Stretching Your Dollar: Local Brews and the Beer Economy

Beer_Bottle-stretch

I’ve lost track how often I do it – standing alone, head bobbing back and forth from one beer to another.

It seems absurd, but in reality, it’s also a growing “problem.”

Do I want to spend $8 on a 22-ounce bottle of locally-produced pale ale or stout or $6 on a seasonal specialty beer from a national brand?

For me, like many beer enthusiasts, “drinking local” is more than a mantra thrown around. It’s a key part of my passion toward appreciating beer. I like knowing exactly where a beer came from, but also that I’m supporting a small, local business.

But the fact of the matter is a penny saved is a penny earned and this is an expensive hobby.

More important, this kind of cost-benefit analysis is pivotal for the vast majority of shoppers: those unlike me, who don’t overthink the malt and hops in a beer. Often, the choice is simple – find a good beer for a good price. Or, rather, find a good price and plan for the best.

So why is this something to worry about, anyway?

It’s a question that’s been in the back of my mind since April 2013, brought to greater fruition in recent months with the continued explosion of breweries across the country. It all reminds me of a comment made by Natalie Cilurzo, co-owner of Russian River Brewing Company:

“I wonder if at some point there’s going to be more brand loyalty for consumers. I’m not sure there is at the moment. You get a lot of brand loyalty with the Budweiser and Coors drinkers of the world, but I think people who drink Russian River beer also drink Sierra Nevada beer, they drink Avery beer, the drink Dogfish Head, they drink Stone. So I wonder if at some point people are just going to be like, ‘I don’t want to try any more beers, I just want to stick to the brand I know and I’m comfortable with.”

This is not a problem that has to do with saturation, but rather one of localization and distribution. As more operations open up, breweries have stronger ties to their immediate community and customer base, but there’s also the issue of scale and money, particularly from the consumer endpoint.

I don’t doubt a consumer commitment to “local” by any means – in fact, I believe it’s only growing stronger within the beer industry and elsewhere for a variety of reasons. But that kind of commitment is simply not prevalent outside niche groups made of people like myself, who are passionate about a particular product. In one recent example, we know that low prices matters greatly for young beer drinkers.

Additionally, as sales volume slowly crawls in opposite directions for Big Beer (down) and craft beer (up), it seems that the stiffest competition may not necessarily be from AB InBev or MillerCoors, but from Sierra Nevada, New Belgium, Lagunitas and more.

Ultimately, it may come down to this: smaller, local breweries have at least as much to fear from regional or national brewery scale economy and volume price advantages as macro beer. No matter the number of breweries or brands, everyone will find their place, but it makes me curious at what price. Literally.

After all, there’s an $11 bottle of locally-produced “imperial amber ale” at my favorite bottle shop that’s screaming for attention, but nobody is hearing it. In the meantime, those bottles sit on a shelf with its twin brothers and sisters, collecting dust as its lower-priced cousins are rapidly adopted by customers and brought home.

That’s something to explore next.

+Bryan Roth
“Don’t drink to get drunk. Drink to enjoy life.” — Jack Kerouac

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19 thoughts on “Stretching Your Dollar: Local Brews and the Beer Economy

  1. How do you think freshness will play in? I’m always wary of a bottle of something from a CA or OR or WA brewery over something from MD or PA, just because I know it has to be at least as old as it took to get across the country.

    • To someone like you or I, I’d say that would definitely come into play. But for Average Joe/Jane Drinker, I’m not so sure. Of course, this is being directly addressed by Stone, Oskar Blues, Green Flash, Sierra Nevada, Lagunitas, New Belgium, etc. with the opening of East Coast facilities…

      • I feel this aspect of the freshness debate isn’t just about breweries a state or more away. I’ve bought 4 month old IPAs at a local better beer store from a local brewery.

        But the debate on the entire importance of freshness is a separate subject. A subject I’ll be tackling in a few months when I do a vertical of a local IPA. My plan is to get at least a 6 month spread and then do this tasting on the day of the most recent canning.

  2. One point about “drink local” that I feel far too few people are making is that “local” cannot be a prime driving factor. Esepcially when we’re talking about getting the most bang for our buck. I feel quality has taken a backseat to locality. If it’s from my town I must buy it.

    The problem is that if it’s crap beer you’ve just wasted $5 on a pint or $10 on a 6-pack. Plus you’ve propped up a company that by all right should be going out of business. It’s time to stop “drinking local beer” and start “drinking great local beer.”

    • It’s odd, because I don’t think there’s the same kind of die-hard motivation behind other locally-owned businesses. If a restaurant makes bad food, nobody goes because there are plenty of other options. There are a few cases where I’ve seen breweries thrive simply because of location and not because of quality beer. That’s great for their bottom line, but it never provides incentive to always tweak and get better.

  3. You touch on a really interesting point here: the convergence between the rising tide of seasonal/specialty and “upscale” releases, and a limited number of pennies to go around. Seasonal and specialty releases often cost more, usually with good reason. But the cachet of exclusivity diminishes as these beers vie for attention with other similarly upscale or exclusive releases. Even if the increasingly vast selection is good news for a promiscuous drinker like me, I don’t have much room in my shopping basket for bottles that cost north of $10-$15 after taking into account the (admittedly rather fluid) spending cap I impose on myself whenever I enter a bottle shop. If you ever adopt one of those stray imperial ambers hanging around your locale, I’d be interested to know if you thought it was worth the eleven bux.

    • Ha! I don’t even know if I’d dare buy the imperial amber as a special birthday beer.

      I was having a conversation yesterday in which we mentioned Against the Grain from Kentucky. I’ve been to their brewpub and rather like their beer, but IIRC, they outsource their production for what they sell in bottles. That jacks up their price substantially, with nothing costing much less than $13 or $14, most bottles a dollar or two more.

      I’m never, ever going to buy their bottles for that price. Their beer is good, but not that good. What’s more, their label designs are fun and interesting and I can easily imagine they catch the eyes of non beer enthusiasts who then balk at the purchase when they see the price.

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  5. Really, who in their right mind is going to pay that much for an Imperial Amber ale? That’s a ridiculous style to try to command that price. I just paid $16.99 for a Deschutes The Dissident, arguably one of the best American sour ales. It’s only released every other year.

    A really good non-barrel aged Imperial Stout might deserve double digit pricing, even if it is local. The biggest problem I see in local pricing vs. national brand pricing is over reliance on “local” and need to have a price tag reflective of many smaller craft brewer’s egos, whether the quality warrants it or not. Recently, we had one of our local breweries come to us wanting to sell us a barrel-aged barleywine. The price he was asking would have resulted in a $25 22oz bottle off the shelf. He had over 160 cases to offer in his small distribution print.

    To add to it, the brewer has never done any major barrel-aged releases and has no track record of high end specialty releases. His 6-packs average about $9.59 off the shelf. We surveyed some of the local accounts, the “usual” suspects on releases like this. Even if we could get the price down to 19.99, the best account would only take 5 cases and would “see how they did.” We would have never been able to sell the quantity offered at the price requested. Largely, this offering was driven by ego. When presented with other similar releases that positive reputations in this realms that were selling for half his requested price, his response was that his beer was way better.

    A lot of the time consumers assume that beer pricing is a mechanical thing. The brewery figures out his costs, adds a standard markup, and then sells it to a distributor. The distributor slaps their markup on it, then sells it to the stores. The store then adds their markup on to it and sells it to you. I’d say, with minor fluctuation, the distribution and store level are pretty standard. Some things may get a little bump due to exclusivity or reputation, but the process all begins at the brewery and what the brewery thinks its beer is worth. Once that is decided, it all flows through until the price tag is printed at the store.

    • Thanks a bunch for this, Chris. I really appreciate this insight.

      I find it really interesting that the brewer had this kind of reaction, which I guess shows that they have faith in their skills and product, but with some obvious bias. Even still, that is a very hefty price for a bomber, which goes past the cost of speciality Allagash releases.

      Do his other beers sell well? Is that the source of his ego on it?

      • His beers sell solidly. But they’re just things like IPAs and Pales. He’s not even using any “big name” barrels. The retail price he should be going for is about half of his original price, maybe $13-$15. Although that might be a stretch. Another local brewery is selling a screen printed 1L swingtop of barrel-aged barleywine for $13.99 and they have an established reputation with higher end releases.

  6. “Smaller, local breweries have at least as much to fear from regional or national brewery scale economy and volume price advantages as macro beer.” Damn straight!

    Also, at some point in this series, are you going to drink that poor little Imperial Amber? Or does it end badly for him?

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  8. This post and the next one are good food for thought. As a general rule I don’t normally see big cost differences between local beers and national ones, but there are a few exceptions. All things being equal I would prefer to drink the local brews, having gotten to know many of the brewers, but as Tom says it comes down to quality. If two beers are very similar in quality I would pay a little more to drink the local one, but if I’ve had a local beer and was not impressed I’m not going back to it.

    The one brewery in my area where the cost often dissuades me from a purchase is a brewery called Rockmill who make Belgian style ales (Saisons, Dubbels, Trippels, etc.) The 750 mL bottles sell for $14-$18 a bottle, and while they are good I wouldn’t say they are better than Saisons and Trappist Ales from Belgium, which sell for similar if not lower price points. It’s pretty hard to convince myself to pass by a Westmalle Tripel or a Saison Dupont for something more expensive and not quite as good.

      • I used this comparison before, but if a beer is selling for more than Allagash, which is universally lauded for these styles, I just don’t see how it has lasting power, both in reputation and price. Or maybe I’m being too harsh. Either way, that’s a hefty ask.

      • That’s a good comparison Bryan. I looked up the prices of Rockmill’s Barrel Aged Tripel and compared to Allagash’s Curieux, which is also a barrel aged tripel. The Rockmill variety sells for $24-25 while the Allagash one (not available in Ohio unfortunately) seems to sell for $18-20.

        I guess Rockmill must be doing OK and selling their beers at these prices. It’s possible that if they sold their beers at the appropriate price they would not be able to meet demand, so maybe for them this makes sense. However, I rarely buy Rockmill for that reason alone, and I’m not much of a penny pincher when it comes to craft beer.

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