What is driving up beer prices?

Yes, let's retire that one. If making profit isn't the primary goal then it isn't a business it's a hobby.

 

Sure, your point is true at some level, but one of the main challenges in the expansion in any business is that it is rare that any business can expand production faster than it infuses financial resources to support it. If you double your brewing capacity, you presumably have a large capital investment in equipment (see my point 1). As a secondary point, let's say you go from two guys in a garage to adding a field sales guy, well that field sales guy is probably going to be a net loss for the first few months while he builds additional accounts depending on how he is compensated.

There are tons of examples, let's say you add a tasting room, but now have to hire additional tasting room employees, depending on state (looking at you Georgia) your tasting room may not be a great source of revenue, instead just a strong marketing tool.

You're right, a wholesaler can absolutely distribute beer more efficiently. The difference though is whether or not a wholesaler can/will do it at a lower cost to the brewer. The most obvious point is that a wholesaler is going to have a somewhat significant profit margin. My back of the envelope math is that if you pay $10 for a six pack, $3.33 goes to the brewer, $3.33 goes to the wholesaler and $3.33 goes to the store. If you have a small focused distribution operation with a limited number of accounts, you can absolutely distribute more cheaply (in absolute dollars) than somebody who is running a million case warehouse and fifty semi trucks, plus back office staff. You might be spending $2/six pack on distribution and a it may cost the wholesaler $1, but because there's a profit margin and additional overhead in there too, making the cost to the brewery my $3.33 ($1.33/six pack more than self distribution). Nobody said a third party is less efficient, but it may cost the brewer more of their total income.

If your statement was true that distributors provided the same service at a lower dollar cost, nobody would self distribute. Alas, it's not.

There are a lot of breweries who don't run their businesses like a business. Look around your local market and if you're a businessperson you can probably see a lot of really boneheaded business moves by local breweries. The OP asked what could cause beer price increases and one reason is increased wholesaler markup, even if a brewery hypothetically doesn't raise price.

 

Is it time for the "Greed is good" quote?

 

It comes down to demand. If people stand in line and buy it all up ASAP then they know they can get pretty much any price so long as people desire it. I guess it comes down to people walking away from these high prices and then you will see a market correction with them. But the way the beer craze is going I don't expect to see any breaks, if anything I expect to see more hikes in cost especially with a new administration coming into office, who knows what crazy tax they will try on us for a luxury item.

 

I draw the line on anything over $12 a sixer. Or $12 for 4 pack 16 oz cans. Most breweries have lower price points than those.

 

Your back of the napkin math is completely wrong, and you apparently don't understand how margins work. Retailer and distributor margins range from 20-30% depending on volume, location, and other factors, but let's use the high end of 30% for this example. The brewery sells beer to the distributor for $19.5/case. The distributor takes a 30% margin and sells it to the retailer for $28. The retailer divides that price by 4 to get the cost of a 6 pack ($7), takes a 30% margin, and puts it on the shelf at $10.

In other words, the brewery makes $19.50, the distributor makes $8.50, and the retailer makes $12.

Real world math pretty much invalidates most of the rest of your cost hypothesis. It may not cost $8.50 per case to self distribute, but when you factor payments on a vehicle, gas, maintenance, insurance (for both the vehicle and driver), wages and benefits for the driver, etc it's probably not much less than that.

The fact is, self distribution works great as a way of getting yourself out there, but if you're popular you'll quickly reach a point where it's not worth it. Case in point, Oregon allows breweries to self distribute until they hit 7,500bbls (roughly 103,000 cases) per year in outside sales. In the 12+ years I've been working in the industry here I haven't seen anyone come close to that before they sign a distributor, because by the time you get to the point where you're delivering ~400 cases/day (103k divided by 260 business days) you're talking about managing a fleet of vans and drivers instead of focusing on making beer.

 

I was at a local chain bottle shop in the Buffalo New York area several days ago and I could hear one of the employees complaining to his buddies in the back room about how he had to come in early the next day to raise the prices on the craft beers. My guess is supply and demand. I myself will vote with my feet and just buy less. I was in a small town in the Adirondaks several times this summer and the local grocery store had one of the best stocked craft aisles I have ever seen no less in a very rural small town. All of their prices were a dollar or 2 less than where I live which is in a very large urban area. They are probably charging more in the big markets because they can get away with it.

 

Its $15.99-$16.99 everywhere here and on the Illinois side. Might be time to find a new place to shop at

 

Just bought a narwhal case for $51. All bells stouts are $17-18 at the market near me. They are quite dusty. They are good too but not worth almost double Narwal.

Enjoy

 

I find that the local selections (for me Odell, Oskar Blues, Left Hand, NB, Great Divide, etc.) are usually less than $10 for a 6 pack. And the local beers are often on sale for $8 or so. So that's usually what I go with.

As for the question of why beers in general are getting more expensive. Simple: supply and demand and inflation. The same forces that drive up prices for any other commodity

 

Greed (aka buy low, sell high) and inflation.

 

2. Not many guys in the brew house last time I was in, March 2016 timeframe. Labor coast go down as the system gets bigger and automated. Hey, you know what the really big guys do for manpower in the brewhouse, right? A month ago I was at Ayinger, 2 guys in the brewery, all automated. There are always more in packaging.


3. Self distribution was passed a couple years back, if you are under 1000 bbls in MI. I think Bells passed that a while back, like the 90s.

 

It's just how it is. I remember years back when these breweries were just getting open. They were basically giving away the beer with cheap pint prices, happy hour deals, and yearly mug club deals that discounted things even more. Fast forward 3-5 years and no one is really jumping through hoops anymore to "gain" customers. The now older breweries have increased their pint prices some $1-2, and the new guys have priced themselves at this newer higher level. And apparently, people are eating/drinking it up without much thought.

Some examples. New place X opens in 2008. $3.50 pints and discounts/gifts with your mug club purchase was the norm. Come 2011, they are expanding and renovating, prices go up on pints. Your mug club perks are lessened. Come 2015 and prices go up even more. They have just invested millions in expanding even more.

Around my parts the new pint norm is about $5, new brewery or established. I have yet to see any new guys come in and provide the perks that older breweries did to establish themselves. It's a whole different world now some 5-8 years later. Pretty much, the new guys don't have to price themselves too low when people will still buy the beers. I've seen every new brewery in town price themselves a touch higher than the established breweries, which for me, makes it easy to never go there again if the product doesn't match the price. You would never have seen the new guys try this approach some 5-8 years back. The new places are gutsy and again, consumers are drinking it up.

I feel economies of scale truly only kicks in after say 50k bbls/yr. Before that, it just seems like a constant battle to grow and the paying customer is actually getting the shaft. Nothing gets cheaper. You help the little guys grow and who's truly winning out?

I don't think saturation has hit my area just yet but does anyone know of any cities or towns where a brewery comes in and lowers their price on draft beers, and others follow suit? For now, it seems everyone in my area is in agreement that they all can raise the price in unison. And I don't like it.

 

I'm realizing what a deal Narhwal is. $8.99 a 4pk at my TW.

 

I'm not sure that these price increases are confined to beer.

So it seems to me that inflation isn't getting quite enough attention in this thread as it should. Seems to me in having to feed a family that most everything, including beer, costs more than it did 5-10 years ago.

Just out of curiosity, how many food or beverage products can people name that doesn't have a higher price (or come with a smaller amount in the package for the same old price) that doesn't cost more than it did 5-10 years ago? Who doesn't spend more at the grocery store (for basically the same shopping list) than they did 5-10 years ago?

 

I know we're talking about buying bottles in stores, but also just makes me think of bar prices.

Was only a few short years ago where people were going apeshit on here due to bars starting to charge $1/oz for the really rare stuff. 4 years or so later and I'm already reminiscing about that sort of pricing cap like they were the good ol' days

 

Ineed it is - that's a great beer at a great price.

 

I need to move lol.

 

Living in NY we get killed on prices here. Going to the Alchemist last month and paying $12.50 for each of their 4 packs felt like the biggest steal in the world to me.