Consumer Perception, Beer, Prices, and Homebrewing

Okay, the following will likely only appeal to those who are interested in 1) beer; 2) economics; 3) the current economic crisis; 4) homebrewing as a response to said crisis; and 5) Chris Anderson's Long Tail theory.

Trust me on this, it's all here and all connected. And yes, this will be a bit complicated and require some patience to wade through. (Will it be worth it? I have no idea.)

Anyway . . . First: I understand that craft brewers -- all brewers, in fact --- are in business to make money. They also manufacture an agricultural-based product, so to a large extent their prices for raw materials are dependent on drought, excess rain, hard winters, and so forth. They also have to pay for fuel, insurance, blah blah blah. AND they want to make a profit.

But I suspect that many consumers of craft beer are starting to wonder if craft brewers are taking said consumers for granted, as in: "Oh, they only drink craft beer. They'll buy at any price." If so, they could be in trouble.

Again, I'm not saying that's what craft brewers are doing so. I'm saying that this is the perception among some consumers of craft beer. And perceptions are powerful things.

So that's the general background. The specific background is that some weeks back, I posted a blog entry about beer prices. You can read that here. I followed that up with blog entry on a follow-up from Patrick Emerson on the economics of homebrewing.

No surprise, the subject of beer prices came up again recently at the blogs of Jeff Alworth and Stan Hieronymus. And all of this prompted a full-tilt rant from Dexter, my Loyal Reader From Hawaii. I now turn this blog entry over to him so you can read the rant in its entirety because it's worth reading (and because he's a hugely entertaining writer).

There is a punchline of sorts at the end.

I can home brew so [rising beer prices don't] affect me so much. Although... when Samuel Adams switched to "Variable Pricing" on their Double Bock it certainly got my BVDs in a bunch. Last year SA sold its Double Bock seasonally in six packs at around $33.50/case.

I bought 5 cases in March and stored it a cool, dark unlighted place. Figured it would last me until March Ought Nine when I could stock my next year's supply. [In Hawaii buying good beer is like shopping at Costco. If I see something unusual at Tamura's Fine Wine & Liquors in Kaimuki, I have to buy as much as I can afford that day because there is no guarantee that it will be there when I come back.]

Anyway come January this year I read a press release saying that SA is yanking their Double Bock out of seasonal rotation putting it in some fancy printed cardboard 4 pack to increase its "perceived value" and jacking that value to $9.95/4 pack. So this smooth marketing move was hiking the price of Double Bock to $60/case!

As Peter Cooke says in 'Good Evening'(1977) "Well, I wrote a letter!" - more like screamed at their customer relations department, "What the fuck are you doing raising the price of SA Double Bock over 50%i n one year?!" And Mr. Todd Bellamy wrote back saying that SA Double was being added to their new "Imperial Series" [just oozes "perceived value"] and that

Samuel Adams Double Bock is expensive to brew. It is brewed with a ½ pound per malted barley per bottle—three to four times the normal amount. Barley prices have increased significantly in the last year.  When it was brewed seasonally and we sold it 6-packs we elected to keep the price consistent with other Samuel Adams styles in order to maintain continuity and avoid confusion despite it’s significantly higher cost.  Now that we are introducing Samuel Adams Double Bock on a year-round basis we need to price it at a point that more accurately reflects the cost of the ingredients to brew this extraordinary, rich lager

It wasn't until the beginning of March when I tasted some of the Ought Nine Imperial Series Double Bock that I came to the realization that this was Bullshit.

Now I don't doubt that in years past that they did use more barley. You could taste it, it had a ton of malt flavor. SA would advertise that its DB was "Award Winning" and "World Class", and they were right! Ron would bring in German DBs from Philly and the SA Double Bock could hold its own Head to Head.

But what I tasted this year wasn't "Award Winning" - it was watered down - it was a New Coke double bock clone. They had gone and changed the recipe!!!

AARGGH! Why would you go and change a recipe that had won you numerous awards in national competition?? You would change it because some bean counters told you that when you geared up for annual production you now had to adjust your ingredients to hit a price point.

There may be some extra malt in their DB mash, but I can't tell because it's not coming out in a great flavor like last year's DB had. I wrote back to SA and told them that their "New Coke double bock clone" wouldn't even place in the SA Long Shot Home Brew Contest.

More indications that this is marketing bullshit. Around the beginning of Philly Beer Week Don Russell [Joe Sixpack] did a little piece on Good Tasting Beers for Good Value. The last beer he featured was Spaten Optimator which he says is available in Philadelphia in six packs for the same price as I paid for SA Double Bock last year!!!

How can Spaten's Optimator kompt all the way aus Deutschland  . . . and still cost 50% less than SA in national distribution? And why wouldn't SA customers be tempted to switch when "New Coke double bock clone" doesn't taste anything like last year's SA Double Bock???

If this trend keeps up there should be a corresponding 50% increase in home brewing...

And then Dexter emailed me the next day with the following, the punchline to the entire rant --- and a reaction-to-prices that craft brewers ought to take seriously.

With home brewing in the mix, this move to "Variable Pricing" could become a social move as well as an economic decision for some customers. What's a craft beer lover to do when the prices for his favorite commercial porters and stouts and maple brown ales start inching skyward??

Okay a craft beer drinker you are already in a social subset. When the guy at the next table says "Simcoe", you know it's bitter, piney hop, not the newest addition to the Dow.

But do you stay with the group who can still afford to "pay the price to be the man"? Do you sacrifice other marginal purchases to keep buying the IPA that won a medal in Denver? OR do you truck on down to the Brew Supply store and talk to the owner for 30 minutes about which oak chips are best for your next brew project.

As a home brewer you will still be rubbing shoulders with guys who flew to Hilo to pick up 2 growlers of Mehana Hawaiian Crow Porter,  but you will also know 8 other people who can brew a better porter and will be happy to show you how to brew it as well.

The whole experience is more participatory...instead of being a consumer waiting  at the end of a long chain, subject to the whim of bean counters and distributors, you become the whole chain. Instead of calling the brewer at Kona Brewing in Kailua-Kona to ask him what Seasonal he decided to put on tap next week, you are corralling him at the Kona Beer Festival to ask him about the  type and percentage of specialty grains in his Barleywine.

It's a whole different outlook. Spassky said "Chess is like Life" But Fisher said "Chess IS Life". But he didn't have to make room for a used Frigidaire® in his garage, and his wife isn't pestering him to make some more Midas Touch.

Anyway, there's not much I can add to Dexter's comments except this: Hey, craft brewer! You wanted educated customers. But be careful what you wish for, because you may educate them right out of your market. PS: Connection to Anderson's Long Tail theory? I think Dexter's closing comments about "participatory" consumption and the consumer as the "whole chain" make a nice corrollary to the theory.