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Tuesday, September 30, 2014

I HAVE A MINOR COMPLAINT: The Bombers Are Too Damn High

Bill Night has his latest survey of Portland beer prices out this week, and I want to draw your attention to one of his findings:
  • 22-ounce bombers: $5.58
Five-fifty eight for 22 ounces of beer?  That's too damn high!*  It's almost exactly twice the cost per ounce as the average six-pack and getting perilously close to the average pint of a pub pour.  In fact, it's the same price as an average happy-hour pint. Due to a weird quirk in his sample, the bomber price actually down from last quarter, too.   For the visually-oriented:


Pints, of course, carry with them the costs of the structure in which you enjoy them and the paycheck of the barkeep (among others) who's pouring them.  What justifies the exorbitant price of a slightly larger bottle with no six-pack cardboard carrying-case?  Not that these are specialty beers made expensively or priced for rarity; nope, they're standard locally-made beers.  There can be only one reason: that people will pay it.   Stop it!

It's highway robbery and I for one planning on shaking my fist impotently at the bomber section of my local beer retailer until prices come down.

____________________
*If you don't get the reference, you've missed something special.

11 comments:

Frank White said...

No offense guys but is your understanding of basic manufacturing principles that naive? A small brewery using a third party to bottle beer in small batches -- beer that cost the small guy a lot more per oz to produce, due to diseconomies of scale -- is going to have WAY higher costs of production than even a good-sized craft brewery. Try 2x. I'm serious. Meanwhile, even the bigger guys are going to have WAY higher costs with 22s that with six-packs.

What you overeducated liberal artists fail to realize is that you've got it totally backwards. The price of a six-pack is WAY low compared to where it should be. It's discounted to hopefully grab market share, in hopes of better profitability somewhere down the road.

Oh and the only reason that bomber average is $5.58 is because brewers can't justify (read: customers don't want to buy) $20 six-packs of esoteric beers. SO they turn to the single-serve option that is the most prevalent, and charge $10 for it.

Anonymous said...

Frank White is right. Small startup craft breweries simply don't have the economy of scale to even offer six packs - they would lose money and go bankrupt quickly.

The 22 ounce bottle at a price point of around $5.50 is often the only way to show modest profit. And often it's hand labeled, capped, the filling is outsourced and distribution is in-house. Steel is expensive and so is labor.

Now, seven years down the road, when they are producing 30,000 BBLs annually on a bigger more efficient system filling an in-house rotary filling machine - then we can discuss a six pack for $7.00 and $3.00 22 ounce bottles.

Jeff Alworth said...

Frank, we approve of your use of the royal plural, and need to get back to that. (Kidding: we are just me.)

So I have no idea what mobile bottlers charge and I'm not going to track it down. But I have the sneaking suspicion that you don't have any idea what they charge, either. I could be wrong, and if so, you can break it down for us. Let's see the numbers that justify the final price.

Until I actually see them, I am sticking with my general sense that the only thing that justifies high bomber prices is demand, not the expense in producing them. I'm happy to issue another in a long line of mea culpas if you have something more than opinion to offer.

Alan said...

Are you drugged, Frank? Same beer. Same brewery. One day bottling in 12s, the next in 22s. Stop reading Brewers Association PR as economics. BTW, what is the opposite of over educated liberal artists?

Leslie Chasse said...

Over educated liberals. Heh, I always liked that one. So much envy. Any who, as Frank well knows, the market self regulates. If the people don't like the price, don't buy it. That is the single most effective way to send a message to the makers/distributors.

PNW_John said...

Amen Jeff. I have been bucking bombers for a while now. I refuse to pay that much for a beer offered in a 12. I only buy 22s when the desired beer isn't offered in a 12 and I really want it.

Johnny Gladstone said...

Despite the fact that I definitely qualify as an over educated liberal, I'm also a professional brewer, and I have to say that Frank has a point. For one, the equipment involved to produce the 12oz. format in the numbers needed to be profitable tends to be much more expensive and mechanically complex (leading to expensive breakdowns) than the more simple and cheaper equipment for turning out large formats in smaller numbers. It's definitely true that some breweries use the large format to overcharge for beers that don't warrant the cost, but I think it needs to be noted that the larger format is a key tool for small breweries, especially startups, to achieve profitability, and thus survival. I have also seen from personal experience that breweries that need to achieve profitability with the 12oz. can be driven to focus on quantity over quality, leading to cutting corners and a decline in beer quality. The larger format can provide the financial breathing room to continuously produce interesting, quality products without shortcuts. I don't think making a generalisation on someone based on one of their opinions is too useful, or relevant for that matter, but there is definitely a point in there.

Anonymous said...

So I just came back from Mart 'n' Mail. Deschutes was priced at 3.69, Widmer at 3.45 and Pyramid standard fare bottles were priced at 2.99

This does reflect the economy of scale achieved by these breweries that drops the retail price.

Ninkasi is 4.94, but I have seen it lower at other stores.

Anonymous said...

Here's an interesting thought, if the market says a 22 is worth $5.50 and your a small brewer struggling to make every dollar count, why would you price your beer less? Ever hear the one about an artist who wasn't selling any paintings until he tripled his prices?

The down side to this is of course consumers will begin to catch on. next time you go to a retailer look at the beers that have been setting on the shelf for an extended time, usually the sale beers.

Frank is right in terms of scales of economies and manufacturing principles (costs) so small breweries try and eek out the best price for their product they think the market will bear.

A lot of talk about too many breweries creating a bubble, but how many consumers will spend money on overpriced mediocre beer and for how long?


am I rambling again.....?

Gary Gillman said...

How does Frank's logic apply to breweries which don't package in bombers? There must be some.

Gary Gillman

Cris Carter said...

@JeffAlworth: Bottling trucks charge around $2.50-$3.00 per case (12 x 750mL/22oz.) to fill and seal. Plus, there's a setup fee (~$500,) and case minimums, so longer runs are more efficient, price-wise. I'm not sure about these costs versus 12oz.

I now work for a good-sized brewery in Los Angeles, and can tell you that 22oz. are very profitable for breweries, much more so than 12/16oz. Mobile bottling/can lines are the way to go, with some figures saying as little as $0.45 per 12oz. can (can and canning included, though not the beer.) As a basic, read shitty, can line sets you back at least $85k, and a nice one is around $1 million, you can see the advantages of mobile canners/bottlers.

While Frank White is correct that the scales of economy aren't in favor of small brewers, if you're really hand-filling and capping bottles- go back to home brewing. Cheers.

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