marketing opinion

Cheap Beer Challenge

Earlier this week, Keith Flett suggests a solution to the vexing problem of the sometimes worryingly high price of some craft beer: as we read it, he is asking craft brewers to challenge themselves on price and brew at least one ‘people’s pint’.

As has been established, we’re weird: we’re already beer zealots — extremists, if you like — and prioritise buying good beer above many other luxuries in our lives. So, to us, there aren’t many beers which don’t seem affordable; we don’t need convincing that there is a connection between price and quality; and we’re certainly not arguing for craft brewers and bars to cut costs across the board. Generally, we admire their tendency to brew for flavour and worry about price later.

The fact is, though, that for some people, price is an issue through necessity rather than choice. Can anything be done to make sure they aren’t excluded from craft beer? Just one beer? Or do we simply have to accept a ‘them and us’ culture?

Here are some ideas off the top of our heads, in brainstorm mode.

1. The Sainsbury’s Basics model
Sainsbury’s supermarket has a range of economy products in simple packaging, just as all the others do, but their clever gimmick is transparency. They say things like “Basics Cucumber — just as green, watery and likely to give you indigestion, but slightly bent” or “Basics Onions — not uniform sizes, but just as likely to make you cry”. This could also work for beer, e.g. “A simple recipe with only pale malt to let the hops shine through”.

2. Inspired by Macrobrewers
Several breweries in different parts of the country could work together to brew the same beer for their respective markets, saving on distribution costs, but sharing the costs of sales, branding and publicity. As a bonus, the savvy punter gets to enjoy the regional variations.

3. Learning from History
Big brewers have always focused on hitting fixed price points. Look at Ron Pattinson and Kristen England’s 1909 Style Guide and one thing that leaps out is how much sugar, corn, rice, Soylent Green and other adjuncts were used in beers before World War I. Kristen has made and tasted all of those beers and, for the most part, enjoyed them. Once again, if made with care, marketed transparently, and presented as a history lesson, adjunct-laden beers could still be craft beer.

4. Play Ball with the Government
The Government wants brewers to make weaker beers and is giving tax breaks to those who do so. The threshold is 2.8%, which sounds disastrously low, until you consider the success of Brodie’s Citra (which is universally admired) at 3.1%. We like weaker beers because we can drink more of them in a session, and the success of GK IPA suggests that many ‘normal’ punters do, to.  (Many brewers are already taking this challenge, of course.)

5. Loss leaders
Sam Smith’s pubs draw people in with the offer of cheap beer but make money from people ‘upgrading’, hence the massive difference between the price of a pint of Old Brewery and a pint of Pure Brewed Lager. Given that most craft beer customers don’t choose on price, would offering one beer at or near cost be such a problem, if it meant drawing in new custom and expanding the market? Which leads us to…

6. A Tax on Beer Zealots
A few ludicrously, deliberately over-priced, over-packaged limited editions beers at the other end of the range could subsidise a ‘people’s pint’ — a kind of tax on craft beer zealots, which many would gladly accept if it meant (a) that they got an interesting beer for their money and (b) it helped to spread the word.

Any more, better ideas?

Note: It goes without saying that our ideas above are poorly thought through, that we’ve missed the point, that they won’t work, etc..

35 replies on “Cheap Beer Challenge”

Did a tasting of several 2.8% beers recently and I’m afraid they were all rather poor. I didn’t think I cared less about ABV until I tasted them. Any recommendations on decent ones?

We were impressed with one Harvey’s did (but that was a limited run); people are saying good things about Adnams’. Generally, they are much better from cask than bottle — without cask zing, they can start to taste like shandy.

Bob Arnott has tried them all and is threatening a roundup review soon.

The Adnams one really is – genuinely – very good indeed. I was quite surprised, as they’ve mostly been awful. The Fuller’s one was thin but pleasant. The Adnams one is quite full-bodied. I might add that Adnams seem able to do no wrong at the mo. I’ve never been a fan of Broadside but even the classics – Bitter, Regatta, Oyster (esp. Oyster! – have been on top, top form over the past couple of years.

Great idea, but not sure that’s within the control of brewers themselves. (Unless they are also controlling the world’s sandal market as part of a sinister conspiracy. Who knows.)

Ha. Without comments telling us why we’re idiots, we’d have hardly any comments.

Most breweries already push their prices as low as they can go to survive and compete fairly. Real ale in particular has incredibly low profit margins because of the way the market is. Duty is a bastard to breweries – it’s shocking how much is creamed off of one cask/keg/bottle. And if you want to brew good beer then you need good ingredients. If you want to make beer cheaply then you need huge scale which itself takes huge financial input…

The 2.8% threshold only affects brewers outside of small brewers relief, so only relevant to the bigger breweries anyway, though obviously every 0.1% of alcohol does change the price of duty paid, so weaker beers can be sold for cheaper (trouble is they often use a lot of hops, like Brodie’s brilliant Citra or Redemption’s great Trinity).

As for balancing margins, I guess lots of places have to do this already but in many cases it’d work the other way – pushing up the price of the £3.50 pint to £3.80 so that they can charge £4.90 a pint of the fancy stuff instead of £5.50 (because they’ll sell double, treble or whatever of the cheaper beer to balance books). Bars set their own prices. Two barrels might leave the brewery and go to two bars on the same street, there one bar might charge £2.80 and the other £3.40.

If only getting cheaper beer was simple!

Thanks, Mark — constructive and food for thought.

So, there probably isn’t much that can be done to make craft beer accessible to people for whom £3.80 a pint is prohibitively expensive? This is as futile as trying to make Ferraris or diamonds accessible? Depressing.

Probably not! Economy of scale and using quality ingredients means high prices. Plus pubs are able to charge a premium on it.

The way it should work is the brewery designs the beer they want to make and to drink, they use the ingredients they need, make it to the abv that’s best and then have to come up with a price for it afterwards – something competitive but sustainable.

The Sam Smith model works because they pretty much only sell to themselves so can charge low prices. Any brewery who owned their own bars/pubs could charge a lower price for their beer but then they risk annoying their customers (the pubs, not the drinkers) who can’t compete on the same price level, so again, pricing comes down to the local market… (which is why Punk IPA will probably cost a different amount in the BrewDog bars in Scotland compared to London).

It is an interesting thing to look at, though. I don’t think breweries over-price their beer. Some of the special-release stuff probably makes no money because it’s such a small scale – small print runs for labels are scarily expensive. If it’s a strong beer then you can add on extra duty, extra ingredients, extra tank-time…

Well, I think there is more to it than that. If you insist on drinking in a pub, it clearly costs way more. I am buying delightful 500ml servings of Sixpoint for £1.25 these days. Brewers could also can a lot of beers that are going into caged corked large format bottles that add an unnecessary £1.00 to the consumer’s cost (a cost amplified by markup if bought in a pub.) And brewers could stop using % markups across the range. If per sale mark up was a flat fee, even with lower taxes for lower strength, costs would be coming down. We all like to make hay when the sun shines but guiding drinkers to higher cost beer does make for higher profits after the higher costs are taken into account.

4. Play Ball with the Government: remember that the tax breaks only apply to brewers who don’t get Small Brewers Relief – it’s the same rate still if you are a small brewer. Not sure there’s any greater motivation to try and brew at <2.8% for those brewers.

Sure, brewers like Adnams, GK, Fullers, etc have jumpes in – the tax benefit is there for the taking (and I'm sure we won't see that saving passed on in full over the bar so there's extra profit for someone in the chain…) – but if the post is targeted at "craft brewers" (whoever that actually includes), it's not necessarily of much benefit depending on yearly output.

Aldi already do 1, and generally do it quite well. Though their first iteration of an Irish red was better than the new O’Shea’s one, IMO. Both were commissioned, to exacting specifications, from Carlow Brewing.

Can’t see 2 working. People (like me and youse, for instance) would immediately start drawing the distinctions between the beers, and referring to them as “the [brewery name] version of [beer]” from the get-go. The brewers may as well all brew a 1.038 brown bitter to a roughly similar recipe and give it different names. And who would want that?

On 3, I’ve seen brewing to a price-point work really well: Carlow (again) were commissioned by a restaurant chain here to make them a sub-4% ABV, sub-€4, hop-forward ale. It’s really nice too.

4, as you say, is well in train. We’ve had the same duty break at the same strength point for longer than you and not a single beer to show for it *sad face*

For 5 you presumably need a tied estate. Are you suggesting that if Samuel Smith can do it, BrewDog should too?

And 6, as Mark says, already happens. I’d say it happens a lot. I’ve been told by a landlord that the kiddies drinking Kopparberg are what keeps my Aventinus at a saleable price.

Hooray for Kopparberg! (Not something I ever thought I’d say.)

Yes, I think Brewdog is probably who we have in mind, but Cask/Craft Beer Co could also make more of their ‘house beer’.

Very interesting to hear that some of these things are already happening and working.

Brutally honestly: we don’t think brewers *are* pushing themselves to be efficient, because, in the current climate, where price isn’t an issue for zealots like us, and the craft beer bars are full, why would they? Your examples show that, with a target to work to, they can do it.

Okay, nobody flog me, shoot me and drag me through the streets, but…what about not drinking pints? There’s much to recommend the half, 33cl bottles and schooner.s..

Drink less, drink better?

Don’t think that’s a bad point. A session-strength beer in minimally designed 330ml bottles (no-fancy-printing or foil) could be a good accessible craft product.

I’ve noticed that, particularly with mainstream lagers, the price difference between a bottle and a pint is almost non-existent. You certainly aren’t paying a relative price per ml. It’s almost as if the pub industry has decided that you’re going to be charged per drink, whether it’s a 330ml bottle, pint or gin and tonic.

I certainly wouldn’t want ale to go down that route, at least with halves you know you are going to be charged half.

Agree with John H: Drink less, drink better.

Surely the price beer is sold at is largely down to pubs, not brewers. Micro-breweries who deliver direct in their local areas often charge surprisingly low prices, as there’s a lot of cut-throat competition. Maybe what is needed is a chain of pubs dedicated to making good beer more accessible to people of limited means. Oh, hang on, there already is, it’s called Wetherspoons.

Surely this conundrum has been solved by Wetherspoons? Not the biggest pub company, but the biggest seller of real ale in the country. And, if they did sell any decent keg beer, no doubt they would be the top seller of that as well.

Come on down, the price is right…

Except in Penzance where they only sell Ruddles, Abbot, GK IPA and Doom Bar. Actually, to be fair, during the festival they also have a few badly kept guest ales…

In places like Penzance they probably have more of a captive market whereas in and around Manchester most Spoons have strong local competition on the beer front. Most will typically have at least 3 or 4 “interesting” cask beers from micro and independent brewers, and in recent years they seem to have largely solved the problems of poor cellarmanship they were once plagued with.

We were discussing only the other day how little the JDW (The Cross Keys?) we visited with Tandleman in the City of London a couple of years ago has in common with, say, The Drum in Leyton. Same branding, same basic interior design, but one is a gleaming palace with great beer, the other a down-at-heel boozer. The JDW brand is no guarantee of a consistent experience.

I’m not sure how the U.K. works, but in the U.S. we also have to contend with the distribution “middle man”. It’s illegal for breweries to distribute their own beer. If a brewery produces under a certain amount, they can self-distribute in some states, but it’s a very small amount. For the most part, 99% of beer is sold to the retailer through a distributor, which obviously raises the price of a pint.

Well, it is legal for breweries to distribute their own beer at the brewery. The tasting room at Middle Ages in Syracuse, NY, for example is one of the delights of the beer world. Generous samples and low cost growlers. They even fill whatever jug you bring in.

The cheapest beers here are all at brewery taps, e.g. Brodie’s at the William IV in London, and Penzance Brewing Company beer at the Star Inn near us.

EDIT: apart from Wetherspoon’s and Sam Smith’s pubs.

Yeah, tasting rooms are cool—and your starting to see more and more of them. But, Kingston (or Albany) to Syracuse is a long way to travel for a free sample of Wailing Wench. Even with the relaxing restrictions of brewery self-distribution, the distributors are still the ones who benefit most from the three-tier system (manufacturers > distributors > retailers) at least in NY. I’m not saying the distributors are doing anything wrong, but I think most breweries and retailers would like an overhaul of the system. It’s just one more layer to raise the cost of beer.

Sorry, but shouldn’t that be more a brewers’ problem than consumers’? Even in the UK there seems to be plenty of pretty good beer at “good prices”.

If part of the strategy of the self proclaimed “craft brewers” is to price themselves out of a certain market it is them who are a loosing more than the consumer.

Exactly. The problem for the consumer comes when an average brewery is making pretty unspectacular beer but being trendy with it and expecting to charge top dollar. Ultimately though it is a problem for the brewery because if more people than your local gang of beer geeks don’t buy the beer, or more likely buy into the brand, they are screwed.

I don’t like 6 – I’ll come on to that. And I don’t recognise 1-5 as solutions, because I’m not convinced there’s a problem for the vast majority of beers and brewers. You can get a wide variety of interesting & different beers in pubs & bars near me (including the Spoons) without ever being asked to pay more than £3.50 a pint. Similarly, you can get some excellent bottled beer in local offies and supermarkets without ever having to go over £3 for 500 mls.

The problem is much more localised than you’re suggesting, although I’m afraid it is spreading. The problem is that a Craft Beer bubble has developed, inside which brewers know they can charge more because drinkers don’t mind paying more – in fact, quite often I think they’re positively keen to pay more. Craft keg is one obvious offender – why does chilled, filtered beer from a pressurised container cost half as much again as real ale (with all its handling and wastage issues), even real ale from the same brewery? Because the brewery can get away with charging more – and they can get away with it because there are people willing to pay more. And don’t get me started on limited-edition bottles… (Solution 6 doesn’t work because I want that beer, dammit.)

Really good blog…I have plenty of comments…

I’m all for drinking good beer in smaller quantities. the 330ml bottles and half pints are your friend when you want to sample some of the more expensive beers on a budget.

Keg beer is very expensive. One of the reasons for that is the propensity of craft brewers to use disposable key kegs. These key kegs cost around £15-£18 each for a 30L keg adding 50p to the price of every pint.

As Mark said the margins on Cask beer are very low and I’m pretty sure that any brewery who is selling cask beer will have to price it as keenly as possible, particularly in certain parts of the country where there seem to be a plethora of micros.

Some craft brewers can’t brew enough beer. (Brewdog Kernel Magic rock etc) The demand for their beer is so high that they sell out without making any sales calls. If market forces dictate that you can sell you beer at a slightly higher price, to not take advantage of this would be criminally bad business if you are looking to expand to meet demand.

Wetherspoons are like the supermarkets of the pub world. Great for the consumer but may not be good for the supplier (brewer) or the shop (pub) down the road.

Margins etc aside – could it be that some breweries simply don’t want to brew an ‘everyday’ pint? Ie – in the nicest possible way – they like being ‘niche’?

Think that’s probably true. The challenge for them would be to find a way, just once, to make a remarkable, mad, niche beer that even the skintest/stingiest beer geek could afford.

A test of their mettle rather than a rejection of their entire business model.

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