Some additional extracts from the above linked article (with some emphasis in bold by me): “Third, pricing on the shelf isn't a continuous function: prices don't increase from $8.99 a six pack on the shelf to $9.17 because of a one- or two-cent increase per can from the brewery.” And: “So what really happens is that breweries just absorb the cost increases and distributors and retailers make the same amount of money.” Also: “The economic feasibility of small brewing is becoming more tenuous over time.” The above concentrates on the economics of craft beer via the distribution model (i.e., buying the beer at your local supermarket or other similar retailer). It seems to me that for a small(er) brewery the ‘best’ way to sell their beer is on premise (i.e., their brewery taproom and other satellite taprooms if local laws permit it). When you purchase a pint of beer at the taproom for 7 bucks (or whatever price) the brewery is not sharing profits with the other tiers of the distribution chain. Yes, there are overhead and other expenses associated with operating a taproom(s) but not having to share profits with distribution partners is a much better deal for the small(er) breweries. I have posted a few threads lately concerning the closing of small craft breweries and it seems to me that a problem they are experiencing now (vs. a few years ago) is lesser amount of folks coming to the taproom(s) to drink beer. One discussion topic often ascribed for this decrease in end customer traffic is that folks have not ‘gotten over’ their pandemic practice of staying home vs. going out to eat & drink. I suspect that there is something to this. Plus, maybe also less disposable money in the pocket after spending it all on groceries to feed the family? Cheers!
The oil and gas industry gets away with some form of collusion (we all compare gas station prices on opposite corners of street intersections, and we all know that some form of controlled 'price matching' is happening), so why can't the beer industry do it too?
The problems the writer of the article posted at the top are the eternal problem facing a brewery. You could have said the same things since the end of prohibition (with all costs and priced divided by 10 or more). In the discussion of taxes, the author (not the interviewee Van Havig) states: "So if they tax brewers the equivalent of 25 cents per 16 ounces (their most recent proposal), your beer will cost $6.75 instead of $6.50, and how bad is that, really? It is disengenuous to the point of mendacity, and Van’s comments help explain why." A proposed tax increase is described as mendacious, which I think isn't warrented. Fed Excise tax is now about 12c per halfquart; State tax is about 3c. The state tax is now one of the lowest in the country. For comparison, if you consider sales taxes, typically 5% and up, to be a part of the price (Oregon has none), the total tax burden in Oregon is extremely low. The state has initiative and referendum laws, so any increase in state revenue is extremely difficult, regardless of the politics in Salem. An increase in the excise tax sounds reasonable to me.
Not to take things too far off topic (though admittedly, that is my specialty), but what’s the deal with gas stations adding 9/10 of a cent per gallon to their prices, which has been a thing for as long as I can remember? Literally no other industry does this. And it absolutely stinks of special treatment bestowed upon the fossil fuel sector.
Ask and ye shall receive- https://www.convenience.org/Topics/Fuels/Why-Gas-Is-Priced-Using-Fractions-of-a-Penny
Well I know we're talking different products with different rules, but collusion is collusion. Our government should be consistent, although it would likely be in different ways. The oil and gas industry doesn't need preferential treatment.
People have this 5th grade notion that when costs to a business go up, costs to consumers go up, but as the article explains, that’s not how pricing works in the real world. Some products, like gasoline or produce, still employ cost-plus pricing models, but for the vast majority of products (clothes, electronics, processed foods, cars, BEER…), companies figure out the highest price their target consumers are willing to pay for a certain product and that’s what they charge. Fluctuations in the costs of the company’s inputs increase or lower their profit margins, not consumer prices. The big empirical study on the tariffs imposed on Chinese goods during the first Trump administration found that, for the most part, there wasn’t an impact on consumer prices; that the majority of tariff costs were absorbed by corporations. If you’re a small business teetering on the edge, increased taxes may push you over, but for most that does not happen. (It’s worth noting also that, while Trump’s China tariffs did succeed in reducing imports to the U.S. from China, they didn’t succeed in creating jobs in the U.S. Production simply shifted from China to other low-wage nations like Vietnam. It was only when Biden coupled high tariffs with industrial policies like the infrastructure bill, CHIPS Act and Inflation Reduction Act that the U.S. saw private investment in new manufacturing plants skyrocket to its highest levels in fifty years. Unfortunately, those are the programs Trump’s talking about killing. He’ll likely take credit as new jobs from still under-construction plants come online over the next few years, but then...).
Let's crunch it down to this simple reality. Once the beer is in the distributors hands. The brewer has NO control over it. That's why you will see seriously old 'shelf turds' from breweries that NO LONGER exist in stores out in the sticks.
One guy I worked with said years ago when he was working in a gas station his boss would drive around and see what the other stations were charging. Sampling, not collussion. Today they can just look on GasBuddy for the whole area. Gas stations make pennies per gallon, they buy from the distribution company that buys from the refinery. The station makes it's money selling snacks and drinks.
*Freedom… Interesting take and point of view from the author. Pretty factual. Like Papagoose and thebeers points out, this applies for plenty other products and good other than beer. I know too well I have a bit of an OCD with the Covid pandemic but around here anyway Macron’s stance of “whatever it takes” (to keep business and establishments afloat) has cost us a lot. Still paying the price to this day, Ukraine/Russia ongoing conflict too for different reasons. Simply put: the super wealthy have never been that rich; whereas the common people and middle class has been sacrificed.
As the @thebeers stated rising costs get absorbed by businesses as long as they can handle it. Im self employed as are many of the people I associate with. Gas,rent,electricity, insurance goes up along with everything else I just make less money. Business owners can't raise prices to compensate because they just lose the customer who don't want to pay more. Small business gets crushed under these conditions and then they stop spending money which hurts the economy further
