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Wednesday, November 18, 2009

Good Ten-Dollar Beer Versus Bad Ten-Dollar Beer

As I read the comments to yesterday's post, a certain ambiguity started to emerge. Then Joe posted this comment and it became clear:
This is to me is the key point and was illustrated last night with my Pike Entire Stout. Not worth $10 bucks to me, not by a long shot. I think high price used to be a better signal for high quality. I think that link is broken and its buyer beware now.
Leaving aside the question of Pike's beer (for the record, Joe seems to be an outlier in his opinion), this is an interesting point. Does price signal quality? Did it ever? And, if it doesn't, how does the buyer make an informed decision?

My guess is that prices have only ever been a mediocre indication of quality. As some commenters have noted, you can find exceptional, inexpensive beers. (That's one of the reasons some people feel no beer is worth $10 or more.) On the other hand, you can spend a lot of money on a dud. To complicate matters, there's the question of taste. My A+ may be your B-.

I don't think pricing has ever been much guide at signaling quality--in beer or anything else. Some cars are fantastically expensive and break down all the time; others are cheap and reliable. Coffee at Starbucks is expensive and not particularly good. Budweiser is more expensive than Pabst, and only a tiny fraction of people could ever tell the difference.

At the base of it, I think people really trust and like breweries. Since craft brewing started, it has seemed like a communal effort. We connect so closely with the breweries we like that we feel like they are more friend than business. As if there's a social contract between breweries and customers. (I actually share this view.) So, when breweries charge a lot--even if the beer is good--it seems like a slight breach in the contract. As Jared said in comments, "It's all about the hype and money." (I don't share this view.)

There is a great equalizer in the age of the internet, however: information. We no longer have to buy a pig in a poke (or a beer in a dark bottle). We can look at what others are saying first. I've seen a little scorn directed at BeerAdvocate, but I find it pretty reliable. If a beer is getting mixed reviews and it's really expensive, I tend to skip it. Unless Bill or Derek or Angelo says it's tasty, in which case I might try it. I think breweries know this. They can move some product before the word gets out, but not enough to make it worthwhile to release an expensive dud. And information may be exactly the reason some beers are getting so expensive. Because we know certain beers are so well-regarded, they're almost a sure bet to be worth the money.

I've definitely been burned by lackluster beer, but not often. The word on bad ten-dollar beer gets out. Breweries learn this lesson and they don't burn their customers--or they don't and we don't buy their beer. Either way, we have better ways of identifying good beer than price tags.


  1. Price isn't a clear indication of quality and likely never will be. But you also have to consider personal tastes as well. I've had Abyss several times (always courtesy of someone else), and to me it's not worth $12, but not because it isn't good, but because it's just not my thing. But Dissident at $12 is worth it because I love sour beers. In any case, if you fork over $12-20 for a botle, there's an expectation that it better knock your socks off and not be just OK. And some of these beers don't seem to live up to the extraordinary hype they get.

    But I wonder about how hype effects it all as well. Some people will be impressed with a $12 beer because they paid $12 for it, while others will be disappointed because they paid $12 for it. What can you do? A lot of it is about perception and wanting to feel that you actually got your money's worth. And no single beer is going to blow everyone's socks off. There's bound to be some disappointment.

  2. My sense has always been that beer pricing (talking crafts here) tends to be cost-driven -- that is, brewers tend to charge as little as they can and pull in fairly tight margins because of it. (Distributors and retailers make up a good bulk of the price but I think we can mostly consider that a wash when comparing beers to one another.)

    This is why I often find myself puzzling over what can be rather wide discrepancies among craft costs, especially it doesn't jibe with the amount of raw materials used or distances traveled. Perhaps differences in debt financing, overhead, local taxes and all that can add up to account for the disparity?

  3. I'm not sure why there's an arguement about whether price is a signal for quality, because there is no doubt that price is used, by both producers and buyers, as a signal of price. Is it a hard rule? No? Do people game the signals? Yes. But exceptions do not negate the rule.

    If someone sells an obviously higher quality beer at a lower price than lower quality beers the market will correct. People will stop buying the higher priced low quality and go for the cheaper high quality, forcing the lower quality beer to drop its price below that of the higher quality beer if wants to be bought at all.

    Now quality is subjective and among products that are similar in profile, experts (who are the readers of this blog) can argue back and forth on comparitive quality and price, but these arguements mean nothing to the average consumer, who does not have the knowledge to recognize the difference whether its beers, wines, or cars. Having no other info to go on (because most of them don't really care) the average consumer will go by price. And thankfully they do, because every now and then it lets the experts find that diamond in the rough.

  4. It is all about equilibrium. So, in general, price and quality are correlated, but for limited edition beers that are out for a short time, don't expect the correlation to be strong.

    With goods such as these, that you can't know the quality until you actually buy them (unlike, say, clothes that you can touch and try on before you buy), equilibrium price can be a signal. But it is pretty crude, looking at reviews (like in this blog), the track record of the brewery, etc., are all important signals as well.

    But if a beer has been around for a while and you didn't know anything about beer, the difference between a Mirror Pond and a Henry's Private Reserve would tell you a lot. Sure Henry's would love to sell at Mirror Pond's price, but it can't.

  5. In many ways, I think the question of whether price and quality can be linked is the wrong question. Average Bill is closest to this problem by saying that my taste and yours are different and influences our sense of quality. In the example of Mirror Pond vs. Henry's, it could be fairly said that both are high quality examples of their particular type. In other words, what do you mean by quality? By definition, saying something is of high or low quality is a qualitative judgment. So, quality and price will only ever be coincidentally linked. You can probably say that high priced beer is typically the result of an abundance of high cost ingredients, small batch production and extensive labor. That should yield a very interesting beer, but the quality may suffer. I've brewed enough beer with lots of good ingredients to know that the results vary and that the quality of my product often varies a good bit. May not be a problem for most commercial operations, but it happens.