CNN Money Price Gouging Article

True, but I would rather pay more to get something quickly and easily than to do a lot of work to get something cheap.

 

Again, I don't understand characterizing this as "two-faced". Their marginal benefits (minimized waste and production costs as a percentage of their revenue) and the black market comes from the same primary cause: high demand. The scarcity is a side effect of that high demand + their desire not to expand. The black market is a side effect of that high demand + their desire to keep their beer at a certain price point.

Raising prices doesn't really address their problem with the black market, which is that their brewery gets associated with decision by retailers to charge premium markups on the beer. All they would be doing is trading the unfounded association for a founded one--but in both cases, the brewery receives negative attention for the retail price of their beer.

It's interesting--if Russian River were truly engaging in an attempt to succeed through "scarcity marketing", it would stand to reason that they would be taking full advantage of their demand by raising prices and taking those extra profits for themselves rather than allowing retailers to do it. Just because a market allows a given price doesn't mean it's right (see: actual gouging).

At the end of the day, it seems to me like they are motivated by 1) a desire to stay at a size that is manageable for them, and 2) a desire to charge their customers what they feel is a reasonable price. I have a hard time calling that two-faced.

 

Well, that's assuming the market is free to self-regulate pricing, though. In this instance, Russian River will pull distribution from anyone that doesn't follow their guidelines, so the artificially-induced market price in this particular instance is the same as the MSRP. The true market price, of course, is another animal altogether.

 

It wouldn't be two faced if they didn't also scold the black marketeers that their strategy created. I would accept hopelessly naive rather than two faced, which come to think of it, may better fit their whole mantra. Going on the record in the CNN article is what leads to the two faced comment.

 

I agree. The MSRP is not the true market price, since if it was, the black market would not exist.

 

I'm sure it has been said already, but you can't price gouge on beer

 

If you actually go with a much more detailed and generally acceptable definition, it's not:

"Price gouging is a pejorative term referring to a situation in which a seller prices goods or commodities at a level much higher than is considered reasonable or fair. This rapid increase in prices occurs after a demand or supply shock: examples include price increases after hurricanes or other natural disasters."
http://en.wikipedia.org/wiki/Price_gouging

As someone said, beer is luxury. Gouging is constrained to, at least in my view, to necessities (all joking about beers being a necessity aside). Moreover, there was no demand/supply shock, a key part of gouging, when stores simply mark up prices.

 

As part of our investigation, we interviewed Joe Samson (31) of Chicago IL, a recent victim of gouging. "I'm going to struggle to make ends meet this month, but what was I supposed to do? It was Cantillon."

 

Life is rough man....

 

If Pliny were readily available what does anyone think the price would actually be. I would guess less than they charge now. Not making a moral case...just curious. Any other thoughts?

 

I think our definitions are basically the same. The one you quoted simply has more details as to possible circumstances.

Ah, semantics arguments...

 

I agree with you that it is wise to have some caution in interpreting the "it's a winning formula" part. However, I think the "not by design" quote might only be referring to how they got to where they are. It is an undeniable fact that they know about it now. But just because you got into a situation not by design doesn't mean that the continuation of the situation isn't by design. This is a case where their deliberate not changing things is, really, to perpetuate the situation knowingly.

That's why I always chime in because I think consumers ought to know that the status quo with RR, and all of the supply/demand problems, is now and going forward by their design. They are choosing to keep it this way rather than adjust prices, increase supply, restrict distribution, etc. For those consumers who might be miffed by this (and if you're not, then I'm not talking to you), then really it doesn't matter how they got into this situation. Those consumers need to know that what they are experiencing now, and in the future, is known and RR won't do anything about it.

 

I see the scolding of black marketeers as a simple way of pointing out to consumers that they aren't the ones reaping insane profits on the beer at the expense of said consumers.

Shit, we have people on this very site who hold brewers responsible for retail prices. It seems reasonable to want to make it publicly known that it's the retailer who is raking it in hand over fist at the expense of consumers.

It's tricky, because I agree they know about it now. But I also don't think they ever expected it to get to this point, so while their continuation of the current situation might be intentional, I still draw a line in my mind between it being intentional because they don't want to expand vs. being intentional because they believe the out of synch nature of their supply/demand creates a good image for their brand.

They may be perpetuating the situation, but out of recognition that it is the least unfavorable option out of three unfavorable (to them) options: 1) expansion, 2) price increases, 3) status quo. Admittedly, I may be I'm splitting hairs here...

 

The totality of her quotes in the article says (to me, anyway) that she was doing more than merely informing. She opined that the black marketeers were "getting away with it", which conveys the notion that they were doing something unsavory (which the author of the piece says explicitly).

Do they actually think it does damage their image, or do they just want to appear to be disapproving while enjoying the status quo?

 

Well, the "unsavory" part could entirely refer to the fact that regardless of the price being charged, the marketeers are selling the goods illegally. They "get away with" selling the beer that they have no legal right to be selling.

And I can't answer your second question. But I don't understand what they would be "enjoying" about the status quo. They aren't getting anything out of those marketeers that sell their beer for 300% markups. I guess they can "enjoy" the fact that the high level of demand and reasonable price point enables them to have less stress when it comes to production planning, because there is less guesswork in projecting demand.

 

well, I don't think that status quo is the least unfavorable option.

 

I guess that would vary based on perspective. I'm speculating that it's the least unfavorable to Russian River, given their stated desire not to expand, and the presumed desire to not hike up prices.

 

Relax everyone. If it is expensive or a rip-off then pass it by- the market will re-adjust. What is wrong with the store giving away a can for every $50 you spend?

 

Absolutely nothing - I agree