What's up with craft beer prices?
Reaction to my column last week about beer prices came in hard and fast. Prices are too high. They’re too low. Brewery employees need to make a living wage. I’m looking at it all wrong. I’m insightful. I’m kinda lame and don’t understand the industry.
I got loads of texts from brewers. I got plenty of voice mails from readers.
Given all that passion, and the fact I could barely scratch the surface last week in the allotted space, let’s keep the conversation going with Part II: Digging into the details.
I interviewed three owners of high-profile bottle shops. Two think prices are getting out of control. One says they’re just fine, that supply and demand sorts everything out. I’m somewhere in the middle — brewers, go ahead and get what you can get, but have a long-term vision for pricing. Sure, you’ll get your $18 for a four-pack of cans the first go-round. But if it’s not awesome, you might just be pricing yourself out of business.
Here is what the bottle shop owners think. They’re right there in the trenches and their customers give them feedback.
Keenan Gorgis, Curtis Park Market: “Sooner or later these prices are going to catch up to them. The hype is there right now. But unless (the breweries) keep putting out better beer with even more hype, I think people will eventually say, ‘Ah, I don’t know.’ As retailers, we actually like the high prices because we make the same margin. If we sell beer for $10, we make 30 percent. If we sell beer for $20, we make 30 percent.
“When you go to Ballast Point (makers of Sculpin IPA, in San Diego), their bottling facility is huge and they’re making huge batches. Our local brewers are making small batches of everything. The beer geeks — and there are more and more every day — don’t care what the price is. Moonraker is charging $18 to $20 (for 16 ounce cans in a four-pack) and they could probably charge $25. Ubahdank (by New Glory) is $14 for a six-pack (of 16 ounces). I think it’s the best IPA out right now.”
Dara Hang, Long’s Bottle Shop (Grass Valley): “It hasn’t really crossed my mind (that prices are too high). These guys are making good beer, it’s in demand and consumers are paying for it. When Ballast Point came out, they labeled themselves as premim and charged $15 for a six-pack. It’s the same with Moonraker and Track 7. They’re selling out of beer, so for them, price is not a problem. Alvarado Street is no longer accepting new retailers and their beer is $20 for a four-pack. If brewers continue to make great beer, it will continue to sell.”
Rohit Nayyar, RoCo Wine & Spirits: “They’re ridiculous. The prices have gone super up on these beers. Now I have beer on the shelf that’s $23.99 for a four-pack. I don’t think these prices are sustainable. It’s getting just like wine. There’s a balance that this industry needs to find. Right now, there’s a sticker shock with a lot of customers.”
After last week’s column, where I suggested that newer breweries resist the urge to charge $18 for four-packs of cans and come in at, say, $10.99 to build a following, I heard from Bike Dog co-owner A.J. Tendick via text: “We are releasing Dog Years IPA next month in cans (4 x 16 oz.) and had an internal discussion about not pricing people out, trying to keep craft beer approachable and affordable, and got it priced so it should sell at $10.99 in stores. You read our minds.”
David Mathis, owner of American River Brewing: “I look at the most expensive top-end beers and the lowest of the craft brands. I’d like to position my brand right in the center price-wise. I’ve always had a strong belief that beer should be in the hands of everybody. Pricing yourself too high alienates you from a large percentage of the craft beer crowd. We’ve had internal discussions about raising prices, but the moment you do that, you’re going to get pushback.”
While it’s a lot more fun talking about great beer, exciting new hops, and all the creativity and innovation in craft beer, price is something these brewers have to get right. Craft beer is still only about a 30 percent market share locally. That’s excellent, but it means there are plenty of people on the outside looking in. Price could be what’s holding some of them back.
Given the high quality of craft beer, the number of breweries and the level of competition these days, if a new brewery gets the price-quality equation wrong and turns off potential customers, it could be a fatal mistake.