Pricing of Craft Beer: The Price of Wine

Pricing of Craft Beer Can’t be compared to Wine Prices:

This is a common comparison.

It’s caused a few arguments in the industry and among friends and tasters alike. “What’s wrong with the price of craft beer? Wine costs more and it’s also a speciality liquor?”.

This is the basis of the argument that charging up to R500 for a craft beer imported from Italy is ok. More, it’s also the reasoning that South African restaurants and outlets sometimes use to justify the large price hikes that they retail their craft beer at. Essentially tripling the recommended price by the brewer in some cases.

While I admit, imported beer prices make sense: cost of imports, the licensing and the actual sourcing, not to mention the tax that South Africa loves to double upon entering the country, it makes sense that imported is priced higher and customers should pay for the privilege of enjoying such exotics in the comfort of their local den.

Though, the issue comes when local craft beers are hiked to unreasonable prices.

The Prices Don’t Make Economic Sense:

While yes, wine is a top-end indulgence for most and yes, it has been branded as such and should be sold as a more exclusive item.

When it comes to craft beer though, I struggle to find a reason for the prices charged by some outlets. Yes, the retailer is more than welcome to charge what they like and feel their market can handle. But on the other end of the scale if the market doesn’t buy high priced beer, start up breweries loose sales and are purchased less by the retailer in return, and therefore less profit and growth is made by a startup that can’t afford a drop in sales.

When it comes to the craft beer, it’s true it can be more expensive to make. I’m not talking hand crafted or some other marketing rubbish, I’m talking about simple economics:

Economies of Scale: a proportionate saving in costs gained by an increased level of production.

What this implies is that the more that a brewery can sell, the more it can produce, the less it costs to produce and therefore (the ideal scenario) the brewery can reduce the price of it’s craft beer to more reasonable commercial levels. We see this in SAB brands that produce millions of bottles a day, it’s quite affordable to consume commercial beer, yes, then what’s the problem with craft beer? Simply, it’s limited.

There are many challenges in changing this and improving economies of scale and reducing costs to reduce price and improve growth. But, one barrier is the price that the retailer or restaurant will charge for it’s craft beer simply because it’s some how seen as: “as exclusive as wine”. That retailer is simply (in the most simple form) preventing growth of that brewery.

This is an over simplification of the entire industries challenges, being as young as it is, but it’s a crucial challenge that needs to be me by both breweries and resellers.

What can be done?

Whats the point of this blog post?

It’s not going to scare any one restaurant into reducing their prices, no, but I hope this will add to the larger conversation when both craft beer prices and craft beer as an image is concerned. No, it’s not like wine, it’s not at all, it’s also got a long way to go before it gets there. What I do ask though is for retailers to remember that they have the power to either grow an industry and economy or not, thats the responsibility on their shoulders, it’s not just about the quick buck or what’s trending.

Resellers can either, and I hope they do, see the big picture, or let it wither and die.

I personally believe that if this kind of business keeps up, the only place to get craft beer in the future will be from the breweries themselves, which, may not be the worst idea in the world when pricing and quality control is concerned, but, the industry will slow to a crawl. The breweries need the resellers as much as the resellers need the breweries, it’s about growth.

I would like to know what you think about the price of craft beer compared to the price it could be sold at, let me know what you think in the comments below!

Originally published at Joburgbrew.