I’ve noticed a lot of folk commenting (complaining?) recently at the cost of “Craft Beer”. When the usual offering for so long has hovered in around the £3.50 mark, that’s understandable…but there must be a reason for this, right?

On the face of it, “craft beer” or “microbrew” or whatever else it is to be called currently, is significantly more expensive than the mass-produced available-in-all-good-stockists standard offering. Yes, some of that is due to ABV or Alcohol By Volume (how alcoholic a drink is) but this isn’t always the case, whilst a lot of craft beers do aim for a slightly higher ABV, the dominant level is still between 4 & 5%..so it clearly isn’t because of this.

The odd thing is, this price disparity isn’t always reflected in the wholesale side of the industry. For example, for example a Keg of Belfast Blonde(4.3%) brewed locally by Hilden Brewery of Lisburn, Northern Ireland (not even 20miles away from where I type) costs less than £120. For the unawares, a standard keg is 50l which is 88pints. So this costs <£1.36 p/pint wholesale (there are other calculations to take into consideration but this is just looking at the fundamentals) A keg of Carlsberg, Tennents or Coors Light from the major breweries distributing across Northern Ireland costs between £120 and £140 for the same size, or <£1.59 per pint. Yet a pint of Carlsberg, Tennents or Coors is probably going to cost you £3.50 in most bars…whereas Belfast Blonde is around the £4 mark… this is due to no other reason than publicans seeing a product that they and the public deem to be more “premium” and putting a premium price attached to it. Supply & demand in theory, however demand for the likes of Belfast Blonde is not setting the account ledger on fire…very few if any bar owners are going to be jetting off on a round the world trip based on the sales of Hilden Ale, it is genuinely just a case of “I think we can charge a bit more for that….” With nothing able to be done about it. Hilden don’t push you towards a certain RRP, in the hope that reduced sales cost increases volume sold… Some companies do, Red Bull particularly like to keep the cost of a can down in bars, especially since it is notoriously high! (99p in a newsagents, >£2.00 in a bar)…

Take another Northern Irish company, Whitewater Brewing. Now Whitewater are by all accounts, a smaller set up than Hilden, and they are based further away…so it must cost more to transport therefore cost more to purchase wholesale. Nope, wrong again. A 50l keg of Belfast Ale at 4.5%ABV is also in and around the £120 mark. Once again, it is being sold for approximately £4.00, or more in some cases. Being local costs more…seemingly. I was once told by a food supplier that Northern Irish Lamb costs more in Northern Ireland than it does in Scotland, and Scottish Lamb costs more in Scotland than in Northern Ireland. That’s fuzzy logic for you right there…

So Whitewater & Hilden are making a good local product, employing local people and not having to hire the worlds largest shipping containers to transport their product across the seas to different markets…Yet they can charge less for a Keg than Diageo….

Of course there is much, MUCH more to it. Anheuser Busch ( for example, owner Budweiser, Michelob, Shock Top, Goose Island) spent over $800million last year on marketing & sports sponsorship…that is a significant expense, and according to their website, they employ over 150,000 people worldwide…quite a big wage bill, especially when you consider that their CEO earned over $11million in 2012/12. So they NEED to charge more for their kegs. They operate huge beer factories 24/7, they aren’t just working from a mates barn, they are also a one-stop-shop, from malting, fermenting, bottling, packaging, shipping, our smaller brewers have to contract out most of this… And of course in Northern Ireland, the main breweries offer a full package of service…From glassware and POS to fitting and maintaining all the equipment required to serve draught beer. On the flip side,

A: their ingredients are often of a poorer quality (Craft brewers are known to be very picky when it comes to ingredients)

B: they can buy ingredients much cheaper due to the economy of scale…I want to buy 20kg of chinook hops, they want to buy 6000tonnes….who is going to get the cheaper price…

There is a lot said about the manner in which beer is brewed, It obviously costs more to have a guy standing with a mash paddle and connecting up pipes manually, standing peeling oranges and crushing coriander for a summer brew, when everything is automated and controlled by computer, the initial cost may be astronomical but you reap the rewards, and if that’s what your company is into, then fair play to you, fire away! To me though, the definition for this industry we call Craft Beer, should be “made”. A product that is made and not manufactured. A product which has someone doing it instead of something doing it. It doesn’t matter if you use Corn instead of Barley, if you use Hop Pellets instead of cones, it really doesn’t…good beer is good beer. Just give me it and let me decide for myself. In my experience though, it is easier to get good beer when it is made and not manufactured, not that manufactured beer isn’t good…it just tends to be a “good beverage” rather than good beer.

Ultimately, they charge the cheapest possible price to sell their products on, because it’s a very competitive market and their rivals are in exactly the same boat…. In the craft beer world, it seems to be very much a community ethic…not so much competition but peers, working together to further the industry…and of course the collaborations, oh the collaborations! With companies like Mikeller leading the way when it comes to working together, of course the big ‘uns collaborate too…but it seems very much a case of “friends close & enemies closer” and “what do I get out of this that they don’t…” If Carlsberg could be sold cheaper, it would be…so as to take sales away from Becks etc. Although…If I buy a keg of Carlsberg from Diageo NI it costs me <£140…I can buy one from a local Cash & Carry who import kegs from mainland UK for £89…except I won’t have the service that comes along with that, is the service worth an extra £50 per keg…hmmm…

So it still comes back to the publican charging more for a pint of locally produced Craft Beer than for mass produced lager…perhaps there is another factor here, that the publican likes pleasing the big companies…if I was to sell 300 kegs of Diageo in a year and 300 kegs of Whitewater, my negotiating position with Diageo is worse than if I was to sell 575 kegs of Diageo and 25 kegs of Whitewater…

HOWEVER

That is kegs. What about packaged beer, I hear nobody ask!

Well from a local supplier, Drinks Inc, I can purchase a case of Smithwicks Pale Ale(Diageo) for £12.49(12x500ml or £1.04p/bottle)or a case of Barneys Brew (Hilden) £18.50 (12 x 500ml or £1.54p/bottle)

What gives? How can Hilden be so much cheaper by the keg than a mass produced beer, but so much more expensive by the bottle? Shipping and bottling itself is the answer. Whitewater have their own bottling line, albeit a small set up, Hilden have no such luxury. Their product must be shipped to the UK to be bottled before being shipped back. Perhaps the local industry should be working together on this issue, but with Whitewater & Hilden being the only 2 market leaders, the onus would be on them, and Whitewater don’t need it… It’s tough to imagine a small set up like Pokertree or Farmageddon being able to invest much into an industrial grade bottling line…

Ultimately, good beer costs more, that’s just an accepted fact. Whether or not it should is entirely up the those selling it. With breweries rapidly expanding, it is understandable that they want to make a healthy profit to reinvest in expanding their volume capability, and with pubs under more financial difficulties than ever, it’s understandable that publicans want to try and get as much money for their sales as possible…and with big companies having to please their shareholders and give their bosses bonuses that could purchase most of the Irish craft beer scene in one bulk buy, it’s understandable why they have to charge what they do. But something somewhere has to give. If the craft beer industry is to blossom from the “alternative” to the mainstream, it needs to convince the wider consumer that it is worth the extra 50p per pint, when the customer needs those 50p’s themselves…I have said for a while now that the craft industry needs an entry level price product to get people onto the bottom rung of the ladder, but who will bring that product to market, knowing that the publican sees the word “craft beer” and thinks that automatically it is worth more…. Or perhaps we could just start charging a fair fee for a fair product.

Addition: something I should have pointed out earlier, if I purchase a case of Clotworthy Dobbin directly from Whitewater Brewery, a 12 x500ml case costs me £21.96…. Or £1.83 per bottle. And I then need to sell that on to the customer at enough of a margin that it covers by expenses and hopefully maybe even puts a few pence profit into the bank account. Or the consumer can but the exact same bottle from Tesco for £2.00. I simply cannot justify a 17p markup. A gross profit of 8.5% is unsustainable. But because Tesco buy the product by the pallet, their cost price will be significantly lower than mine, and this is reflected in the sales price. But when a pub charges £4 for a pint of the same product, the pub just looks silly.