Why Does the Price of a Craft Beer Vary So Widely?


    These day ordering a craft brew in a bar, typically goes be complemented by a shot of confusion: How much will this pint expenditure me ?

    I may pay$ 4 for a “pint” of pale ale at my local brewpub, or$ 7 in a city saloon. Pints start at$ 9 or $10 at brew saloons in Las Vegas, and I may be expected to pay up to $15 for a pale ale in Manhattan( visualized it happen, friends ). I mention ” pint” in quotes because in most places you’re going to get the standard-looking glass, but what it actually contains usually ranges between a miserly 11 ounces to the full 16 ounces. The amount depends on the owner’s whim( or profit margins ), so caveat your emptor on that, too.

    So why does the price differ so much? There are a variety of reasons.

    First off, this isn’t Uncle Sam’s fault. Unless you live in the handful of states with abnormally high brew taxes( Tennessee, Alaska, Alabama, Georgia and Hawaii ), brew taxes in the U.S. are relatively low. Even in Tennessee, it’s only $1.29 per gallon, plus about a dime a gallon in federal tax for most craftsmanship beers–that breaks down to about 17 cents a pint. It’s an annoying sin tax, but it’s not gonna breaking you.

    And production costs are moderately standard across the board. So why are there variations in price?

    Well, big strong beers expense more, for reasons both obvious and not so obvious. There’s more stuff in big brews, to be sure, but the way they push the envelope also lowers the brewing efficiency; it’s as if you have to add 50 -percent more malt to get 20 -percent more booze. But that’s true for almost everyone, everywhere.

    A standard craft-type IPA costs about $80 per 31 -gallon barrel to brew, produce and package. That’s includes everything that goes into it: parts, energy, all costs of labor, equipment and maintenance. An extraordinarily hoppy and hefty IPA will cost more, and a lager‘s longer cold aging will create the cost a little bit; a session beer, with less malt, may be a bit less.( And special projects that require exotic parts will, naturally, increase expenditures .) But, again, those differences in production costs will be somewhat constant for all brewers.

    However, there are some exceptions at situations of extreme. A very successful and large aircraft brewer, suppose Dogfish Heador Deschutes, one that’s able to use bigger and more efficient equipment and get significantly better prices on materials, is going to have a notably lower cost than a tiny operation that’s working a lot harder to make a much smaller sum of brew. That’s how that $15 pint in Manhattan happened, for example; it was Maine Beer Company’s Peeper, and they were brewing on a tiny and inefficient system at the time, which produced a very small output. You, of course, have to pay a premium for rarity.

    Once the beer’s brewed and packaged–and costs are higher for bottles or cans than for draft barrel; efficiencies again–they have to sell it. Marketings staff, marketing, advertising, labels, all that material adds up, depending on how much a brewer wants to invest.( All those branded sun umbrellas, glass and coasters aren’t free to stimulate !) Don’t forget the last thing: profit. If a brewery isn’t making money, it’s going down. Again, the bigger the brewery the lower the profit margins, since they’re selling so much.

    Figure all that in, and it’s time to actually come up with the price, and that’s quite complicated. The brewer has to make money, but they likewise have to work through the steps between their loading dock and that brew sitting on the bar in front of you to figure out what to set their wholesale price. Up until very recently, brew costs have been fairly similar across the board no matter which brand you ordered. Maybe a bit more for an import but not much. However, over the last 20 times or so, the number of small craftsmanship brewers have explosion across the country and has thrown the standard pricing system out the window. Many customers equate quality and cost and as a result a number of these upstarts are accusing a premium to induce themselves stand out.

    There are also two big steps that add 20 to 30 -percent each to that price: the wholesaler, and the retailer. The wholesaler is like a grocery wholesaler, they provide option and convenience and majority marketings to the retailers. They move the goods from producers to storages and bars. There’s an important difference, though: in beer( and wine and feelings, too ), wholesalers are legally required. Except for a few loopholes, producers may not sell beer directly to retailers, they must sell it to the wholesaler, who then sells to the retailer…while, of course, tacking on their mark-up.

    The so-called the three-tier system–producer, wholesaler, retailer–was put in place to prevent the big brewers from exerting pressure on retailers. That kind of economic pressure, and the graft and corruption it encouraged, was one of the major reasons Prohibition was legislated. When Repeal came along, the three-tier system was put in place to insulate retailers from the producers.

    A pint was maybe a bit cheaper in smaller towns and a bit more in bigger cities, like just about everything else. But there has been a lot of wholesaler consolidation in the past 20 years, which has cut down on rivalry, and allowed wholesalers to throw more lobbying pressure on state governments. Less tournament at the wholesaler level means that they can effectively determined costs across a wide area, sometimes across government frontiers. Once brewery gain, advertise and promotion, shipping, wholesaler markup, and taxes are added in, that $80 keg is closer to $180.

    You might want to sit down at this degree when you recognize how much money that barrel of beer brings in for a saloon when it’s sold one pint at a time. A barrel of IPA is going to realize $840 for a saloon when it is sold at$ 7 a pint. But a saloon, of course, has a lot of costs; even more than a liquor store. There’s the staff, the furnishings, rent, entertainment, licenses, a kitchen, maintenance, ad and much higher insurance, including litigation coverage.

    And then there’s the question of how much people think they should pay. A bar that wants to attract an upscale clientele will create prices. A saloon in a college town that’s going for the dependable, high-volume newly legal drinker will lower them and sell pitchers. A restaurant will likely create costs; a corner taproom not so much.

    When you think of all that, you realize that if the prices are too high where you’re drinking, you can almost always find a place where they’re lower. It’s a question of whether you want to booze there. If that’s not working for you, you can always drink at home. The prices are a lot more reasonable there, but it’s always that same old crowd!

    Read more: https :// www.thedailybeast.com/ why-does-the-price-of-a-craft-beer-vary-so-widely