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View Full Version : Increased Retail Pint Prices and Margins



beauxman
04-21-2008, 12:55 PM
OK, bear with me here and please tell me if I am off base (I know market prices are different based on region).

We all know about the increased cost of brewing beer. The consumers have been mostly conditioned to accept it. So I was looking at the numbers and kinda scratching my head. It seems like we have increased our prices to offset the cost and retain our margins, as we should. When you look at the retail side of this, it would appear they have taken this situation and used it as a golden opportunity to increase their margins.

Average beer example:
Pre-hop meltdown keg price to account: $105/110
Now reality price to account: $120/125

So this would be an increased cost of goods for the account of about $15.

Pre-hop meltdown pint price at retail account: $4.25/4.50 (Seattle)
Now reality price at retail account: $4.75/5.00

"Those brewers increased their keg prices, Joe Pintglass drinker, we had to raise our prices too!"

OK, let's look at again:

1 keg (15.5) = 140 short pour shaker glasses (typical under sized bar glass)

All things being equal here from before and after (waste/shrinkage/ect.)

Increased cost of keg: $15
True per pint COGS increase: $0.11
Actual pub price increase: $0.50

Publican increases their margin and blames it on the hop crisis and the brewer. I know retailers are dealing with cost increases and such but to truly say your prices are increasing because of brewers is a bit misleading. And I know you don't just raise your price $0.11 but wouldn't $0.25 be more appropriate than $0.50? Anyone find this a bit frustrating?
-Beaux

lhall
04-21-2008, 05:40 PM
Yes, extremely frustrating. I had one bar manager tell me that he raised our beer from $4 to $4.50 because "I don't have a $4.25 key on my POS system."

BMOOR
04-22-2008, 07:34 AM
You are exactly right, and this is why I didn't worry about the hop increase (or even the malt for that matter) at our brewpub. Our supplier put this spin on it and made me only concerned about availability rather than the costs.

Buckley
04-23-2008, 07:38 AM
I think that a lot of us (brewers) were not the ones that raised the prices. I know in my case I came in and the owner of the pub just told me that he raised the prices.

MatthewS
04-24-2008, 07:30 AM
I understand where this is coming from but...

It seems to me that everyone seems to blame everyone else. Bar owners blame us and distros... distros blame us... we blame distros... consumers blame the brewers and bar owners because that is all they know...

My take is that if a bar wants to sell a 1/2bbl($125) for a certaiin price then they have every right to do it. We also can NOT sell them our beer if we so choose. (not a good option for many of us)

A local beer bar carries our beer...
Our kegs are line prices at $125 for 1/2s They sell TRUE pints for $5.50 for the IPA and the porter is a 12oz for $6. I aked about this, and understand the owner happens to be friend as well... he says that it is a balancing act to keep certain beers fresh and others... to be thought of as a premium. I shake it off, and figure he goes through a 2-3 1/2s a week.. so who am I to complain. This particular bar also pays his people very well, and that needs to be considered too.

I think the reality is ... is that everything is more expensive(not just a breweries costs) and a bar only has a certian number of seats, therefore can only sell a 'set' amount of beer.(sort of) Let them dictate price, and if it bothers you... then pull the product or make an aggreement on a certain price.

Personally, I think a pint of Boulder Mojo for $5.50 is an OK deal, and I will pay it anytime. This place also has De Ranke XX Bitter for $8 for a 12 oz... another beer I would not pass up .. even at that price.

beauxman
04-24-2008, 11:01 AM
I think the reality is ... is that everything is more expensive(not just a breweries costs) and a bar only has a certian number of seats, therefore can only sell a 'set' amount of beer.(sort of) Let them dictate price, and if it bothers you... then pull the product or make an aggreement on a certain price.


I agree but I think you missed my point. I am saying that many pubs have used this as a reason to raise margin, not just price and blame it on the brewers and the crisis. I would bet that most breweries raised their prices to a level that acheived the same margin from pre-crisis days. I think the craft brewers are sensitive to the fact that if the beer prices go too high, we will start losing market share to wine, cocktails, and large breweries that can absorb cost increases better. Let's remember we are in a recession and our prices are increasing as is almost every other industry/commodity. Price increase is acceptable, plumping up the margin I suspect might start dropping sales for the sector. On the other hand, publicans have increased costs from many other parts of their business and raising prices to keep margin is the best option. I guess at the end of the day, when Joe pintglass asks why the $0.50 price increase, I would like to hear the answer be more like " Well, keg prices have increased, minimum wage has gone up, fuel is off the charts, and my food costs have skyrocketed". Don't blame it all on the breweries.

-Beaux

frigatebay
04-24-2008, 11:05 AM
lets not forget that some wholesalers have raised the margin because of the shortages. How it affects them is beyond me.

K

100
04-25-2008, 04:35 AM
fuel, packaging, paper, additional taxes, demands on other components (glass) , environmental expenses, etc..roll up into total craft production

everything needs to be weighed against the bottom line, the hops increase is just the most obvious and the population is looking for it there first

the gross margin factor in beer is very tight, i would think you would need to retail that $5.00 pint at minimum $5.50 just to absorb that increase, which leaves room no profit

think about (in restaurants) the increase in milk a couple of years ago and what that did the retailers and consumers - ice cream, milk , cheese now milk is almost $5.00 a gallon... it was $1.85 and that was just a couple of years ago...

twoodward15
04-25-2008, 10:34 AM
beauxman, as a homebrewer that happens to visit here I can tell you that I really don't see people going back to wine at this point. I can also say that if I am a fan of your beer that I am more than willing to pay the higher price for it. If I go into a store that has say, Flying Fish Farmhouse Ale on tap and it was $4 last year but it is $6 now I will gladly pay that. I think that is also the trend of other people that are truly into drinking good beer. On the other hand you might not get anyone to try one of the more expensive beers to get converted from the BMC crowd unless they have someone there pushing them to try new things.
Now you're thinking that although you'll still get me to drink that I won't have as many. I think that is not a good estimate. If I go out I don't normally have that many and the cost difference for me to have fun and relax or to hold back and not have a good time is a matter of about $10 now. So, if it's a matter of $10 to have a good time or to not enjoy myself then I'll pay the $10 before I downgrade my beer choices.

RaySherwood
04-25-2008, 03:23 PM
I think so long as the price changes are gradual its reflective of our economy. Nobody notices the $2 - $2.50 they are paying for soda these days versus half that 5 years ago. My cost per batch of beer has doubled in about a year so if I charge a quarter or two extra per pint I don't think its gouging.

Jephro
04-25-2008, 04:04 PM
Increased cost of keg: $15
True per pint COGS increase: $0.11
Actual pub price increase: $0.50

Ray,
I think Beauxman's point is that brewers are trying not to jack the price up too high and run themselves out of a market, but some pub owners may be doing it for them. In this scenario a pub selling the beer only pays 11 cents more per pint, but they charge the public an additional 50 cents. That bar owner is pocketing 39 cents per pint, all the while blaming the brewery/brewers for the price increase. If a brewpub increases prices and drives away customers that is their own doing, but i can understand the frustration if a greedy pub owner does it for you.

I think the real test will be when that same pub owner has to pay another 11 cents, i.e. due to the great barley shortage of 2009. What does he do now? Does he raise prices again? Does he write it off because his profits were higher last year?

I know some business owners would rather only change prices every couple years. I worked for a bar that did this. Over a three year period as beer and liquor costs went up we did not change our prices. When we did it was a rather sharp increase, but that gave us a built in buffer to adsorb the inevitable increases to come.

brewbong
04-28-2008, 09:53 AM
This is in-friggin-furiating.
It all has to do with regulation, over-regulation to be precise.
Those of us who live in franchise states understand this full well, and those of you who don't suffer the empowering wrath anyway.
This is precisely why we don't manufacture anything in this country anymore and subsequently why the economy is in the crapper (luckily the folks who have the money to spend are spending it, and regardless of whether people have the money to spend or not they will always spend it on booze).
Everyone in the entire food chain, or in this case beverage chain, should be entitled to his fair mark-up, the problem is; there are too many biscuits and not enough gravy. Until someone figures out a way to jettison some of the mandatory biscuits (the lawyers, the insurers, the lawyers of the insurers, the legislators, etc.) the cottage industry producer will always be the first to feel the squeeze of the proverbial belt tightening.