Price gouging

Discussion in 'Beer Talk' started by Ndfan1323, Dec 21, 2014.

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  1. Jsmick

    Jsmick Initiate (0) Feb 20, 2013 New Hampshire

    Very, very true. I completely agree.
  2. RBassSFHOPit2ME

    RBassSFHOPit2ME Initiate (0) Mar 1, 2009 California

    The Bruery & Cascade immediately come to mind.

    Wait, those are their standard prices... Oops.
  3. bluehende

    bluehende Poo-Bah (2,440) Dec 10, 2010 Delaware

    Nowhere in my post did I say that being a distributor has no costs or even little costs. My premise is that those costs add nothing to the product. In fact it adds another level to screw up the product. Also in today's beer industry I think the distributor has way too much power over the whole industry. The large reason why breweries sign up with distributors is that they cannot sell their beer with out one. Not because they are not able to, but because the retailer is so locked into the distributor that they dare not go behind their back.
    larryarms847 likes this.
  4. mudbug

    mudbug Defender (622) Mar 27, 2009 Oregon

    Not true. Even in states like mine that allows self distribution most breweries still use a distributor. As far as adding nothing to the product that makes as much sense as saying the car adds nothing to the race car driver in a race. Imagine what the cost of your favorite craft brew from a different state would cost if it didn't piggy back on the already set up distribution network the distributor already runs. In fact, we already have a very good group of folks right here! Ask any trader if shipping small amounts of beer is cost efficient, they will all tell you no. It is far cheaper to buy the beer from a retailer.
  5. pagriley

    pagriley Meyvn (1,032) Oct 27, 2014 Illinois

    To answer the OP's question, in Chicago I check the prices at Binnys to know what the 'correct' price should be. They are by far the largest big box liquor retailer in my area and have a pretty good online store with prices and availability. I would suggest finding whatever the equivalent store is in your area and using that as a reference.

    When something is released I want, I try Binnys first knowing I will have to be lucky, but it will be the lowest price. If they are out of stock, I try the smaller stores (one of which I know charges a much higher mark up) in sequence of lower to higher price and if I find it at a big markup I have to decide if I want it at that price.

    So this. I mean, if prime steak was always delivered on say a Tuesday and sold for $10 a pound and sold out in minutes in grocery stores, is the store that charges $30 a pound and has it in stock for a few days really gouging, or is it that the stores who are selling it at $10 are undercharging? It all depends on your perspective.

    There are plenty of people with families / jobs / lives that don't permit them to be at the store on a mid week morning when there is a special release beer delivered (or respond instantly to twitter, chase trucks / hunt these beers) but are happy to pay extra to get a bottle a few days later at a store that 'jacks up' prices. Do they wish it was cheaper? Probably. I mean, I wish a Ferrari was $50K because then I might one day be able to afford one, but they aren't - they are $300K, so I aspire to a Corvette instead. Sure the Ferrari is a little bit better than a Corvette (but certainly not 6 times better) and rarity and cachet drive the Ferrari price - no-one seems to complain that Ferrari is gouging... (yes yes, not the same as beer; distributors and retailers are jacking up the price, whatever, I am making a point about price)

    You could make the same argument for a BMW or Audi that costs $50K - I bought a new car a few years ago, and instead I bought a $20K Hyundai because the price difference to the fancy German car was way too much for what I was getting - For ME the Hyundai was 80% as good for 40% of the price - clearly this isn't true for everyone because lots of people buy the german car. Versions of the price topic seems to come up weekly and descend into a litany of complaints interspersed with 'free market' vs. 'gouging' type arguments, but rarely do people acknowledge that rarity / cachet / branding / marketing that leads to social desirability and increased demand almost always results in higher prices in just about any other type of good.

    Eventually beer is going to head this way (I am already seeing it happen) and prices of the limited rare stuff with cachet attached to the label will increase. We will all then just have to decide if we give enough of a shit about Firestone XX to pay the premium.
  6. bluehende

    bluehende Poo-Bah (2,440) Dec 10, 2010 Delaware

    Can I bet on the race between a driver with no car and the driver with a car?

    My beer tastes the same or worse when I get it after it goes through a few hands. The beer is not improved by the process. I have no where said that distributors are not sometimes ( and I will even say most times) needed for the marketplace. My premise is that too much of the cost of beer industry wide is coming from middlemen and too little of the total cost at retailer gets back to the brewer than I BELIEVE it should. Agree or disagree with this point instead of making straw men to argue with.
  7. mudbug

    mudbug Defender (622) Mar 27, 2009 Oregon

    Well just how much should go back to the brewer? And what about brewers that sell their product for nearly the same price at their establishments as what you pay at a retail store? (A whole lot of them) And how would that effect the brewers that self distribute? Would they have to lower their prices, and thereby their own profits?
  8. scream

    scream Meyvn (1,363) Dec 6, 2014 Wisconsin

    I was at a brewery several years back and was shocked to find the price higher there than at the store down the street ! I still go there but only for what is on tap.
    yemenmocha likes this.
  9. bluehende

    bluehende Poo-Bah (2,440) Dec 10, 2010 Delaware

    I would like to see 74.21% go back to the brewer instead of the 50% now. The biggest reason that brewers sell their beer for the same price or a bit more at the brewery is to not undermine or piss off their distributors. If they sold their beer for less they would sell a lot more of it therefore increasing their profits while lowering their profit margin. I would love to see a complete open competitive market where a 3 tiered system is not mandated and everyone can make decisions on what is good for their business.
    mudbug likes this.
  10. LambicPentameter

    LambicPentameter Initiate (0) Aug 29, 2012 Nebraska

    If somebody will drop X dollars on a beer, then it seems that the beer is worth that price. The idea that there is some objectively "appropriate" price at which to sell given products is a myth. If a store is successfully charging $X for a beer, sounds like they are gettig the message just fine.

    It sucks to be the guy who isn't willing to pay what's being charged, but it's no different with beer than any other product. I'd argue hat the reason there is the impression that retailers are unfairly jacking up prices is because as a whole craft beer prices are artificially depressed by the producers who don't want to rack the boat by raising prices to what the market will bear. It's expensive and difficult to accurately project price elasticity. Much easier to just undercharge and guarantee that you will sell your stock.

    The vast majority of distributors and retailers increase the price by a straight percent margin. They arrive at that margin in part by calculating their own operating costs. Contrary to popular belief they aren't just hiking up prices on a whim.

    Nope. Brewers aren't getting "peanuts", and to my above point, they likely have considerable room to increase prices without severely hindering demand. I'm also fairly certain that the ratio of revenue to operating costs is likely fairly consistent across the producer, distributor and retailer roles. In fact, if I'm remembering the beer supply chain cost/revenue article that was posted on BA a few months ago correctly, I believe brewers make the largest margin over costs compared to distributors/retailers.

    The idea that a distributor's job consists of nothing more than "handing" the product to another person is laughably over-simplified.

    I found the article I was talking about. It notes that the brewer gets 8% of the cost of a six-pack in pure profit (aka, net margin). Comparatively, the distributor and retailer get 21% and 31% (respectively) in *gross* margin--i.e., revenue before calculating their own operating costs. Without seeing what percent of that gross margin goes to operating costs, it's impossible to determine how the members of the three tiers compare in profit margin.

    In order for the distributors'/retailers' profit margin to match that of the brewers', they would hove spend 62% and 74% (again, respectively) of their cuts on operating costs. For comparison, based on the numbers in the article, the brewer spends 84% of it's cut on operating costs.

    Even if you eliminated the three-tier system, there is no way any distributor and retailer would be able to work with a brewer who took 3/4ths of the cost of product without a significant increase in retail price that enabled the distributors/retailers to cover the margins they need to stay in business. I promise you there are no distributors/retailers getting rich on the backs of brewers.
    #50 LambicPentameter, Dec 21, 2014
    Last edited: Dec 21, 2014
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  11. Crashdown

    Crashdown Initiate (0) Dec 1, 2012 Virginia

    In my experience, the mom and pop or smaller stores have the "gouged" prices -- but I love supporting them. They'll usually spend time getting to know you and spend more than a few seconds talking to you. Totalwine, Whole foods etc are great (and ive seen some crazy inflated prices at TW) -- but the mom and pop shops help you break into craft beer easier.
  12. dennis3951

    dennis3951 Initiate (0) Mar 6, 2008 New Jersey

    It costs as much if not more to transport beer than it does to brew it.
  13. nc41

    nc41 Poo-Bah (2,771) Sep 25, 2008 North Carolina
    Society Trader

    Bestway here is within pennies of TW, they don't gouge at all, a few are a bit pricy though.
  14. spitshaded

    spitshaded Initiate (0) Nov 12, 2012 Virginia

    Yikes. This was when it first came out.
  15. Imacopyouidiot

    Imacopyouidiot Initiate (0) Oct 1, 2012 Illinois

    Price gougers and beer re-sellers are human garbage (in any market).
    Interesting that this site is supposed to be a conduit for the appreciation/celebration of beer, but has become a stock market for beer.
    Side note, the free market isn't free.
    RBassSFHOPit2ME likes this.
  16. Andrew041180

    Andrew041180 Initiate (0) Mar 15, 2013 Massachusetts

    I was in line at a nice bottle shop yesterday and the gentleman in front of me had a pretty good sized haul, most of which was fairly ordinary. One bottle that stood out to me was the $30 bottle of 50/50 Eclipse, not sure which color wax. I asked him if he had tried it or not, and he said no, he just wanted to buy himself a gift. I wonder whether he would have bought it if the bottle had been priced at $20.

    Regarding the OP's question, I'm perfectly happy to let over-priced beer rot on the shelves. It's not my business to tattle on the store owner to the brewery regarding pricing. Bottles past their freshness dates on the other hand...
  17. StuartCarter

    StuartCarter Initiate (0) Apr 25, 2006 Alabama

    This isn't generally about the distributors, it's about the other retail outlets nearby. If you, as a brewery, are undercutting the restaurants/bars/etc that sell your beer, they won't be selling your beer for very much longer.
    drtth likes this.
  18. scream

    scream Meyvn (1,363) Dec 6, 2014 Wisconsin

    makes sense
  19. Brewventurer

    Brewventurer Initiate (0) Dec 23, 2013 Tennessee

    What I wonder is why do the defenders of the 3 tier system always present their argument as though distributors couldn't or wouldnt exist without the 3 tire system? Allowing direct wine sales doesn't seem to be too big of a problem so what's it going to take to get direct to consumer beer sales.
  20. rgordon

    rgordon Meyvn (1,320) Apr 26, 2012 North Carolina

    Case in point: BCBS this year was at least 25% higher in cost to retailer. What was it that happened before that and who was involved?
  21. scream

    scream Meyvn (1,363) Dec 6, 2014 Wisconsin

    While the 3-tier system is probably less than perfect, I wonder how many folks would have cases of beer shipped to them. We have a number of cases of wine shipped to us from California each year. The shipping cost is in the area of $45-$50 per case from California to Wisconsin. I know I am not going to be having beer shipped to me at those kinds of costs. I guess some folks would for those "special" beers they cannot get otherwise, but I have not gotten my head to the point where it would be something I would do.
  22. rgordon

    rgordon Meyvn (1,320) Apr 26, 2012 North Carolina

    I'll buy Cascade Blueberry and I'm a stodgy old fickle bitchy down the line consumer. That beer with fresh blueberry pie is one of my great memories of fermentables and food!
    RBassSFHOPit2ME likes this.
  23. Brewventurer

    Brewventurer Initiate (0) Dec 23, 2013 Tennessee

    I simply think that if we're going to call this a free market than we have to address the access issues with craft beer. My area distributors don't appear to me to be trying to meet my needs and when they do, their prices are some of the highest in the country. ($20 Backwoods Bastard $30 BCBS)They've also earned a reputation for being seemingly unmotivated regarding craft beer among the local retailers I've spoken with. I struggle to believe the argument that without the 3 tier system we couldn't or wouldn't still have distributors. Direct to consumer wine sales don't seem to be causing problems so why not treat beer the same? While I recognize the premium that would be involved if I wanted to have a beer shipped from a California brewery, I should be able to in a free market.
  24. Valleyview06

    Valleyview06 Aspirant (206) Oct 13, 2012 Pennsylvania


    edit - to be more proper, marijuana
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  25. anth0ny

    anth0ny Initiate (0) Jan 5, 2012 Michigan

    I think after looking through the thread that (maybe) 3 replies actually attempted to answer or even acknowledged the OP's original question. With many replies being "you don't like it, don't buy it", I find it interesting how these types of threads give the opportunity for people to become some kind of 'hard-ass of logic'. Thank you Captain freaking obvious. Then you've got ones who take the opportunity to educate us all on how and why beer prices are priced the way they are. Do people even read the opening thread or do they just use the forums to fill a void of hearing themselves talk while they're buzzed up on high end beer? A question for another time, I suppose.

    Anyways, I know that a lot of Founders releases will have notes such as "Suggested retail price for this beer will be $xx.xx"
    which gives the consumer a general point of reference saying - hey, if you see this beer for more than a couple bucks over this price, you're probably getting screwed over. Not sure if other breweries do this as well, but I think it should be a more commonly used practice across the market. You can always call the brewery and ask for their standard pricing, if you felt the need to. Generally speaking, anything over $3/12oz for standard/seasonal beers is high, and anything over $5-6/12oz for specialty is high.
  26. LambicPentameter

    LambicPentameter Initiate (0) Aug 29, 2012 Nebraska

    In fairness, there is a bit of a disconnect between the thread title and topic. Based on the OP, it's about the best way to determine "appropriate" price. The question posed is one that, at worst, doesn't have an answer, because the appropriate price is the point at which it sells (hence all the stuff about free market, don't buy it, etc.), and at best, the answer is--to your point--the MSRP of the beer.

    The thread was never about "Price gouging". Unfortunately, introducing that term--which can be a bit loaded around here--sets off all sorts of unintended conversational elements related, exactly as has happened.

    I think your suggestion is probably the best answer the OP could hope for. Find out what the brewery thinks it should cost as a point of reference and purchase (or not) from there.
    yemenmocha likes this.
  27. jesskidden

    jesskidden Poo-Bah (2,543) Aug 10, 2005 New Jersey
    Society Trader

    You certainly implied it:
    Got an example of that scenario? Typically, when a brewery self-distributes their own beer in a region, there is no distributor that also carries the brand. There is no "going behind the back" of a distributor- the brewer IS the distributor. It would make no sense - for the brewery or for the distributor - for a brewery to sign with a distributor and also continue to self-distribute in the same market. The industry standard is that a contract between a brewery and wholesaler gives the latter exclusive distribution rights within a region.

    Self-distributing breweries and wholesale distributors seem to co-exist fine in the 33 states where SD is legal.

    Did anyone in this thread imply that? As stated above, self-distribution is allowed in the majority of US states - noting the services that distributors offer breweries does not constitute defense of a mandated Three Tier distribution system. Outside of the NBWA and some state regulators, I doubt you'll find many people who are against the legal option of self-distribution for breweries.

    OTOH, given the distribution system as it exists today, 80 years after Repeal and with two companies controlling nearly 3/4 of the US beer market, totally eliminating Three Tier - thus allowing AB and MC to own their own distribution networks in all 50 states - would play havoc with the still tiny "craft" segment of the market.

    That's what brewpubs are - direct sales of beer from brewery to consumer, eliminating both the wholesale and retail tier. Every state in the union had to change their alcoholic beverage laws to allow brewpubs in the past few decades, proving that the image of a rigid, Three Tier system that remains unchanged since Repeal is a fiction.

    As for legal shipping of beer from brewery to consumers over state lines, that's still a state by state issue and given the average price of beer vs wine, it is probably unlikely enough brewers would want to get into that sort of market that brewing industry groups in each state would spend the money and effort to change those state laws - as was done in the above example of the on-premise brewpub.
    #67 jesskidden, Dec 22, 2014
    Last edited: Dec 22, 2014
  28. Ndfan1323

    Ndfan1323 Initiate (0) Jan 26, 2012 California

    I agree with "almost" everyone's post but the one guy who thinks I get pissed off for walking into a 711 and paying $2 for peanut butter didn't mean to start arguments over it I just remember 1 brewery a year ago posting about bringing it to their attention so I just wondered..
    Believe me I don't buy from these stores but the sad truth is there are a few that do so by me not buying is not showing these guys hey you better drop prices or else your going to go out of business. It does work for all non essential products out there. I'm a cigar guy as well and the price fluctuations are incredible from one store to another. As much as I like saving money and buying online I do like to support local b&m's as well. I also will not drive all over to save $2 on beer and waste $10 on gas lol
    You guys enjoy the holidays ty for the responses and drink up!! CHEERS!
  29. wcu80

    wcu80 Devotee (427) Feb 2, 2005 Georgia

    I agree 100%. And I'll take it even further and say that there is no such thing as price gouging on essesntial products either. The price is the price. Always.
  30. rozzom

    rozzom Meyvn (1,076) Jan 22, 2011 New York

    That's a step too far. But I fully agree re: beer
  31. maltmaster420

    maltmaster420 Initiate (0) Aug 17, 2005 Oregon

    This is so much bullshit it's not even funny. I deal with several large distributors multiple times per week, and even more independently distributing breweries, and there's no concern about "going behind anyone's back" or being "locked ito a distributor". In Oregon, any brewery producing less than 5,000bbl per year is allowed to self distribute, and yet in the 10 years I've been doing this job not a single brewery has come anywhere close to that cap before they realize that it's easier and more beneficial to them to sign with a distributor. Hell, Pelican BRewing was largely responsible for pushing for the increased self-distribution limit (it used to be 2,500 IIRC), but even they signed with a distributor before cracking the 2,000bbl mark.

    Breweries are in the business of brewing beer, not managing a mini-distribution empire, and they all quickly discover that it's a hell of a lot more efficient to make one delivery to the distributor than it is to manage the small fleet of trucks, drivers, and delivery routes needed to service any decent sized metro area.

    You're welcome to your opinions and whatnot, but unless you actually know what the hell you're talking about please don't go spouting crap like this as though it's fact.
  32. TylerKitchens

    TylerKitchens Aspirant (270) Apr 9, 2014 Massachusetts

    Some Brewery websites I've been to list a suggested MSRP under the description of their beer. This may be only true for smaller breweries, scope out their websites.
  33. otispdriftwood

    otispdriftwood Initiate (0) Dec 9, 2011 Colorado

    Like gas, whatever other goods and commodities whose prices are driven by speculation or someone's opinion, and not by supply/demand or some other forces that have nothing to do with reality.
  34. otispdriftwood

    otispdriftwood Initiate (0) Dec 9, 2011 Colorado

    And it's also called capitalism.
  35. bluehende

    bluehende Poo-Bah (2,440) Dec 10, 2010 Delaware

    All I know is DE. You have your Oregon facts and I have my DE facts. I wonder why Oregon has a better craft scene than Delaware? I am very good friends with the owner of a local brewery. He has no choice. He cannot self distribute. He also has 3 choices in a distributor. He does not have the power that DFH has so was told what he had to do to distribute. Since only 1 distributor would talk to them he had to sign an exclusive deal that was a good boning. His words not mine. My OPINIONS come from the talks with him. I agree with him that the person that creates then builds the beer gives up way too much of the retail price to downstream players. I do not believe they shouldn't exist. Many states may run better than DE. I understand they have costs.

    Bottom line the crap I am spouting is no different than the crap you are spouting.
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  36. maltmaster420

    maltmaster420 Initiate (0) Aug 17, 2005 Oregon

    In the first post I replied to, you said:

    My post was meant to point out that this is bullshit and show that even in places where breweries can self distribute, they inevitably sign up with a distributor before they get very big. If you live in a state that doesn't allow self distribution, and your only experience with the matter is talking with one bitter sounding brewery owner, why the hell are you making claims like the one I bolded?

    The bottom line is that I've been dealing with this crap for a decade, and am friends with not just one, but many, many brewers (not to mention distributor reps and even the owner of one of the local distributors). We may both be spouting crap, but at least mine is fact-based crap gleaned from years of industry experience, while yours is apparently based on discussion with one disgruntled brewer owner.

    Oh, and as a side note, if your friend's brewery was making great beer they would have no problem getting multiple distributor to talk to them and working out a favorable deal. I've watched small up and coming breweries get woo'd by every distributor in town and seen some of the ridiculous "signing bonuses" they've been offered to choose one over the other.
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  37. PaBrewSki

    PaBrewSki Initiate (0) Apr 23, 2013 Pennsylvania

    Grapefruit Sculpin has been sitting on the shelves for months across the street from our office here in PA. I was pretty unimpressed with it on tap fresh and didn't purchase any bottles.
  38. LambicPentameter

    LambicPentameter Initiate (0) Aug 29, 2012 Nebraska

    You seem to be missing the point, which is that the vast majority of breweries go through a distributor, not because the law makes them, but because it is a sound business decision to focus on what you do best while partnering with vendors that do what they do best.

    It's something called core competency or competitive advantage. Brewers are good at brewing beer. They are not good at managing distribution. Brewers don't typically self-distribute for the same reason that most brewers don't grow their own hops and malt their own grain. That's not the area of their expertise.

    This happens in other industries too--restaurants, by and large, don't grow their own food/raise their own livestock because they are in the business of preparing food, not growing it. Heck, the issue of businesses not self-distributing happens in other industries as well--brewers are far from the only type of business that doesn't self-distribute, even in industries where there is no law prohibiting self-distribution. It is most cost effective to focus on performing one's core competency to the best of one's ability and pay someone to do the things that are outside that core competency.

    As was noted by @jesskidden, the elimination of the three tier laws would likely have the unfortunate consequence of favoring those brewers who had the size and resources to develop their own distribution networks or purchase distribution partners outright. And I'd hazard a guess that even the largest of the "craft" brewers (Boston Beer Co., Sierra Nevada, New Belgium), don't really have the kind of money they would need to grow their own distribution network or purchase distributors outright.

    But I know some companies that do have that kind of money....
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  39. radams

    radams Initiate (0) Nov 25, 2014 New Jersey

    in the south jersey/philly area, i got BCBS from 10 different places. only one of those places had it for less than $9.99 per bottle - even if you bough 4 packs. it sucks that there was no better alternative available for me, but i still bought plenty of it at that price. i love this beer and it's very common to see worse beer at a higher price per ounce. so it was justifiable. i hate the gouging but what can you do?
  40. bluehende

    bluehende Poo-Bah (2,440) Dec 10, 2010 Delaware

    I am getting your point. In fact I agree with it. My only disagreement is in the restaurant analogy. The product is changed and improved by the restaurant. In the beer industry the product is exactly the same when it leaves the brewery as when I buy it at retail.

    My only point is that I would like to see the brewer get more of the final retail price. I would also like to see the farmer get more of the retail price of a box of cereal and the rancher get more of the final cost of my steak. If all of these products need to be more expensive then so be it. I would gladly pay more if that money gets in the hands of the actual producer as opposed to middlemen.

    Here is what I am not saying. That distributors are not needed or wanted or even important.

    Not to open another can of worms, my original post I mentioned distributors and retailers. Interesting that no retailers are defending their markups. This side of the comment is also more on topic to the op's original question.
    yemenmocha likes this.
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