Beer Run: The art, science and confusion of pricing beer
10/30/2013 4:00 PM
10/31/2013 7:07 PM
You’re at your favorite retail beer place, looking up at all the shelves – the bottles, the styles, a plethora of labels and names cool, clever and otherwise.
There’s a lot going on, no doubt. But what’s going on with the prices?
Some 22-ounce bottles of IPA, for instance, are $3.99. Others are $5.99. Some even top the $10 barrier. The same wide and baffling spectrum exists with six-packs. There is no direct correlation between price and quality. Some of it has to do with economies of scale, some with hype and some with hope – as in, we hope you will pay a little more to support us, the little guy, because if you don’t, we’re going to go bust.
At the esteemed Sacramento Natural Foods Co-op (not the place to go for bargain beer, by the way), a six-pack of Sierra Nevada Pale Ale was $8.99 (I saw it at Safeway for $6.99). Same with the Chico-based brewery’s big, bold and yet balanced IPA, Torpedo. A couple of shelves below, I spotted a four-pack of cans of Ruhstaller, Sacramento’s stylish new entry in the craft beer game, selling for $11.59.
Less beer. More money. Let’s discuss.
Let’s start with the obvious: economies of scale. The big craft breweries – Sierra Nevada, New Belgium and Boston Brewing – have big production runs and efficient distribution channels, and they buy their ingredients in such great bulk that they can negotiate lower prices. The little breweries have to charge more because their production is smaller and their ingredients cost more per unit. No need to belabor the obvious.
Newcomers such as Ruhstaller, Track 7, Berryessa, American River and New Helvetia, along with established craft brew houses such as Rubicon and Hoppy, have to win customers over in different ways.
If they try to compete on price alone, they will be out of business before their “best before” date expires.
Frankly, price is not an issue small-batch breweries are thrilled to discuss. That’s because the answer often boils down to intangibles – a good story, a good neighbor and, in the best of situations, a distinctive beer of exceptional quality. A beer consumer has to have some disposable income at hand in order to pay more for some of those intangibles.
Ruhstaller’s 22-ounce bottles are in the $9.99 realm. I asked J-E Paino of Ruhstaller why a consumer should choose his beer over one that costs $5 less.
“The only reason they should do it is if they think it’s worth it,” he said. “We’re about making great beer. That’s what will separate us.”
Hoppy Brewing, a stalwart on the local craft beer scene, sells its 22-ounce Liquid Sunshine for $3.99. You could buy three of those for one Ruhstaller.
Hoppy’s Troy Paski says it’s partly a matter of positioning the beer amid the competition, knowing there is only so much room at the top and bottom pricewise. Paski doesn’t have the cachet of being new and exciting. He has to focus on quality, value and brand image.
“We have always tried to be at the high end of the middle of the market to emphasize it is a quality brand and we’re not cheap,” Paski said. “You’ve gotta sell local, and you’ve gotta sell that you’re the little guy. We also spend a great deal of effort doing charitable functions.”
Paski added: “There’s hype and there’s substance. A consumer is not going to pay $12 for a 22-ounce bottle forever.”
Dave Mathis of American River Brewing spent plenty of time pondering price point. He positioned his award-winning Coloma Brown at $4.99 for 22 ounces.
“That’s pretty much exactly where I want to be. I put a superior quality product into a package that looks good. I stay competitive in the market with the demographic I’m trying to hit.”
Knee Deep Brewing, on the other hand, sells its 22-ounce beers at around the $10 mark. Co-owner Jerry Moore says it’s neither hype nor hope. The brewery uses plenty of high-end ingredients and produces a high-end product. Fans of the beer must concur – Knee Deep can’t keep pace with demand.
Here’s how to look at craft beer pricing in a nutshell: If you like their beer, their story, their status as an underdog and the fact that they’re your local brewery, you’ll likely feel fine paying more. You’re not only a customer, you’re a booster. If you don’t see it that way, you’ll likely try the beer once and, if you’re not blown away, move on. If an intangible goes awry – poor customer service, mediocre beer – you’re likely to look to ol’ reliables such as Sierra Nevada. I encourage you to look at all the options and all those prices, select a few throughout the price spectrum, and see what kind of consumer you might be.
Russian River, best known for its Pliny the Elder, which is priced moderately at about $5.99 for large bottles, is sensitive about price-gouging. The wholesale price, by the way, must be posted in each county and that price cannot vary from vendor to vendor. Co-owner Natalie Cilurzo notes that the brewery doesn’t set the specific retail price, though “sometimes we can come to an agreement on what is considered ‘fair’ and sometimes we are very far apart. Beer is still an affordable luxury and should not become something that only rich people can afford. We can, however, choose not to sell our beer to retailers who are gouging their customers by charging outrageous prices.”
Russian River, as you can see, has the quality product/good neighbor ratio down pat.
Speaking of good neighbors, I was minding my own business and enjoying my beer the other day at New Helvetia Brewing on Broadway when, all of a sudden, it got really crowded. Everyone was wearing running attire. The mood was upbeat. What did I just witness? I got the story from owner David Gull.
An Air Force pilot and new resident named Kyle Blaikie was part of a running group when he lived in Spokane, Wash., and back in March, soon after New Helvetia opened, he decided the brewery would be the spot for his new running group, Sloppy Moose Running Club, named after his dog, Moose.
The brewery welcomed the idea with open arms – and free T-shirts. It’s a great way for New Helvetia to connect with the community, encourage a fun social outlet and create loyal customers. Anyone can join, and you go at a pace that suits you. The run is a 3-mile loop every Thursday at 6:30 p.m. It starts and stops at the brewery (1730 Broadway, Sacramento). When you complete five runs, you get a free T-shirt. Gull’s wife, Amy, an anesthesiologist, even started running with the group.
Says Gull, “It’s a group of healthy, vibrant, athletic people who do their training and then hang out and celebrate afterward. There’s something appealing about that notion.”
About This BlogBlair Anthony Robertson, The Sacramento Bee's restaurant critic, writes Beer Run. In addition to visiting the area's breweries, restaurants and coffee shops, he enjoys riding his road bike, playing golf and hiking with his dogs. Reach him at email@example.com or 916-321-1099. Twitter: @Blarob.
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