Apr 26, 2013

Craft Beer...At What Price?

Let me start by saying I'm an ignoramus.  I have to tell you upfront that I do not know how much it costs the average craft brewery to brew a six-pack of their standard IPA or a 750ml bottle of their year-round stout.  It might cost them $6.  Maybe a $1.  I'll be it's neither, but somewhere in between.  I know it's likely a heck of a lot more than it costs SABMiller or one of the other macro-giants.  

But still, beer prices have been on the rise across the board.  Are we seeing an endless upward trend in the average price of 6-pack (or God forbid, downsized 4-pack).  I won't call out breweries or beers by name, but you've surely noticed it yourself.  That $7.99 or $8.99 six-pack of craft tastiness you used to eagerly snap up is now $9.99 or $10.99 or even more.  Or maybe it's still $8.99, but now it's in a 4-pack.  Quick math says it may only be a buck or two, but that's a 20% increase or more.

Chart courtesy Brewer's Association
This begs the question, is the cost to brew a quality craft beer increasing that quickly?  I've read that raw material costs are on the rise.  Those costs get passed on from producer to consumer, and I have no problem with that.  Reports show that, while hop acreage increased YOY in 2012, the yield actually decreased (source).  In a similar twist of grain-related fate, the cost of barely has been on a fairly steady 3-year rise...a 250%+ increase from Summer 2009 to Summer 2012 (source).  However, despite the seeming squeeze on resources "craft beer numbers were up: 18% more breweries in the U.S., 15% more beer produced by volume, a 17% increase in sales, and a whopping rise of 72% in American craft beer exports." - Time Magazine (3.22.2013).  Production has, most certainly, not gone down as a result.

I just can't help but feel that maybe some breweries are piggybacking off their more popular beers, and their high demand, to increase prices across the portfolio.  Maybe it truly is the rising cost of raw materials combined with increased demand that is pushing craft beer prices up and up.  Could it be that retailers are picking our pockets without the knowledge of breweries or distributors (it does happen)?  Perhaps it's a combination of all of these factors.  

And I know, I know.  If I want a craft product, I have to pay craft prices.  If I want a high quality beer, I have to pay higher prices.  If I think it's too expensive I don't have to buy it.  I understand how the free market works.  But frankly, I do have to buy it.  I can't drink macro beer anymore...and maybe that's a factor too.  They've got me...right where they want me.