of Dogfish Head Brewery is sending in connection with the trip he and other brewers are making to Belgium.

And let’s give Beaumont credit for following his first prediction with this one:

In British brewing, on the other hand, I expect that more and more brewers will discover how much fun it is to play with American hops like Cascade and Centennial, much to the dismay of CAMRA traditionalists across the land.

Consider this: Centennial hops would have died in infancy were it not for American brewers (and Ralph Olson of Hopunion).

The point is that Americans aren’t just throwing more hops into their beers – OK, some are and the results sometimes suck – and that ultra hoppy beers pave the way for complexly hoppy beers.

A worthy 6-pack

It’s that time of year. How many Top 10 movie lists have I already seen? Do I care about the list of 10 best wines (since I can’t afford and/or find any of them)? Somebody else’s Top 10 CDs? (Here I’ll add that if you aren’t crying by the time you get to Charlie Miller performing “Prayer for New Orleans” on Our New Orleans you must never have been there.)

Should I make a beer list? I’ve thought about it (and that might be enough). I’d be more interested in seeing what’s on Garrett Oliver’s list or Phil Markowski’s. And I will look forward to seeing what Stephen Beaumont reveals as his Taste of the Year in a few days.

Another list worth looking at, I think, is Don Russell’s favorite new beers in 2005. You’ve got to register to read it, so without he accompanying explanations, his list:

1. Dreamweaver Wheat. FromTroegs Brewery in Harrisburg, Pa.
2. George’s Fault. From Nodding Head Brewery & Restaurant in Philadelphia.
3. Stegmaier Anniversary IPA. From the Lion Brewery’s in Wilkes-Barre, Pa.
4. S’muttonator Doppelbock. From Smuttynose in New Hampshire.
5. Peche Mortel. From Brasserie Dieu Du Ciel in Quebec.
6. Supplication. From Russian River Brewing in Santa Rosa, Calif.

Supplication would also be on my list (if I were making a list).

Epic, indeed

It makes no sense to endorse a beer from a brewery whose products you’ve never tasted, but we’d sure like to try Epic Strong Ale from Roots Organic Brewing, a brewpub that opened in Portland, Oregon, earlier this year.

The beer is 14% abv and calculated IBUs are 70, but it’s not those numbers that intrigue. The recipe includes 60 pounds of malt smoked over cherry wood then soaked in single-malt scotch, brandy and cherry juice.

The execution may suck – although the early reviews of Roots’ beer indicate otherwise – but that’s not the point. The willingness of brewers – be they American, Belgian or Chilean – to attempt such experiments keeps the category moving forward. Pretty exciting.

UPDATE: Roots closed in 2010.

Fighting for a better image

U.S. brewing companies aren’t the only one concerned about beer’s image.

An article in the Los Angeles Times (free registration required) reveals that when Heineken opened a restaurant specializing in beer year on Paris’ Champs Elysees, it banned the kind of food typically found in German beer halls.

From the story:

Culture Biere offers cumin-flavored tortillas and pan-seared prawns in ginger. The restaurant opened in July with the ambitious aim of changing the image of beer in France.

Heineken, like other brewers, is trying to figure out how to arrest a decline in consumption of beer in many countries in Western Europe, as imbibers increasingly favor other kinds of alcoholic beverages.

Heineken does not expect Culture Biere to be profitable. Instead, the Dutch brewer sees its investment (it will not disclose how much money it has spent) in the Culture Biere brand as a marketing tool.

“If we defend the category, we defend our business,” said Richard Weissend, director general of Brasseries Heineken.

Many brewers are finding that they are several years behind their counterparts in the spirits business in terms of understanding drinkers and communicating with them. “Beer as an industry has been too inward-looking for too long,” said Richard Evans, vice president of marketing for InBev.

International brewers are trying different tactics. For instance:

– Danish brewer Carlsberg opened a brewery in Copenhagen, the Jacobsen brew house, to develop new types of beer, including seasonal and “experimental” brews. Only 1% of the brewer’s total sales are derived from these beers.

– InBev is targeting the Leffe brand at older drinker, a group it says has been neglected by the beer industry. “Sometimes the industry behaves as if people die or stop drinking when they hit 40,” Evans says.

– In contrast, Heineken believes that the best way of keeping customers loyal is to catch them before they turn 35. Consequently, it is focusing on marketing activities that resonate with young people.

You may not be interested in drinking Heineken or Leffe or other beers from this large brewing companies, but how well they fare in upgrading beer’s image will make a significant difference in what sort of beers are available to all of us.

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