Craft-Beeronomics: The dangers of exploitation

Greed: Noun; intense and selfish desire for something, especially wealth, power, or food.

The recent boom in Craft Beer has been a fantastic shot in the arm for those of us who crave good beer. Good, varied beer is now a thing. Previously there was a variety of beer available but nowhere near the extent that is available now. But what’s it driven by? The growth has two elements, firstly there has to be a desire to brew better more diverse beers, and also there then needs to be a consumer demand for the beer styles which have broken away from the norm.

Both of those elements are self-driving, so a good brewer will develop a popularity and therefore demand, but also the consumer demand gives the brewer confidence to try more varied beers. And if anything, I think the link between brewers and consumer are far shorter than they previously were. Breweries are local and accessible and there are genuine personalities behind them which in many cases are well known and it’s easy to see the brewery image reflecting that of its owner, in both branding and beer styles.

But as a consumer base, for all the economy has gone through times, there is a high level of disposable income around these days. Economic confidence has grown which makes for a less conservative consumer. One who is more likely to splash out on perceived luxury items. I have to say, 10 years ago the idea of spending over £10 on a single bottle of beer would have been laughable. Now I see it as pretty much the going rate for a special beer.

As I understand it, beer prices rose originally due to the cost of importing specialist beers from the US. In order for businesses to be inclined to do that, there needed to be a return for that investment. The cost of getting a beer imported from the US was huge when compared to getting a keg of beer from the local brewery. So if the importer was going to make a loss, they wouldn’t bother. So the price reflected the cost of importing.

Even in the UK, brewers were faced with a much higher cost for raw materials. The amount of malts, hops and other adjuncts in modern flavoursome beer is massive in comparison to the bland beer of the past. And naturally all those extra ingredients come at a cost. That cost has to be passed on to the consumer otherwise the whole market economy fails!

OK maybe alittle dramatic, but you see the point. As the cost of the beer we demand has increased, so too has the price we have to pay to enjoy that better product. I for one am happy to pay what I see as a fair price for a better beer. Its par for the course isn’t it. I remember when I first started drinking craft, it very much coincided with becoming a parent. Which meant I was going out less and less and my mindset was that as I was drinking less, I wanted what I drank to be good and interesting. So I find myself here today back up to drinking at the level I used to drink before I became a parent, just with a far bigger bar bill as a result!

But are there instances where our loyalty and understanding is being exploited? And this stretches way beyond the hype argument. This is about practices which could potentially turn people away from craft beer which is the very thing the rest of us are campaigning to encourage new drinkers to try.

I guess everybody’s different and what one person sees as someone exploiting the consumer, another person sees as a small business owner trying to make a living. So it’s a difficult tightrope to tread. I’ve been aware of several releases in the past 12 months which certain people have said are overpriced and actually the market self-regulates in that instance because the consumer doesn’t buy it.

Let’s be clear on this, I don’t think there is a widespread problem here. But I think it’s very important that breweries respect us consumers as we are their future. If a brewery doesn’t keep its consumers onside, it won’t last very long.

So what do I see as exploitative practices? There have been several times where I’ve questioned the motives. Clearly I’m not always aware of all the factors involved but its important to state the case as I see it so that the brewers understand what the consumer is seeing.

First instance of what felt exploitative: It cost me more to buy a beer from a brewery than it did to buy it from a reputable local shop. This isn’t some dodgy sourced stock that the shop got hold of, they bought it direct from the same brewery that I was buying it directly from. How can adding a third party to the transaction make the cost price less? That third party would expect a profit of their own from the transaction, and the brewery would expect to make a profit on their original costs of producing the beer. So put simply, from where I sit the difference in prices is pure profit for the brewery. And whilst I would encourage breweries to make sure they are profitable, this feels to me like pure greed.

Second instance of what felt exploitative: During 2015 a great many breweries brought cans to the market. Now I’m a big fan of cans as a way of preserving the hoppy beers that I love. But in some instances I was aware that cans were seriously sub-standard and yet were made openly available to buy anyway. Where’s the quality control? It doesn’t come cheap but its hugely important. I can’t help feeling that the reputation of the brewery should be the most important thing and the perhaps the drive to recover the cost of canning the beer has been allowed to let that suffer. Long term a brewery won’t get away with that very often before the stigma drives them out of business.

Third instance of what felt exploitative: Cashing in on hype. Let’s face it, we’re all aware of the latest buzz beer being talked about, but often these beers are being talked about long before any of us get to try them. What bugs me is where hype is built up driven by the brewery itself, not the beery community and ultimately the price point is based on that hype rather than the quality of the beer itself. The thing which annoys me the most is when the end product falls well short of the expectation built on the hype driven by the brewery in the first place. I feel that they’re making money out of the need for us craft beer lovers to get excited about the sound of a beer well in advance of actually tasting it. We’re our own worst enemies at time though, for hyping beers before we’ve tasted them. The difference is if that hype is brewery driven rather than craft community driven. To my mind I feel like my passion for good beer is being exploited. And it leaves me with a bad taste in my mouth, the taste of underwhelming beer…..

I don’t need to name names here as I don’t think it’s necessary. It’s up to each one of us to determine what we feel is acceptable practice and ultimately we vote with our wallets. And therein lies the danger here. I want the craft beer industry to grow and talk of negative practices could make potential new consumers wary of trying new things. We don’t want the whole industry tainted by stories of the actions from the few.

I guess my gut instinct here is that I want brewers to be driven by the goal of producing the best beer they possibly can. My problem comes when the profit becomes more of a motive than the drive for the perfect beer. I’m well aware of the need to strike a balance and it’s a grey area as to where that balance should be.

So in summary, if you see things which you feel are exploitative say so. You don’t need to get into an argument on twitter or fisty cuffs in the street, just vote with your own actions and keep your money in your pocket. Whatever level at which you perceive that exploitative bar to be at, chances are there’s a great many brewers out there who meet your expectations.

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9 thoughts on “Craft-Beeronomics: The dangers of exploitation

  1. jgvyvan

    Hm, not sure about this “greed” issue.

    Pricing: the situation explained must be pretty rare for starters. Breweries will discount to trade as they’re outsourcing sales, stock risk, and expanding market. Usually selling in bulk quantities too. Some sell their beer retail too, usually for what they belive it is worth in the general retail market – and without wanting to undercut their precious regular retailer customers.

    Perhaps some retailer gets a good deal from the brewery but then uses a much lower margin than the brewery expects? Nobody’s being ripped off – no greed involved, just different expectations.

    Most breweries are not making a load of sales to the public. And in fact in some cases any retail trade can be at higher overheads than dedicated off-licenses as it is not their core business.

    Cans: mostly you’re highlighting a quality issue that isn’t about greed – just substandard packaging. Much microbrewery bottled beer is badly packaged – hardly surprising this will also apply to cans. Often the evidence of the issues (O2 pickup often, infections sometimes) is not immediately obvious too.

    Some breweries do knowingly release flawed beer sometimes. This often comes back to bite them badly though, and is usually more about a certain level of financial desperation than greed.

    Hype: I’m not sure I can recognise a source/example for hype issue. Marketing? I guess it could be a term applied to makerting-first brewing. But I think folk recognise when this is the case and word spreads quickly – and quality tells, folk quickly vote with their feet.

    So overall I’m not convinced there is a significant greed issue in the brewing industry.

    Not to say there isn’t some. Their is, often in the minds of misguided fools with a rad ‘craft beer’ idea that just needs some slick marketing. Oh, and probably a brewer or something like that. 🙂 Details!!

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    1. mlambert010 Post author

      Totally agree with you, I don’t see this as a widespread issue. But even the odd isolated issues left me feeling disappointed. I guess it’d make more sense if I’d given specifics of which beers etc I was talking about, which is something I ummed and arred about doing in the run up to publishing.

      Thanks for the feedback! Much appreciated!

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  2. DaveS

    Re cashing in on hype, one thing I’d be happy to see more of is comments on the lines of “beer X is very good, but perhaps not good enough to justify the price when you can get beer Y so much more cheaply.”

    It’s more useful than “the price of beer X is ridiculous” and also has an implicit sanity check – if no-one, anywhere is producing a similar beer for less money then maybe it really is just difficult and expensive to make.

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    1. mlambert010 Post author

      Totally see your point. I thought long and hard about giving the specifics of the beers that disappointed me. Maybe next time I’d be alittle bolder and make the whole thing clearer.

      Thanks for the feedback!

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  3. Matthew Curtis (@totalcurtis)

    Interesting post Myles with some good points made.

    I think there are a number of cases to be made for a brewer charging a premium at their own tap. Most significantly a lot of brewery taps are seen by consumers as pretty special places to visit. They’re destinations that don’t really struggle to pull in trade, what’s better than drinking fresh beer at the brewery, right?

    The trouble is that brewery spends all week trying to sell that beer to the trade. If at their own outlet they’re going to take the opportunity to undercut these potential customers then many of these customers might not be interested in the product. The pub trade is very competitive and margins are tight, if they have to compete with a brewery that sells the beer cheap from its own tap then that brewery is giving the consumer an unrealistic expectation of how much that beer should cost. It’s far better practice for a tap to sell at RRP so as not to perpetrate this expectation. In the US it’s quite common for breweries to charge the same as bars but offset this extra margin by donating a portion of their takings to charity.

    In the UK, the opportunity for a small producer to make this extra margin is golden, with profits going right back into maintaining and expanding the brewery, as well as hopefully being able to pay themselves a little too. Don’t forget that these taps have to pay rates and staff just like any other outlet too.

    So basically I think a brewery is well within its rights to charge RRP or a ‘premium’ if it’s selling direct and if another retailer wants to undercut that to drive sales then that’s fine. It’s just business after all. As a consumer we have the power to spend our money where we like.

    In terms of breweries releasing beer with faults – this is a more widespread problem than people are admitting. I think as consumers we should be challenging this but tactfully, eg in private conversation with the brewer (at first at least) to see what they are doing to rectify this. I think there needs to be a lot more dialog on this kind of thing this year.

    As for the hyperbole, that’s just how the industry works. It’s up to you as the consumer not to get caught up in it!

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    1. mlambert010 Post author

      Thanks Matt, appreciate your thoughts. I am basing a lot on one off transactions I’ve had in the year. And I totally agree that the price point is a real grey area. I guess I just felt uncomfortable with the variation in prices. If I’d given specifics it probably would have made more sense.

      What’s interesting is how people are interpreting what I’m actually talking about. Somehow by not giving specifics people are applying it to their own grievances etc. I like that it’s made people think about things. That’s my goal with this piece.

      Thanks for commenting though, always appreciate your feedback.

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  4. Nate

    I work for a brewery and as much as it pains me to, I have to sell our cans for more than a shop direct from the brewery because I’ve found that in the past there’s risk that shops will stop buying from you if you outprice them. It was an isolated incident but I’d sold a six pack to someone who dropped by the brewery then once they’d finished that, they were in the area of a local shop who stocks our beers and found that it was more expensive and complained to the shop. In turn, this made said shop call me and complain that we’re stealing his customers as the beer is so cheap here.

    As much as I would have liked to argue that obviously beer is going to be cheaper directly from the brewery, that shop is selling more volume than I do directly to the consumer so of course I’m going to raise my prices here so I don’t piss anyone off.

    It’s not like I’m selling beer from here at an extortionate raise, but just enough to keep everyone happy.

    Of course, on the flip side we do get drop ins that are like “What the hell? 6 little cans for £12? You’re having a laugh. I can get 4 big cans of Carlsberg for that price”

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