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18-07-2020, 13:02
Visit the Cooking Lager site (http://cookinglager.blogspot.com/2020/07/the-price-of-cask-beer.html)
Thank the gods of beer geekery, topics that cover cheap grog never run out. There is always opportunity to chunder out thoughts in a format that don’t suit twitter or a comment on another’s blog. Todays rant is on the price of a pint of cask beer. To some it is too high, to some it is too low. It’s never just right, though, noticed that? It is for me. Spoons voucher price is just right.
https://1.bp.blogspot.com/-0UDgXgYKOVo/XxLZHF_ONUI/AAAAAAAABF8/CTZgLiUlIOEY-b2rNetwaxVcRQmvPWFEACLcBGAsYHQ/s320/0b41463415fd01a1797de0d617c64600.jpg (https://1.bp.blogspot.com/-0UDgXgYKOVo/XxLZHF_ONUI/AAAAAAAABF8/CTZgLiUlIOEY-b2rNetwaxVcRQmvPWFEACLcBGAsYHQ/s1600/0b41463415fd01a1797de0d617c64600.jpg)
notice the brand of beer
It’s easy to see why differences of opinion occur. A customer that spends a large amount of their disposable income drinking in pubs is entirely rational to baulk at suggestions to increase this and then rationalise said argument by defending those lower income customers who would most likely reduce their pub usage and transfer to alternate markets at higher prices. Better to defend the poor than defend one’s own comfortable position.
If you are daft enough to be churning out casks of ale, then it is entirely in your interest to make an argument to increase the price. Whatever the price is, you’d be better off it was higher. Those that profess to campaign for cask ale, for whatever bourgeois reason that is, it is rational I would guess to advocate higher prices on their behalf in order to prop up the least efficient of the producers and thus maximise the number of them. If you want a lot of small producers, you are advocating for productive economic inefficiency and that can only be achieved within a market of inflated prices. You can also achieve it by abolishing prices and most socialist countries achieve an astonishing level of economic inefficiency by removing price discovery in capital and consumer markets.
Unfortunately, these arguments over the price of a pint of bitter tend to sit at the retail level, inferring that our decisions as consumers can somehow promote an outcome at the wholesale level that we desire. Pay more for your ale to support craft brewers being one argument lacking a fundamental underpinning of understanding. I’m going to suggest a better understanding of the market conditions is required and offer to supply that. Here and now for your delectation
Beer is a produced good. The inputs to it are agricultural commodities that undergo a production process to produce a processed good and, in that way, it can be considered; little different from others processed goods. Tins of peas, cans of pop, chocolate bars et al. The processed good passes through 2 markets, the wholesale and the retail. You pay the retail price. The brewer gets the wholesale price. The processed goods fall into 2 categories, commodity and none-commodity. In each case the processing of commodity agriculture has created value, but the none-commodity good has created the most value and commands the higher price.
In the determining of a retail price, the wholesale price is only one of many factors and only one of many input costs. Other inputs costs to a pub pint are staffing, rates and taxes and capital. Arguably the biggest influence on the retail price of a pint is the capital cost of the establishment it is sold in and not the wholesale price of a cask of beer. If I want to buy a freehold in a major city centre what am I looking at? 1 million? 2 million? That capital deployed requires a return on capital. If it is financed through debt it requires an interest payment, if it is financed through equity it requires a dividend. The owner of the capital requires a return on the capital employed. Even an owner seeking to run a business for a salary. They could get a salary without deploying capital and invest that capital for a return elsewhere. Money makes money. Suck that one up. It’s one of the reasons you should stop buying overpriced craft beer and avocados. You can work for money or money can work for you. That’s the choice, that’s the world.
A freehold in a small satellite town on the outskirts of a city centre may be had for what? 250, 350k? That is a smaller amount of capital. The amount of return on capital employed is therefore lower. If you are looking at an expected return of 3% then 3% of 200k is lower than 3% of 2 million.
It should not surprise that a pint in a suburban town at £3 is thus cheaper than a pint in a city centre at £4. The only surprise is that the gap is not wider. Other input costs may not be that different. Do bar staff earn more in city centres? Is the power charged at a different pence per kwh? Many input costs may be the same but the one factor that is not is the cost of capital. The single biggest reason why the price of a pint is different wherever you travel to. That’s not even considering what customer are willing to pay. That different levels and operational models of hospitality command different prices simply because consumers see more value in one operational system over another.
The point of this is to illustrate how the price of a wholesale cask of beer is unrelated to a large extent from the retail price. Of course, there is a connection. The wholesale price is one of the input costs, but not even the largest of those. It doesn’t follow that higher retail prices will flow to one specific input cost. You paying 50p more for your pint isn’t paying a brewer 50p more for it. You are likely paying more to service any one of the myriad of other input costs.
https://1.bp.blogspot.com/-wKnigLLE5Xc/XxLZkMeKxsI/AAAAAAAABGI/cVSjSeeACXodEG1mRoH2dUKrodRp0UO4wCLcBGAsYHQ/s320/rihanna-bikini-pic-2-spl.jpg (https://1.bp.blogspot.com/-wKnigLLE5Xc/XxLZkMeKxsI/AAAAAAAABGI/cVSjSeeACXodEG1mRoH2dUKrodRp0UO4wCLcBGAsYHQ/s1600/rihanna-bikini-pic-2-spl.jpg)
again, notice the brand of beer
You running a pub and moaning about the price of Spoons Bitter saying they are devaluing pubs? Try running a pub where your hospitality is worth more than Timbos hospitality. You running a brewery and moaning that Timbo is devaluing cask beer? Make a cask beer that’s worth more than Spoons bitter. You want to pay brewers more by paying more in the retail market? Good luck with that.
How about a look at the wholesale market? As I mentioned before, the processed good that is beer sits in 2 categories, commodity and none-commodity. Most keg beer is branded none-commodity product. Yes, even all that macro filth I love, and you hate. Guinness and Carling are arguably 2 of the strongest brands in beer. When the producers put up the price in the wholesale market the pub retailers pay it. Why? You may not be a loyal customer of these brands, but you are outnumbered by a wider group of mainstream drinkers that are. When a pub that sells a lot of Carling switches to Fosters after a price rise, it loses custom. It notices Dave the plasterer no longer pops in after his shift. He’s gone up the road for his Carling. After a short while they get the Carling back on. That is how the retail market influences the wholesale market. The establishment of brands that consumers trust decommodify the wholesale market for that beer. You, dear beer geek, can think of craft keg brands that achieve this in the niche market that is craft beer. A brand that consumers know, trust, demand, recognise and want. Beaver town? Cloud water? I’d describe them as strong brands. You most likely have better examples than me as you swim in those waters. They don’t need to discount their beer in the wholesale market.
So now we get to the wholesale market for cask beer. Thousands of products from thousands of breweries, most interchangeable, little customer recognition or trust and most changed regularly on bar tops so customers never really get to pick a favourite. When Bogetons Pale Ale is replaced next week by Dogetons Pale Ale and then by Logetons Pale Ale, we shrug, drink it, barely notice the difference and celebrate just how much choice there is. Whether me in Spoons looking for a pale ale on the guests because the regular stuff is boring brown dishwater or you down the CAMRA pub all excited about how you’ve never drank any of this weeks handpumps and you never will again because next week they change again.
There is lots of ever-changing choice between lots of low value commodity cask beer that is interchangeable and barely disguisable from each other. Good luck making that product and asking for a price increase. You ain’t getting a reorder next week. If that’s your business, then you are churning out a commodity and you need to beat the others with a lower price.
No amount of sanctimonious self-righteous beer geek snobbery and anger about low retail price value pubs devaluing cask beer is going to change a market fundamental. Get angry about the price of Spoons bitter last year, this year and if you want, next year. Do that as often as you want. Do it on twitter and feel smug about it. You’ve achieved nothing, nor will you ever. Sorry, you have achieved entertaining me. You’ve not changed the wholesale market by boycotting 1.49 spoons bitter in favour of your local micropub. You’ve simply influenced the retail market in the provision of one hospitality operational model over another by your singular choice. I’m influencing it the other way.
If you want to increase the price of cask beer, you need to do one simple thing. You need to influence the wholesale market. You need to decommodify it. Build trusted brands. As a customer you can do this. The brands that exist now were built by customer trust. You can build new ones for beer more to your taste. You need to pick products you like and repeat purchase them and ask for them and demand them. You can be like Carling afficionado plasterer Dave but for whatever your chosen pish is. That’s how you alter the wholesale market.
More... (http://cookinglager.blogspot.com/2020/07/the-price-of-cask-beer.html)
Thank the gods of beer geekery, topics that cover cheap grog never run out. There is always opportunity to chunder out thoughts in a format that don’t suit twitter or a comment on another’s blog. Todays rant is on the price of a pint of cask beer. To some it is too high, to some it is too low. It’s never just right, though, noticed that? It is for me. Spoons voucher price is just right.
https://1.bp.blogspot.com/-0UDgXgYKOVo/XxLZHF_ONUI/AAAAAAAABF8/CTZgLiUlIOEY-b2rNetwaxVcRQmvPWFEACLcBGAsYHQ/s320/0b41463415fd01a1797de0d617c64600.jpg (https://1.bp.blogspot.com/-0UDgXgYKOVo/XxLZHF_ONUI/AAAAAAAABF8/CTZgLiUlIOEY-b2rNetwaxVcRQmvPWFEACLcBGAsYHQ/s1600/0b41463415fd01a1797de0d617c64600.jpg)
notice the brand of beer
It’s easy to see why differences of opinion occur. A customer that spends a large amount of their disposable income drinking in pubs is entirely rational to baulk at suggestions to increase this and then rationalise said argument by defending those lower income customers who would most likely reduce their pub usage and transfer to alternate markets at higher prices. Better to defend the poor than defend one’s own comfortable position.
If you are daft enough to be churning out casks of ale, then it is entirely in your interest to make an argument to increase the price. Whatever the price is, you’d be better off it was higher. Those that profess to campaign for cask ale, for whatever bourgeois reason that is, it is rational I would guess to advocate higher prices on their behalf in order to prop up the least efficient of the producers and thus maximise the number of them. If you want a lot of small producers, you are advocating for productive economic inefficiency and that can only be achieved within a market of inflated prices. You can also achieve it by abolishing prices and most socialist countries achieve an astonishing level of economic inefficiency by removing price discovery in capital and consumer markets.
Unfortunately, these arguments over the price of a pint of bitter tend to sit at the retail level, inferring that our decisions as consumers can somehow promote an outcome at the wholesale level that we desire. Pay more for your ale to support craft brewers being one argument lacking a fundamental underpinning of understanding. I’m going to suggest a better understanding of the market conditions is required and offer to supply that. Here and now for your delectation
Beer is a produced good. The inputs to it are agricultural commodities that undergo a production process to produce a processed good and, in that way, it can be considered; little different from others processed goods. Tins of peas, cans of pop, chocolate bars et al. The processed good passes through 2 markets, the wholesale and the retail. You pay the retail price. The brewer gets the wholesale price. The processed goods fall into 2 categories, commodity and none-commodity. In each case the processing of commodity agriculture has created value, but the none-commodity good has created the most value and commands the higher price.
In the determining of a retail price, the wholesale price is only one of many factors and only one of many input costs. Other inputs costs to a pub pint are staffing, rates and taxes and capital. Arguably the biggest influence on the retail price of a pint is the capital cost of the establishment it is sold in and not the wholesale price of a cask of beer. If I want to buy a freehold in a major city centre what am I looking at? 1 million? 2 million? That capital deployed requires a return on capital. If it is financed through debt it requires an interest payment, if it is financed through equity it requires a dividend. The owner of the capital requires a return on the capital employed. Even an owner seeking to run a business for a salary. They could get a salary without deploying capital and invest that capital for a return elsewhere. Money makes money. Suck that one up. It’s one of the reasons you should stop buying overpriced craft beer and avocados. You can work for money or money can work for you. That’s the choice, that’s the world.
A freehold in a small satellite town on the outskirts of a city centre may be had for what? 250, 350k? That is a smaller amount of capital. The amount of return on capital employed is therefore lower. If you are looking at an expected return of 3% then 3% of 200k is lower than 3% of 2 million.
It should not surprise that a pint in a suburban town at £3 is thus cheaper than a pint in a city centre at £4. The only surprise is that the gap is not wider. Other input costs may not be that different. Do bar staff earn more in city centres? Is the power charged at a different pence per kwh? Many input costs may be the same but the one factor that is not is the cost of capital. The single biggest reason why the price of a pint is different wherever you travel to. That’s not even considering what customer are willing to pay. That different levels and operational models of hospitality command different prices simply because consumers see more value in one operational system over another.
The point of this is to illustrate how the price of a wholesale cask of beer is unrelated to a large extent from the retail price. Of course, there is a connection. The wholesale price is one of the input costs, but not even the largest of those. It doesn’t follow that higher retail prices will flow to one specific input cost. You paying 50p more for your pint isn’t paying a brewer 50p more for it. You are likely paying more to service any one of the myriad of other input costs.
https://1.bp.blogspot.com/-wKnigLLE5Xc/XxLZkMeKxsI/AAAAAAAABGI/cVSjSeeACXodEG1mRoH2dUKrodRp0UO4wCLcBGAsYHQ/s320/rihanna-bikini-pic-2-spl.jpg (https://1.bp.blogspot.com/-wKnigLLE5Xc/XxLZkMeKxsI/AAAAAAAABGI/cVSjSeeACXodEG1mRoH2dUKrodRp0UO4wCLcBGAsYHQ/s1600/rihanna-bikini-pic-2-spl.jpg)
again, notice the brand of beer
You running a pub and moaning about the price of Spoons Bitter saying they are devaluing pubs? Try running a pub where your hospitality is worth more than Timbos hospitality. You running a brewery and moaning that Timbo is devaluing cask beer? Make a cask beer that’s worth more than Spoons bitter. You want to pay brewers more by paying more in the retail market? Good luck with that.
How about a look at the wholesale market? As I mentioned before, the processed good that is beer sits in 2 categories, commodity and none-commodity. Most keg beer is branded none-commodity product. Yes, even all that macro filth I love, and you hate. Guinness and Carling are arguably 2 of the strongest brands in beer. When the producers put up the price in the wholesale market the pub retailers pay it. Why? You may not be a loyal customer of these brands, but you are outnumbered by a wider group of mainstream drinkers that are. When a pub that sells a lot of Carling switches to Fosters after a price rise, it loses custom. It notices Dave the plasterer no longer pops in after his shift. He’s gone up the road for his Carling. After a short while they get the Carling back on. That is how the retail market influences the wholesale market. The establishment of brands that consumers trust decommodify the wholesale market for that beer. You, dear beer geek, can think of craft keg brands that achieve this in the niche market that is craft beer. A brand that consumers know, trust, demand, recognise and want. Beaver town? Cloud water? I’d describe them as strong brands. You most likely have better examples than me as you swim in those waters. They don’t need to discount their beer in the wholesale market.
So now we get to the wholesale market for cask beer. Thousands of products from thousands of breweries, most interchangeable, little customer recognition or trust and most changed regularly on bar tops so customers never really get to pick a favourite. When Bogetons Pale Ale is replaced next week by Dogetons Pale Ale and then by Logetons Pale Ale, we shrug, drink it, barely notice the difference and celebrate just how much choice there is. Whether me in Spoons looking for a pale ale on the guests because the regular stuff is boring brown dishwater or you down the CAMRA pub all excited about how you’ve never drank any of this weeks handpumps and you never will again because next week they change again.
There is lots of ever-changing choice between lots of low value commodity cask beer that is interchangeable and barely disguisable from each other. Good luck making that product and asking for a price increase. You ain’t getting a reorder next week. If that’s your business, then you are churning out a commodity and you need to beat the others with a lower price.
No amount of sanctimonious self-righteous beer geek snobbery and anger about low retail price value pubs devaluing cask beer is going to change a market fundamental. Get angry about the price of Spoons bitter last year, this year and if you want, next year. Do that as often as you want. Do it on twitter and feel smug about it. You’ve achieved nothing, nor will you ever. Sorry, you have achieved entertaining me. You’ve not changed the wholesale market by boycotting 1.49 spoons bitter in favour of your local micropub. You’ve simply influenced the retail market in the provision of one hospitality operational model over another by your singular choice. I’m influencing it the other way.
If you want to increase the price of cask beer, you need to do one simple thing. You need to influence the wholesale market. You need to decommodify it. Build trusted brands. As a customer you can do this. The brands that exist now were built by customer trust. You can build new ones for beer more to your taste. You need to pick products you like and repeat purchase them and ask for them and demand them. You can be like Carling afficionado plasterer Dave but for whatever your chosen pish is. That’s how you alter the wholesale market.
More... (http://cookinglager.blogspot.com/2020/07/the-price-of-cask-beer.html)