The other day a question was posed by Creative Loafing on their Omnivore blog, “Are craft beer prices out of control?” It’s a good question so we decided to think it though. First off the article was written very well and expanded much further than we do here. We encourage you to read it yourself and come to your own conclusion. However, here are our thoughts:
As a company that is on the cusp of starting a brewery, we have spent a fair amount of time “projecting” what it will cost to make beer and, maybe more importantly, sell beer. There are a multitude of costs for a micro brewery that home brewers do not have to deal with; e.g., employees, taxes, forced use of a distributor and the 30% markup that is associated, taxes, lease or property costs, and more taxes. On the other side of that coin, micro breweries do not get to recognize the benefits from economies of scale that the macro breweries trade on. Micro breweries are really at the disadvantage in the market as far as operating cost and, because of that, it has to be reflected in the bottom line product cost.
With this being said, we still feel that craft beer is a great value and would like to present you with a few examples of what influences the price and why:
1. Craft means craft and making it isn’t cheap: A great deal of time, effort, and materials go into making craft beer. The production costs necessary to get beer out the door of a brewery is around $3 per 6 pack, and this is before any type of mark-up or margin is applied. Then, with the 3 tier system taking their 30% margin at each level, you can easily see how it can become relatively expensive to get quality beer made, shipped, stored, and served.
2. We need to make a living: The simple truth of the matter is that we are all alike in this regard; we have bills to pay and families to provide for. And, while we all have to punch a clock on a daily basis in one form or another, we prefer to punch that clock with a smile on our faces and know that we’re doing what we love. We support the basic idea that a fair wage is to be paid for any work done, and feel that everyone and anyone who has worked for what they have can appreciate that.
3. Current Prices are in flux: The current beer market, which was started and is for the most part still maintained by major brands, is in a price war. This is because the products therein have been homogenized, and price was the only differentiator. However, now that there has been a substantial boom in the creation of breweries and the introduction of new offerings, the market is trying to work out all of the components and figuring out the cost of craft beer will come with further understanding.
So say you don’t care about all of the above and all you want is a buzz? If craft beer costs more why should you drink it over everything else? Below is a rough bang-for-your-buck comparison of the cost of alcohol in different drinks assuming average costs and alcohol content.
As you can see, craft beer is not the cheapest way to get a buzz. But, for a few cents more, you get to enjoy a far superior product, support the little guy, help expand a market, and broaden your culture as well as get that buzz. Sounds like a deal to me.