Price Point: It’s Not Them. It’s You.

It’s rare that I actually consider the retail price of beer in my evaluation of the beer itself.  But last night, I had a very different experience: I opened a bottle of a barrel-aged oatmeal stout (nope, not naming names), which I paid $29.99 for back in November, and poured it into my snifter. I then proceeded to drink one of the most unremarkable barrel-aged beers I’ve ever had.  Was it good? Yes, it was decent, drinkable, well-made… but for a $30 beer, no, it did not meet expectations associated with that price tag.  I thought further: if it had only been $20, would I still be disappointed?  I think I still would have been, since that’s apparently my threshold for expectation based on price.  At $10, I would have probably sighed, then moved on to a different beer, never to think of this one again.

Mostly I think it’s disingenuous to think about price when evaluating beer, as I have no way of knowing what a brewer’s actual costs are related to that beer, and therefore have no business trying to determine the fairness of the price.  That said, I have a pretty good idea of the cost drivers that may contribute to more money leaving my pocket in order to get a taste.  Here are a few:

  • Barrel Aging: This one’s obvious; barrel-aging a beer requires maintenance and storage, and often temperature/climate control, for long periods of time, with the financial return to the brewery coming long after the beer was actually brewed.  It’s a given that these beers will likely have actual costs higher than their non-aged brothers, in addition to taking on so’called opportunity cost (profits that could have been made on beer produced more quickly). For breweries with a portfolio containing a large percentage of barrel-aged brews, this will escalate prices even higher, as they will not have as many lower-cost beers with higher profit margins to help offset the costs of barrel-aging.
  • Lagering: This is a less noticeable effect, as it generally won’t send a price tag skyrocketing, but it takes several weeks longer to produce a lager than an ale, due to longer fermentation periods.  Those beers will stay in the tank, or other finishing vessels, longer than their ale sisters. 
  • Ingredients/ABV: Generally, it takes a larger amount of ingredients, namely malt, to reach a higher ABV in a beer, though it can also be done with adjuncts, additional sugars, etc.  Similarly, it logically takes more hops to make a highly-hopped brew.  There are also certain ingredients, namely when it comes to hops, that are very expensive relative to other options.  The Citra hop, which has absolutely boomed over the last few years, is notoriously expensive as the demand far outweighs the supply available to brewers.  A beer that uses a rare, seasonal, or generally pricey ingredient, such as Moody Tongue’s Shaved Black Truffle Pilsner as an extreme example, is obviously going to cost more for the consumer.  Poor harvest years due to droughts, flooding, etc. may also temporarily raise the costs of ingredients, which may or may not be passed along to the consumer.
  • Independence/Size of Brewery: The bigger the brewery, the more resources it will have available, and the more economies of scale it will be able to utilize to keep costs, and therefore prices, low.  Any brewery owned by AB-Inbev has an immediate advantage over your independent, local option, beginning with purchasing power and efficiency of operations.
  • Location of Brewery: Different countries, different states, and different counties and towns for that matter, have wildly varying regulatory and taxation requirements related to the production of alcoholic beverages.  Additionally, distribution channels are hodgepodge even within individual states.  A beer produced in a highly regulated and taxed state may have huge costs attached to it before it’s even in the fermenting vessel.
  • Gypsy Brewing*: Gypsy brewers certainly have many advantages over their brick-and-mortar cousins, namely skipping out on the huge investment of capital necessary to build and license a functioning brewery.  However, they still have to rent space from those breweries, and that expense comes at a premium.  While an existing brewery will factor in usage and space of their own facilities in coming to a final price, when they charge a gypsy brewer they will rarely just try to break even.  In the end, the cost of space and facility usage for brewing a single beer or batch may be significantly higher for a gypsy brewer, by virtue of not owning their own facility.

  • The Experience: Three Floyds Dark Lord and Cigar City Hunaphu are both released as part of a major on-premises festival.  Bourbon County Rate came with a very cool package and an awesome release/pick-up event.  Cantillon is freaking Cantillon.  All of these have something beyond the beer itself to be excited about, whether it be a great bottle share while waiting in line, an awesome collection of beers being served alongside, or being, you know, the best brewery in the world (Cantillon, my opinion).  Price becomes less of a factor when you’re getting something beyond the liquid, tangible or intangible.

  • Prestige: This one’s the kicker, and where breweries tend to get in trouble with the public, especially when their idea of the beer’s/brewery’s prestige level is not matched by the consumer’s view.  Given the success of its KBS, Founders can likely command a higher price for a bomber of its new barrel-aged imperial stout than, say, Pabst might be able to.  The consumer will intrinsically believe that there’s a good chance Founders’ product will be worth the money, given the previous track record.  However, a newer, less-established brewery charging $40 for a four-pack may not get the same benefit of the doubt.  Add on to this the concept we often see in wine, where the higher the price point, the more prestigious the bottle is believed to be, and you have a recipe for disappointment.  I have never tried Fifty Fifty’s Eclipse series, but I tend to assume that if they sell it for $30-plus a bottle and people keep buying it, it must be a pretty damn good beer.

Of course, for every consumer, there’s a different point at which price even comes into play, psychologically, when consuming beer or any other product.  My tipping point tends to run around $10 for a single 12 ounce bottle, or $20 for a bomber of 750 milliliter bottle, as noted previously.  For many people that number may be significantly lower, and if you’re a big fan of barrel-aged sours, for example, especially the ones that are actually produced in Belgium, those numbers better be higher!  This threshold can get even bigger for a beer that I already know I love—there’s probably not a viable price point at which I wouldn’t buy at least one bottle of Bourbon County Stout, and the price of a bottle of Rare this year seemed (mostly) reasonable.  If I’d made it in via the lottery, I was prepared to buy my allotment, without hesitation.  Going back to the original point, though, if I felt like it was worth buying the beer, period, it rarely ever would come into mind later when drinking the beer. 

 So back to that barrel aged stout that led all this off: instead of disappointment in the beer, I initially actually felt ANGER. Like I’d been gouged, taken for a ride.  Now I will say that I generally really like the brewer of this beer, and doubt they set out to short-change me.  But I will also say that I doubt I’ll ever drink a beer they make without thinking of the $30 (plus tax!) I spent on a beer that I, fairly or unfairly, felt didn’t warrant the price tag.

And there’s the rub.  The flavor, the aroma, the mouthfeel, and the appearance of a beer, on their own merits, have ABSOLUTELY NOTHING TO DO WITH HOW MUCH THAT BEER COST TO MAKE!  Price is certainly often a function of quality (see “Prestige” above), but in the end, it’s a function of the costs involved in making the product and the desired profit margin on the product and on the brewery’s portfolio as a whole.  This brewery used a lot of malt and oats to make an oatmeal stout.  They used water that is increasingly precious in the area in which they produce the beer.  They aged it in a barrel that took up space in a climate-controlled facility that could have been used for other, more profitable ventures.  They packaged the beer and marketed it.  I may think it tasted like a $10 beer, but their cost accounting records very likely would not agree.  To reiterate, I have no idea what brewer’s costs are, even though I can make some reasonable guesses.  And I have to doubt that they put that kind of effort into making a shitty beer, and regardless of the outcome I still know that costs have to be recouped.  Unless the final product was infected, or in some other way unfit for consumption, they have to, as a business, at least try to recoup those costs.  It becomes harder and harder to truly be angry the further I go down that rabbit hole. 

So that brings me back to the original decision to purchase the beer.  I felt like I could take a chance on it because of my familiarity with the brewery, the style, and of course the capacity for my bank account to absorb the hit.  If you feel like you can afford to take a chance on a given brew, at the price point at which it’s being sold, then buy it! And then forget about it when it comes to evaluation of the beer itself.  If you are tasting a beer and THEN getting angry about the price, the beer may not be the actual problem.  Disappointment, sure, but if anger is the emotion you’re feeling (and holding on to) about a beer you just didn’t like… It’s not them. It’s you.

JAB - 4/24/16

*Note: The section on gypsy brewing did not appear in the original post, and was added on 4/28/16.