Concern Over Price Creep

When predictions that the sky would start falling in the craft beer world over forecasted price increases a few months ago, I initially trained most of my focus on those breweries whose prices went up before their present contracts even came due (in many cases, the more established craft breweries have raw materials contracts going out a year or more). Despite the fact that their suppliers continued to meet their contract requirements (and prices), we started to see wholesale prices creep up a little bit in February and then considerably higher in March. While many American craft brewers have already raised their prices, even if minimally so, there are still many breweries in New England and beyond that have yet to even raise their prices.

Despite the delayed onset of the prices increases that we have been bracing against for months, drinkers in the Boston area began to see beer prices rise sharply as early as three months ago. In some places, beer went up 50 cents, in others a dollar. In a few dastardly holes, extortionists raised prices even higher. And all of this happened long before the bar owners even received their updated price sheets and felt the pinch of an extra five or ten dollars per keg. So to recap, price increases just went into effect, yet some bar owners have had their hands in the back pockets of their customers for a couple of extra months.

In justifying the price increases, I’ve heard a few pub owners break out the old gem, “the beer is good, so you should be willing to pay more for it.�? That’s fine and all, but in this case the money is going directly into the publican’s pocket, not to the brewers.

Things recently hit a fever pitch for my friend Todd Alstrom, one half of the brother team, during a visit to Bukowski’s. A longtime fixture on the Boston better beer scene, Bukowski’s (with locations in Boston and Cambridge) has a reputation for loud music, obstinate servers, and absolutely outrageous prices. In 2002, I visited the bar soon after the Stone Brewing Company entered the Massachusetts market. After pulling up to the bar, I ordered an Arrogant Bastard. A few minutes later, I received a 12-ounce pour of the beer and a bill for $5.25! I eventually figured out that the bar was marking up the beer 500-percent over its wholesale cost.

So on Todd’s recent visit, he encountered the following highway robbery prices:

-Southern Tier Jah-va 12 ounce pour for $8
-Southern Tier Backburner 12 ounce pour for $7
-Young’s Winter 16 ounce pour for $6.75
-Sixpoint Sweet Action 12 ounce pour for $6
-Blanche de Bruxelles Wit 12 ounce pour for $6.25
-Dogfish Red & White 10 ounce pour for $10
-Harpoon IPA 16 ounce pour for $4.95
-Boulder Mojo Risin’ 12 ounce pour for $6.25
-Harviestoun Old Engine Oil 12 ounce pour for $7
-Brooklyn Pils 14 ounce pour for $5
-Abita Restoration 16 ounce pour for $6
-Opa Opa IPA 16 ounce pour for $5.75
-Harpoon Brown 16 ounce pour for $6
-PBR 16 ounce pour for $2.99
-Weihenstephaner Hefe 16.9 ounce pour for $7.75

It’s hard to quite know where to start here. Putting aside the fact that Buk’s charges an extra buck per glass of Jah-va stout versus Backburner when both have the same keg price, you really have to wonder just how malicious a beer pricer can get when it comes to the Brooklyn Pils and the Harpoon IPA. The Brooklyn beer sells for $125 for a 15.5 gallon keg, while Harpoon IPA sells for $120 for a 13.2 gallon keg. By the numbers, I should be paying less for the Brooklyn Pils then I do for the Harpoon IPA, but this not the case. In fact, I pay a little more for Brooklyn and get 2 ounces less of beer! And can someone explain why I should be paying an extra $1.05 per pint of Harpoon Brown, a beer which costs the same wholesale as the Harpoon IPA? Then we get to the Weihenstephaner…While the keg cost is a little higher and the pour slightly more generous (less than one ounce more than a pint), the keg cost is only $20 more than the similarly sized Harpoon IPA keg. Yet I am asked to pay nearly $8 for a beer that many local bars (Redbones in Somerville included), charge $4.50 for. On a single keg of the tasty hefe-weizen, assuming a ten percent draft loss with overpours, Bukowski’s is taking in $700 for a single keg, with a cost of $145, a price to cost ratio of almost 5 to 1). Compare that to the $470 Buk’s takes in for a keg of Harpoon IPA, with a cost of $120, and you can begin to picture the guys in masks riding up to your stagecoach.

For the last few months, I’ve been keeping an eye on wholesale price increases in anticipation of the impending “crisis.” Let’s take a look at some of the prices that we have seen here in the Massachusetts market, from January 2007 to March 2008 (prices reflect 15.5 gallon “half-barrel” kegs unless otherwise noted). The first column reflects prices (if available) in January 2007, the second January 2008, and the third March 2008.

Dogfish Head Craft Brewery (Atlantic Importing)
-60 Min IPA $129 $129 $139
-90 Min $175 $175 $189

Stone Brewing Company (Atlantic Importing)
-Stone IPA $129 $129 $149
-Arrogant Bastard $129 $129 $159
-Ruination $179 $179 $219

Bear Republic Brewing Company (Atlantic Importing)
-Hop Rod Rye $149 $149 $179

So in comparing Stone and Dogfish, Dogfish Head’s price increases seem pretty reasonable overall, between $10 to $14. Stone’s seem a bit higher, from $20 to $30 and $40. The jump on Ruination is a bit troubling overall and cannot simply be put off by an increase in hop prices (regardless of how stupid hoppy this beer may be).

Now if you were a bar owner and the price difference between these kegs in your mind really represented a substantial hit to your business (keep in mind the margins employed by Bukowski’s, extortionate as they may be), you might consider doing some shopping around for bargains. And you would find them. Great Divide Brewing Company offers its Old Ruffian Barleywine for $169 per keg, while North Coast Brewing offers its Old Rasputin Imperial for $156 and Old Stock Ale barleywine for $147 per keg. Compared to the Ruination price (these beers in my mind compete insofar as they represent sipping beers, not session beers), these respected brands seem like a steal.

By why bother restricting your shopping to the American craft market? While it may have been on fire in recent years, American craft brewers have much to thank their European counterparts for. Arguably the ancestor of much of America’s brewing creativity, Belgium is looking more and more like a steal recently. The same goes for German, Czech, Italian, Scandinavian, and British breweries. Despite the global scope of the above-mentioned raw material problems, the Boston area (a major market for better import brands) has seen next to no price increase on European “craft” beers. As I wrote in a very controversial column for BeerAdvocate Magazine, titled “Price Creep,” classic European brands often bring hard-to-match quality at a much more reasonable price than American craft brands. The Atlantic Importing lineup of Belgian and German draft beer (and bottles) has seen almost no price increases. Some brands have even seen a substantial decline in price in the last year (St Bernardus Abt 12, a beer many compare flatteringly to Westvleteren 12, went from $165 in January 2007 to $145 in March 2008 for a 30 liter Sankey keg). Only Brasserie de Rocs, Urthel, and Pauwel Kwak have gone up and only by a few dollars (seven in the case of Urthel Hop It!). Oddly enough, it was Brasserie de Rocs that I focused on as a wildly underpriced brand in the column.

While it may be time to start looking to imports for better value, don’t forget your price friendly local brands. Western Massachusetts juggernaut Berkshire Brewing hasn’t raised prices for its bottles or kegs a single cent since January 2007. Despite this, I’ve seen local package stores and bars consistently jack-up the price of this great brewery’s 22-ounce bombers.

And what about the small price increases we’ve seen for some breweries? A price increase of $10 per keg for a brewery such as Harpoon (from $110 to $120 for a 13.2 gallon keg) is probably long overdue. By the numbers, however, the cost increase shouldn’t result in anything more than a single dime being added to the price of your pint. Similarly, we’ve seen the following small price increases for these popular brands from the Craft Brewers Guild distributorship. (Prices in the first column are January 2007 or most recent period before price increase and the second column prices reflect March 2008 costs).

-Allagash White $135 $141
-Boulder Mojo $120 $130
-Clipper City $115 $130
-Gearys $110 $120
-Magic Hat $104 $110
-Sierra Nevada $120 $125
-Wachusett $120 $125

From a consumer’s perspective, those are entirely reasonable wholesale cost increases that shouldn’t result in major price changes at their favorite pubs. Now when we look at a brewery such a Rogue Ales, whose Dead Guy Ale jumped early from $140 to $165 (13.2 gallon keg), questions should be raised or bar owners should opt for a different brand.

How about our friend Weihenstephaner, which by the way, also hasn’t gone up a cent in more than a year.

I end this mini-rant by confirming that I do believe that the raw materials situation requires some price increases and that breweries should, to the extent possible with competition, seek to follow the example of industry leader Anheuser-Busch and occasionally institute modest price increases (versus stagnation for more than a year). But when a brewery’s prices jump substantially more than their competitors, consumers should be alerted to the red flags.

Moreover, I also believe that the actions of some greedy bar owners are causing the public’s perception of the hop/malt/gasoline/glass shortages to hit “crisis” levels. To be clear, a 500-percent markup on beer is robbery, not in the sense of someone holding a gun to your head and making you order the pint (14 ounces), but in the sense of robbing respect from the client and dollars from his wallet. In the long run, it’s also bad for business as smart consumers aren’t likely to order a second beer or linger at a place with $7 12 ounce glass prices. In The Good Beer Guide to New England, I defined a “great beer bar” as an establishment which has “an extraordinary selection of craft beers, respects their clients in terms of keeping prices fair, holds events promoting craft beers (from beer dinners to brewer meet-and-greets), makes craft beer key to their business, and also offers true character as pubs. While I used to enjoy Bukowski’s and still occasionally stop by for a single pint (or 12 ounce pour as it now may be), it never came close to making my shortlist for inclusion in the book because of its abusive price relationship with its customers. I’d hate to see more bars follow its unfortunate lead.

One thought on “Concern Over Price Creep

  1. Why is price a moral issue? Can’t we let the market set the price? I’m no libertarian but the beer bar market is sufficiently fragmented that bars should be able to compete and/or differentiate on price, and people have plenty of options if they think one bar is too expensive. For example here in NY Pony Bar is known for $5 drafts of anything they have on tap, and Ginger Man – known for being a place where Wall St types go for craft beer – has much higher prices. Depending on the mood I’m in, or who I’m meeting, I might prefer one over the other.

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