The Price is Might (Pricing Low Cal IPAs)

Discussion in 'Beer Talk' started by BeerCruncher, Feb 7, 2020.

  1. BeerCruncher

    BeerCruncher Devotee (418) Aug 4, 2013 Illinois
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  2. Mr3dPHD

    Mr3dPHD Initiate (193) May 6, 2008 Florida

    Great read! Good insight regarding the clear connection between brand protection and price point. It's a very weird game in my opinion, but clearly that's how you have to play it.

    On a side note, the new Light Hearted branding is DOPE! I love the retro look and such a clever play on Two Hearted.
     
  3. Crusader

    Crusader Disciple (301) Feb 4, 2011 Sweden

    Since it is often claimed that ingredients costs make up a small part of the overall cost of production it would have been interesting to see some numbers as opposed to simply stating that more malt makes a beer more expensive. In Sweden alcohol is heavily taxed yet 3.5% beer and 7.2% beer can be priced rather similar, even though more malt is clearly needed for the higher abv beers (and the taxation being more punitive). This leads me to believe that the ingredients indeed make up a small part of the actual overall cost. It also leads me to suspect that the margins desired by the brewer are more of a deciding factor when it comes to beer pricing in a country where beer taxation is indifferent towards alcohol content (such as the US with its per-barrel taxation), than alcoholic content is.

    With hops I could see there being a different story. Not too long ago a strongly hopped beer would be using something like 1-1.5lbs of hops per barrel, alot of craft beers these days are using alot more hops than that just for dry hopping, and hops are a more expensive ingredient than malt. So I can see where costs might increase on that end. But producing a wort of 19% plato or one of 10% plato and fermenting that out to an abv of say 8% or 4% should have little impact on costs in a tax system that doesn't care about the alcoholic content of the final product.
     
  4. jasonmason

    jasonmason Initiate (185) Oct 6, 2004 California

    Well written article.

    While I understand your points, I still see this as ultimately leading to failure of these beers, much like the failure of most session IPAs to catch on. I empirically don't see customers willing to pay a premium for a low ABV IPA. Craft customers I think see right through the "branding" aspect and understand that it there is no product-driven reason for the pricing to be the same, only marketing-driven reasons.
     
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  5. dukeandduke

    dukeandduke Meyvn (1,296) Feb 2, 2015 Illinois
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    I respect the piece. I can appreciate a good session beer, and your post establishes good points as to the thought process behind pricing, both short and long term. I also concur with your point inelastic pricing for "health conscious" products such as low cal offerings.

    Low cal is a significant trend, and I do believe it is here to stay. Looking forward to quality great tasting offerings, OK paying the same price as a higher ABV offering if it is on point. So far the products I have tasted are light on taste so I don't go back.
     
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  6. Mr3dPHD

    Mr3dPHD Initiate (193) May 6, 2008 Florida

    I've never been impressed by any low calorie beer. To me it would be like buying low calorie bacon. But I'm clearly not part of the market their going for.
     
  7. ssimpson89

    ssimpson89 Defender (632) Jul 24, 2009 Illinois

    I enjoyed the article. For better or worse, I sometimes factor in ABV when determine what a beer is worth. I drink a lot of Two Hearted and have no issue with the price point.

    if I’m buying session IPA’s for boat / day drinking, BBQ, etc. I typically default to All Day IPA. It tastes good for what it is, but more importantly has a great price point. I typically get 15 packs at $15.99 or $13.99 on sale. I always have it in my fridge. I’ve only had one Light Hearted on draft, which I enjoyed. The packaged price point will need to be near Founders 15 packs before it will find a place in my fridge. So for me, price does matter for these lighter beers.
     
  8. BrewHound601

    BrewHound601 Initiate (24) Jan 30, 2020

    Nice read. I'll tell you that this dude on youtube reviewed that Light Hearted as well as the seltzers(which I have no idea why he'd waste his time and put it on his beer review channel) in addition to Neverending by Stone; Other than the Stone none truly held up as a good alternative. He said the Neverending Haze was delicious so what I'd say is that unless breweries specifically CRAFTING the beer on an individual perfection standards basis the buyers/drinkers shouldn't buy/tolerate this shit and boycott those the gimmicks and stick to what you've been doing prior to the emergence of this crappy trend. The whole thing is about cost/price and fixing by 'training'(brainwashing) the consumer through marketing.
     
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  9. MistaRyte

    MistaRyte Zealot (529) Jan 14, 2008 Virginia
    Trader

    Darwin?
     
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  10. JackHorzempa

    JackHorzempa Poo-Bah (4,360) Dec 15, 2005 Pennsylvania
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    I just watched Darwin's Beer Review for Light Hearted Ale and he mentioned the word "watery" several times. This is my beef about Session IPAs. This will be a pass for me.

    Cheers!
     
  11. BrewHound601

    BrewHound601 Initiate (24) Jan 30, 2020

    yes darwin; didn't know he was that internet famous
     
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  12. xKURTx

    xKURTx Initiate (31) Jun 3, 2019 Nebraska
    Trader

    Great little post on the blog. I'm excited to try Light-Hearted and also don't mind it costing the same as Two-Hearted. Like most people here, I love the heavy-duty brews, but sometimes you just want to drink a couple good-tasting beers and not get wrecked. Fair State's Dry January is a similar concept and really tasty, so if it's available in your neck of the woods I'd recommend it.

    Additionally, first time to your blog, and I really dig it. Well done!
     
  13. IceAce

    IceAce Champion (884) Jan 8, 2004 California

    Congrats on a well thought out and well written blog post. With 27 years in the biz...I was prepared to take copious notes (and offense).

    In my opinion, Bells did a fine job of crafting this beer to effectively mimic the Two Hearted flavor profile while coming in at (if I recall) 110 calories. While the hop bill differs from 2H, the overall result is a slightly thinner mouthfeel in my perception (which is to be expected), yet the overall result comes strikingly close to the original.

    I liked it so much, it may become my post-game hockey shower beer. Heck, if I just sweated off 6 lbs. of water weight, something lighter with flavor makes just a much sense as the line pricing Bells is well-known for.
     
  14. Singlefinpin

    Singlefinpin Disciple (377) Jul 17, 2018 North Carolina
    Trader

    Well written piece.
    If they'd knock one dollar off the price? More people would try it.
    Price point is and will continue to be an issue.
    I like sessions and I drink them when I'm having more than one.....okay, more than three or four.

    The light craft beer thing is here to stay, and that's okay, because it is a better alternative than seltzer!
     
  15. mmmbeerNY

    mmmbeerNY Devotee (416) Mar 5, 2014 New York

    Most new beer is overpriced. Maybe some is scale and cost of entry, but when Heady Topper can be 12.50 / 4 pack, the 18-20+ prices for DIPAs are crazy

    For lighter beers there are lots of good lager options or pale ales that I would rather get 6 or 12 of. If it's 15 a 6er, I'm finding myself looking at SN and JA and similar more and more
     
  16. aleyeast

    aleyeast Aspirant (233) Sep 15, 2004 South Carolina

    10.99 a six is a bargain in Charleston, SC. We have a local brewery put out a mexican lager for more than that.. Also have paid $8 a pint for a local kolsch.

    I was told once that Charleston prices are higher than North Carolina because of taxes. I of course investigated this and found it to be less than a penny a pint.
     
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  17. zeff80

    zeff80 Poo-Bah (11,334) Feb 6, 2006 Missouri
    Society

    I agree that this will be a passing trend. I haven't loved any of these that I've tried. It's gotten to the point that I won't buy a 6 pack of a low cal beer. I only grab singles to try/tick.
     
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  18. AZBeerDude72

    AZBeerDude72 Poo-Bah (1,867) Jun 10, 2016 Arizona
    Society Trader

    Agree!
    I am all for a low calorie beer that tastes great but so far I have been underwhelmed on what has come out. Most are watery and light on flavor and just don't do it for my tastes anyway. I still try them as they appear in hopes someone dials this in.
    Cheers
     
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  19. Whyteboar

    Whyteboar Initiate (103) Jun 7, 2008 Michigan
    Trader

    Something else to consider when it comes to pricing anything on the retail market - scale tends to enable lower costs. There is a lot of Two Hearted brewed and has been for some time. The Light Hearted is relatively new and, I would wager, not produced at the same scale. So more man hours as opposed to larger containers and automation, etc... That simply means that it (LHA) actually *might* cost as much or more to produce than it's older sibling, Two Hearted.
    My 2 cents anyways. I'll try one at some point, summer is going to arrive in Michigan at some future time and I'll want a few sessionable ales and lagers in the beer fridge. All Day from Founders (brewed largely by Avery in CO IIRC) is good, but variety is nice.
     
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  20. beerwego

    beerwego Initiate (44) Dec 5, 2019

    They must follow in the Founders 15 pack model, or fail.
     
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  21. BeerCruncher

    BeerCruncher Devotee (418) Aug 4, 2013 Illinois
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    A 12-pack is coming, but I think it will be a good bit more expensive. Light Hearted uses Galaxy hops which are pretty pricey for whatever that is worth to ya.
     
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  22. beerwego

    beerwego Initiate (44) Dec 5, 2019

    Their problem. Consumers will not pay a premium for session/light beers. They will need to reverse their pricing down the line, at which point consumers may also penalize them for previously over-charging.

    If you don't get pricing right, you won't sustain

    Cnsumer research and craft beer don't typically go hand-in-hand, but basic principles of marketing and a simple view of the market dynamics as they exist today, can make all the difference
     
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  23. mambossa

    mambossa Devotee (403) Jun 30, 2015 Ohio
    Society

    I don’t think the Stone Neverending is branded as a low calorie IPA. It’s just a session-strength hazy. Which is probably why it’s much better.
     
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  24. Ranbot

    Ranbot Savant (906) Nov 27, 2006 Pennsylvania
    Society

    From stuff I've read the additional malt needed to ferment up a few extra percentage points of alcohol is negligible to the final cost of a beer for a production brewery. A production brewery brewery has far too many fixed costs independent of ABV (e.g. labor, distribution, packaging, QA/QC, equipment, utility bills, mortgage/rent/lease, loans, marketing, wholesaler/retail mark-ups etc.). By the time you add up all those fixed costs a little bit of extra grain isn't the deciding factor on the final sticker price. So, I don't begrudge any craft brewer setting the same price for a 4% beer as they do a 8% beer.

    That said, if a beer is designed to drink several of them in a row (i.e. like a session beer) and I'm in a situation where I will have several beers in a row, the total cost of that drinking session can add up pretty quick. Therefore, in those situations I will favor the cheaper option just for total cost considerations, not because I think ABV inherently should have any bearing on a beer's cost.
     
  25. Bitterbill

    Bitterbill Poo-Bah (6,820) Sep 14, 2002 Wyoming
    Society Trader

    Do all of the lower abv beers like Slightly Mighty, All Day IPA, similar beers, cuz I can't think of their names right now, claim to be lower calorie, lower carb beers? The 2 I mentioned outright, I do enjoy, back to back even.
     
  26. BeerCruncher

    BeerCruncher Devotee (418) Aug 4, 2013 Illinois
    Society Industry Trader

    All Day does not. It’s 4.7% and probably not at the calorie count that’s worth showcasing.

    The ones that’s do are mostly pretty new: Slightly Mighty, Light Hearted, Flyjack (Firestone), One-y (Oskar Blues), Wowza (Deschuetes), probably a bunch of others I’m missing.
     
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  27. HorseheadsHophead

    HorseheadsHophead Poo-Bah (2,033) Sep 15, 2014 New York
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    Light Hearted Ale costs more than Two Hearted Ale here. $10.99 for a six pack of Light Hearted versus $9.99 for a six pack of Two Hearted. Almost all of the other ~4% IPAs cost the same as their 6%-8% counterparts. I'd like to start buying and drinking more session IPAs, but goddamn, if they're going to charge as much or more for beer of half the strength, no one is going to buy it. I don't for the life of me know how a beer that uses significantly less malt and hops would cost as much or more. Breweries need to start charging less for lo-cal options or they will ultimately fail.
     
  28. JackHorzempa

    JackHorzempa Poo-Bah (4,360) Dec 15, 2005 Pennsylvania
    Society

    Pricing does not have to directly correlate with cost to produce the product. Needless to say it must be priced high enough to cover the cost to make and distribute the product but if the business thinks that consumers are wiling to pay more the business can charge more. It appears that Bell's is of the opinion that the health conscious portion of the beer market is willing to pay more for the feature of lower calories?

    Cheers!
     
  29. jesskidden

    jesskidden Poo-Bah (1,937) Aug 10, 2005 New Jersey
    Society Trader

    That's not how it worked for the second generation of "light beers" in the 1970s in many markets:
    [​IMG]
    Although, what was then "Budweiser Light" which didn't come out until the early '80s was typically priced the same as Budweiser (found one outlier in yellow).
     
  30. IceAce

    IceAce Champion (884) Jan 8, 2004 California

    According to the price book from a local distrib, Two Hearted, Light Hearted and Official are all line priced.

    Your Retailer may be charging more for Light Hearted hoping to make an extra $4 per case in profit.

    Blaming the brewery is an expected reaction, but store owners can be an unpredictable bunch.
     
    #30 IceAce, Feb 15, 2020 at 8:06 PM
    Last edited: Feb 15, 2020 at 8:11 PM
  31. JackHorzempa

    JackHorzempa Poo-Bah (4,360) Dec 15, 2005 Pennsylvania
    Society

    Would that be the case 'nationwide' or is this a regional (Wholesale Distributor) thing?

    Cheers!
     
  32. IceAce

    IceAce Champion (884) Jan 8, 2004 California

    It’s my understanding that Bells has line priced their core beers nationwide.
     
  33. JackHorzempa

    JackHorzempa Poo-Bah (4,360) Dec 15, 2005 Pennsylvania
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    But can't each Wholesale Distributor charge what they want per brand? For example x dollars per case of Two Hearted and y dollars per case of Light Hearted and z dollars per case of Official?

    Cheers!
     
  34. hillind

    hillind Aspirant (250) Apr 24, 2010 Pennsylvania

    I just saw Light Hearted today at Wegmans for $13.49 a six pack, priced significantly higher than Two Hearted. I’m hoping that’s a mistake, I can’t see this beer moving at all at that price point.
     
  35. IceAce

    IceAce Champion (884) Jan 8, 2004 California


    Technically, a distrib could charge more for an item, but it’s not very common.

    And I’ll add this...if they did deviate from expected pricing, they would not be selling Larry Bell’s beers much longer. :grin:
     
  36. JackHorzempa

    JackHorzempa Poo-Bah (4,360) Dec 15, 2005 Pennsylvania
    Society

    How would Larry Bell do that? Once a brewery establishes a contract with a Wholesale Distributor it is my understanding that it is next to impossible to terminate the contract under each state's beer franchise laws.

    Cheers!
     
  37. IceAce

    IceAce Champion (884) Jan 8, 2004 California


    Well, without getting too deep into it, the contract you reference sets the distribution margin and as a result, sets the selling price.

    Larry is one heckuva great guy and a very astute businessman. Just ask the Reyes Brothers
     
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  38. JackHorzempa

    JackHorzempa Poo-Bah (4,360) Dec 15, 2005 Pennsylvania
    Society

    I have asked that question many times and the responses I have received have varied. Some folks state that margins are not established in contracts, some say every contract between brewery A and varying Wholesale Distributors will be different, some say that for each state the contracts (and each state's Beer Franchise Laws) the contract details will vary, some say...

    Do you have personal experience with establishing these contracts? Have you done this in other states besides California?

    I have no reason to doubt that Larry Bell is a great guy. I have reason to doubt (see above) that he can dictate all aspects in every state that he distributes beer.

    Cheers!
     
  39. IceAce

    IceAce Champion (884) Jan 8, 2004 California


    Larry is fiercely protective and, if I may say, it seems he is not the biggest fan of the Reyes companies.

    https://www.craftbrewingbusiness.co...s-it-with-larry-bell-other-distribution-news/


    This isn’t the first time they’ve gone toe to toe either; https://www.google.com/amp/s/www.chicagotribune.com/news/ct-xpm-2006-11-10-0611100190-story,amp.html


    My personal beer distribution experience is all within California for the past 27 years. I’ve worked for a wholesaler who did 12+ million cases per year, helped launch a fledgling brewery for 3+ years and currently work for a Craft wholesaler located in LA County and have the utmost respect for Larry and his brand.
     
    #39 IceAce, Feb 16, 2020 at 8:48 PM
    Last edited: Feb 16, 2020 at 8:57 PM
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  40. JackHorzempa

    JackHorzempa Poo-Bah (4,360) Dec 15, 2005 Pennsylvania
    Society

    The article you linked highlights a number of the aspects of state Beer Franchise Laws that I made mention in previous posts:

    “I think Virginia’s laws are written really skewed towards the middle tier. I think those laws were written back when distributors were more mom-and-pop situations, and they were looking for protection from the very large companies that owned the breweries before craft beer was a thing. Every state has its thing. Personally, I think Virginia’s laws are a bit antiquated.”

    And:

    “In Virginia, signing a beer distribution contract falls under that painfully cliche married for life classification with the word “perpetuity” constantly popping up. See the Beer Franchise Act for all the minutia.”

    “For example, we could decide that we wanted a single wholesaler to sell our beer across the entire Commonwealth of Virginia. Once that contract is signed, our distribution rights would be granted to that wholesaler in perpetuity. Based on previous litigation, there is almost no offense that a wholesaler can commit that would be enough to break the contract. The wholesaler could stop selling our beer completely and they would still be under no obligation to return our distribution rights.”

    You have been consistent in lauding Larry Bell and I will take your word for it that he is a “great” guy but… while you would likely applaud his action to stop selling beer in Virginia because “he is not the biggest fan of the Reyes companies” the consequence of his actions is that beer consumers within Virginia are now not able to purchase Bell’s beers like Two Hearted. If I lived in Virginia and I was a fan of Bell’s beer I may not be a fan of Larry Bell – even more than that I might be very pissed off at Larry Bell.

    Cheers!