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Thursday, September 03, 2009

Does Expensive Beer Taste Better?

Some time ago, we discussed the economic principle behind charging more for a product as a "signifier" of quality. The case in that point was Rogue, who seems to charge more for their beer than other local brands. I was reminded of that discussion when I read a report about how it works for college pricing:

For liberal arts schools, tuition makes a big difference.

Traditional economics would suggest that raising the price of an item (such as a college education) would reduce demand for it. But instead this study found that raising tuition — as well as instructional expenditures — actually improves the demand to attend liberal arts schools and schools in the bottom half of the top 50. For example, for liberal arts colleges ranked 26th to 50th, a $1,000 increase in tuition and fees was associated with a 12.9-point increase in SAT scores and a 3.5 percent increase in the proportion of top freshmen admitted.

This is because such costs “serve as markers of institutional quality and prestige,” the authors write.

This got me thinking. Last night I sampled a Stumptown Tart (finally!). Stumptown is a part of BridgePort's "big brews" lineup and a 22-ounce bottle sells for a modest five bucks. This is comparable to Full Sail's"Brewmaster Reserve" lineup, but quite a lot cheaper than Deschutes "Reserve Series," where bottles regularly are priced at north of $10. And Deschutes is cheaper than other national micros that sell special beers for twenty backs or more.

Here's what's odd. Take these contrasting examples: BridgePort Raven Mad and Full Sail Black Gold Bourbon Imperial Stout on the one hand; Deschutes The Abyss and Allagash Interlude. All four are world-class beers, and all four have different price points. The Raven Mad is the cheapie in the group--five bucks. I can't recall exactly what I paid for the Full Sail, but it was between five and ten bucks. Abyss, when you can get it, generally runs about eleven or twelve bucks. And I paid something like twenty bucks for the Allagash when I was at the brewery last year.

Preferences vary, so calling these beers comparable will provoke dissent. (My least favorite among them is the Abyss, at least when it's less than two years old. Though after that....) Yet the Abyss has a kind of stature that compels people refer to it sotto voce, as if in a cathedral. It sells out almost before it hits the stores. Raven Mad, on the other hand, was on shelves forever (and at five bucks, I kept stocking up). What role did pricing have? Had BridgePort taken the same beer, bottled it in a jet black label with a name weighted with gravitas ("Molten" or "Chasm" or "Oracle"), and priced it at twelve bucks, would it now be selling on eBay for $112?

This is where signifiers seem very important. High-gravity beers are generally rated for the intensity. If you look at the big beer ratings on BeerAdvocate and Rate Beer, they're uniformly the highest scores. (Though BeerAdvocates raters are far more subtle and nuanced.) The intensity actually makes judgment more difficult: there's so many very strong flavors that you're left with an impressionistic reaction to the overall force of the beer. Factors a drinker might easily take in include bottle presentation and price. I wouldn't be at all surprised to learn that drinkers responded more positively to more expensive beer because, seeing the price, they assume it must be rarer and more sublime. As with liberal arts tuition, the way to sell expensive beer may be to make it more expensive.

(A final parenthetical. Wouldn't it be wonderful if a brewery secretly ran this experiment? Divide a batch of very good beer into two bottlings, one cheaper and more downscale-looking, one austere and expensive, and see which sells best? No brewery would risk this, because it's a PR catastrophe waiting to happen. But wouldn't it be fascinating?)


  1. Depends on your audience for sales and the quality of the beer. That would determine the outcome in the long run.

    A quality beer at decent price is always the best buy. A borderline quality beer at a high price will probably tank, but some demographic areas are like sheep and will follow the others when it comes to quality.

    I would easily buy more Abyss for $6 a bottle because of it's quality, but others may not like Russian Imperial Stouts. Some people will pay any amount for what they want.

    It would be very interesting. The experiment would have to cover multiple geographical areas to compare and contrast the different demographic interests.

    How much would marketing come into play?

  2. I don't tend to head north of 6 bucks unless it's a special release of some sort. And while I know everyone and their mother has a Uber-Special Release!!! coming out every six seconds, the Reserve series from Deschutes that you noted are ones that would qualify. And those only pop up three or four times a year, so it's not that big of a deal. 20 bucks? I'd be hard pressed to consider that worth it if I could, say, find it on tap at some point in the future.

    But like Dan said - quality beer at a good price is where you want to be. Elysian is my #1 seed on that front. Bombers at sub-four dollar prices are a good thing. Even better when the beer inside ranges from 'good' to 'Where Can I Send Gifts For The Brewer?'

  3. It also depends upon whether you value quality, or just the appearance of quality; you may spend more money on the school you attend, but if you learn nothing more than you would have otherwise, what have you gained other than a flashier diploma? For some that's enough/all that matters; but I don't think that fits the beer world and/or the majority of the people in it.

    Slightly aside, I don't think the Raven Mad fits in this comparison - despite its price difference - because it is not even close to the same league as Black Gold/Top Sail or Abyss (I'm unfamiliar with Allagash's Interlude, but throw Curieux/Odyssey in there and I'm right with you). Even at half the price (or double if it so suits you), it's not worth it - not because of perception of value (or lack thereof), but simply because it's a weak beer (I get no bourbon from it, and it's just a generally weak porter - on cask, CO² or from the bottle); I'd sooner drink a Black Butte at ¼ the price - far superior, regardless.

    A better comparison would be Goose Island's Bourbon County Stout, which at $5/12oz is the best bargain of the bunch… not by a wide margin, granted, but combined with its ready availability (I can still find the '08 on shelves all around town, some 9 months after its release), this should work against its "perceived value;" yet it's my favorite - primarily because it has the best (IMO) bourbon flavor, but also because it's in 12oz bottles (22oz is just too much for me). The fact that it's the cheapest just allows me to acquire more…

    On the flip side, North Coast's Old Rasputin XII - at $22 for .5L - should be the pinnacle of ostentation, for which the appearance of the bottle in your hand should be enough… yet I find it to be no better than Black Gold (perhaps not even sufficiently different; I doubt I could tell the difference in a blind taste test)… by that barometer, it's no question which is the better beer.

    There are a number of other beers/breweries I could name which would fit the latter category - where the quality of the product (as spectacular as it may be) does not justify its price, but its price has no effect on my perception of that quality… that just makes it a beer I'd be more inclined to try rather than buy.


  4. "Quality, or the appearance of quality . . ." Those are pretty much inseparable, unless the tasting is done blind. Our preferences are always influenced by what we know about the beer (or wine, or any other product). If we know it comes from X Brewery at N price in a certain kind of bottle with a certain type of label, we will be influenced. For another example, what's the quality difference between an iPod and any other decent MP3 player? All are made of the same parts. Apple commands a premium because they are, well, Apple and their products are beautifully designed.
    To the specific question, does expensive beer taste better, I'd say, "better than what?" Inexpensive beer? Maybe not, but our perception of it's quality and value may be greater provided we know the brewer, see the label and know the price before we drink it.
    I do believe that breweries experiment with price points. One reason to introduce these "special" beers is to understand what consumers are willing to pay and to reach specific customer niches. And, I would be fairly certain that uber-expensive bottlings from craft breweries are priced to do more than merely cover the cost of production, markup and distribution. They are meant to distinguish the beer as a very valuable product and one worth having.

  5. Price is definitely one factor in marketing a beer. A couple weeks ago when I was writing about dear old Shiner, I noted that it didn't really even catch on throughout Texas until Gambrinus raised the price of it.

    Any discussion of big, highly-prized, not-cheap beers must deal with Hair of the Dog. Fabulous beers; I'd say their high price is also a good marketing tactic.

    Wow, anónimo, you *really* don't like Raven Mad, do you? I thought it was very nice on tap -- I'd choose it over a Black Butte -- but I can't remember if I had it from a bottle.

  6. Does expensive beer taste better? It depends on the beer. Using your examples, and assuming for the sake of illustration that they fall in the same category, I prefer Full Sail Black Gold over BridgePort Raven Mad and Allagash Interlude. Thus, on the Full Sail - BridgePort comparison, the expensive beer tastes better. However, on the Full Sail – Allegash comparison, the (more) expensive beer does not taste better. It’s tough to draw any conclusions from that.

    Of course, it’s not too hard to argue that, in general, more expensive beers taste better than their cheaper counterparts. This could be a function of better ingredients, more time / love put into the process, etc. In other words, the beer is more expensive because it tastes better (rather than the other way around).

    I know this blog has already discussed the impact of pricing on sales (versus taste), and I agree that it’s natural to assume the more expensive product is going to be better. And this strategy probably works for college pricing because students are unlikely to switch schools every year in an effort to comparison shop.

    I think that strategy falls apart for beer sales though. Continuing with the above example, as good as I think the Black Gold is, I wouldn’t spend $20 / bottle on it (more than once). However, I would buy it by the case if it sold at Raven Mad’s price point. But I probably wouldn’t buy much Raven Mad even if it sold at $2 / bottle. The point is, after trying a bottle of each, subsequent purchases are made based on taste / budget. Raven Mad isn’t going to get my money at any price. Black Gold gets some of my money, could get a lot more if they were cheaper, but would not get any if they were more expensive.

    You hear that Full Sail?

    -Sláinte Mhaith

  7. I haven't bothered with Raven Mad yet because there are so many Porters to choose from.. I avoid the 3D glasses thinking it is more show than go.

    I happen to really like Full Sails Reserve Imperial Porter release which is much more cheap than the Black Gold which for me is too strong in Bourbon flavor, and gives me heartburn.

    Deschutes brews are a treat.. I might buy 4 bottles of Mirror Mirror to age a long time... not so many of the Black Butte XXI etc....

    My bottle of Old Rasputin XII was about $24 and I am afraid to ever drink it.

    Cuvee de Tomme at $30.... 1 bottle to try. If I find it to be worth it, I might buy 1 more next year.

    Widmers 25th Anni. Dbl. Alt is well worth the $10 in my eyes. To me, it, and Full Sails Imp. Porter are spot on in price. The others not so much. Maybe Mirror Mirror.

    Price and bottle presentation have nothing to do with quality and taste. I find Full Sail Session Black to taste better than a lot of more spendy bombers.

  8. Update: Thanks for this post... I have now tried Raven Mad (Still found at QFC) and love it... and what a great price. Hard to find many Porters aged in both wine and bourbon barrels.... and for that price!

    Had Rogues Chipotle Ale too and think it's awesome!

  9. Jeff,

    Companies have been doing the experiment you mentioned for years...just not breweries.

    Infommercials and magazine adverts do this routinely. The price of the item is decided by the assumed income level of the reader/watcher. This is why Shamwows cost Saterday afternoon on ABC than they do late Thursday night on CW.

    The experiment plays out to some degree with craft beer retailers. For example; down here in Eugene, the couple bottle shops charge around $15.00 for Black Butte XXI. At the supermarket, it is sub $10.00. The difference? It's always easier to sell something to someone who already wants to buy it.

    Most supermarkets do not have the built in customer base for $10.00+ bottles of beer. So, when they do order limited releaes, they order light and price them to sell. Shear customer volume dictates that eventually the bottles will make it from the shelves to the carts; along side the detergent and cat litter.

    Bottle shops on the other hand know that customers will be coming in for the sole purpose of purchasing these same limited releases. They understand that their customers not only want these beers, but are excited to purchase them...and price accordingly.

    In this case, the brewery didn't even need to bottle the beer differently. The percieved value based on the customers knowledge of the product was enough to support two different prices.