On Beer Pricing

Michael Kiser has a provocative post at Good Beer Hunting. It's a long piece and he makes a number of points, but the thrust is basically this:
I’m arguing for a greater tolerance among consumers and retailers toward the costs associated with certain beers, or the revenue opportunities they legitimately represent for those breweries in a wider spectrum of considerations. Otherwise, this industry you’re claiming you have passion for and want to see grow is being held back by your own narrow idea of “what beer costs."

I think there's some basic economic misunderstandings along the way--which (plug alert!)--you can learn about in our latest Beervana Podcast. But that's not my major concern. For me, the problem is that Micheal's looking at the consumers, not the breweries.

Somehow these guys stay in business.
Pricing is an interesting issue, and customers would do well to understand that some beers necessarily cost more than others to make. But here's where Michael and I part ways: the beer industry should not depend on the kindness of customers to keep them afloat. They are not charities we need to support with our dollars. And indeed, to do so perverts the market and keeps weaker (and less scrupulous) players in the game.

I'd point people to Oregon as a great rebuttal to his thesis. Here breweries must compete on both price and quality. Our supply is insane. Breweries that overcharge or make mediocre products don't sell a lot of beer. (Rogue is basically the only brewery that overcharges, and their Oregon sales have been in decline for years.) We have natural ceilings on what breweries can charge for standard and specialty beers, both in pubs and on the grocery shelves. Specialty beers can't fetch more than about $15 (in a very few rare cases slightly more) without getting stuck on shelves--and breweries in other states where super-premium pricing in the norm avoid Oregon. Why would we pay $30 for a wild ale from Allagash when we have Block 15, De Garde, Solera, Logsdon, and Cascade here at home?

Here's a good example. Josh Pfriem recently released his first batch of barrel-aged beers, and he sold cork-and-cage bottles (12 ounce), for under $10. The quality was spectacular. He priced the beer to earn a profit. And in this market, he needed to: as good as his Flanders-style beers are, he couldn't have charged much more for them. And yet Josh seems to believe he can make a profit this way, shocker of shockers. When I toured the brewery this summer, he took me to his barrel rooms (he has two), where all manner of wildlings lay ripening. Josh has spared no expense at the brewery--he even has a centrifuge, which I've never seen in a brewery that small--and is busy expanding the barrel-age program. And he can make a nice profit doing it. You could also look to Belgium, where the lambic-makers somehow manage to put together spectacular gueuzes (blends of vintage lambic, portions of which are aged three years) that they can ship to the US and sell for under $20.

No brewer in Oregon to whom I've spoken has complained about price pressures. There's no danger that Oregonians are about to see their wonderful beer go extinct. But even if there were price pressures, it's not the consumer's responsibility to subsidize (or even worry about) the brewery with inflated prices. Beer is a good, honest beverage and it is quite possible to make it well and profitably. If it weren't, there wouldn't be 3,500 breweries in the US with just a handful of annual failures. As the market tightens, the best breweries will, like Josh Pfriem, learn how to continue to brew spectacular beer and sell it at a price consumers will pay. That's how markets work. Not by charity.