Why Beer?

Those of you who read my last article saw me taking subtle shots at the snobbish parts of the craft beer movement.  I still do believe that it’s wrong to be overly snobbish with beer and I will go into that in future articles.  But an article a friend sent me last week put everything more into perspective.  The big picture is that beer is losing overall market share to wine and spirits.  If beer as a whole is shrinking, that might make the 6%+ market share of craft beer seem less impressive.  Does that mean craft beer isn’t growing as quickly because beer is losing market share?  It’s possible, but I still think there is some good growth overall.  However, at this rate, in 10 years I am going to be sitting in a craft beer bar with a lot of 70 year old people (OH NO MY DRINKING FRIENDS ARE GOING TO BE DEAD SOON). But seriously I want to explore one of the main reasons why consumers might turn away from craft beer…cost.

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Cigar City makes the best pumpkin beer ever….

Before I get into this, I want to point out that I am basing this argument on people who go out to the bars or restaurants to socialize and consume alcohol responsibly.  If you want to tell me that you can get hammered on 8 rail whiskeys for 20 bucks, I can’t really offer you an alternative at that point except maybe to tell you that homeless alcoholics tend to be drinking Listerine and that’s much cheaper (and barely a step above it).  I will discuss the value of buying beer/wine/liquor in stores another time.

People perceive the overall cost of a craft beer to be too prohibitive when going out to a bar.  Which is fair when considering that most people come from a background where you can buy a cheap macro brew for 3 bucks or less on happy hour.  Buying liquor and wine can also be perceived as giving the imbiber more “bang for their buck” because of the higher alcohol content.  What isn’t readily apparent is that opinion is exactly what bars count on.  Liquor and wine are actually sold to the consumer at larger profit margins for the bar.  Let’s look at some numbers to give everyone an idea.   A 750 ml bottle of mid shelf liquor retails at 25 dollars (absolut, jack daniels etc).  750 mls roughly works out to be 25 oz or about 16 1.5 oz portions that bars measure by.  Each shot of liquor costs 1.50 to the house.  How ofter do you see a double pour of Jack and Coke costing 3 dollars? Never.  Jack and coke costs 8,9,10 dollars in most cities, so buying a premium spirit drink is making the bar 5+ dollars a drink.  Keep in mind I am basing this cost on retail value in stores and not the lower wholesale costs that most bars buy their alcohol at from distributors.  Even fancier mix drinks use juices and other modifiers that are equally cheap and those only serve to push the overall cost of the beverage higher.

Wine has a similar deceptive cost structure.  Most bottles yield 4-6 servings so let’s split the difference and say 5 glasses a bottle at a bar.  If the house wine costs 3 dollars a glass I can guarantee you that the bottle they are pouring from costs a lot less than the 15 dollars that works out to.  But let’s also look at buying nice wine off the wine list.  The wine list is always intimidatingly pricey to those of us without a lot of money.  Then you get to the cheap stuff, but you don’t want to be that guy who buys the cheapest wine there right?  Second cheapest wine #moneygenius.  Wellllll maybe not.  Let’s just pull my favorite quote out to really hammer this home, “a cheap bottle could be priced three to four times wholesale, while an expensive wine may be marked up only 1.5 times.”  Thank you mental floss for the numbers.  So, that 22 dollar bottle might only be a 7 dollar bottle of wine and might be cheaper to the restaurant than the bottle actually priced as the cheapest wine?  Bar and restaurant owners were not born yesterday.  From my experience, wine is a crap shoot and I have a hard time trusting a sommelier insisting that the 2010 was a really good year.  Wine is a questionable value if you don’t really obsess over it.  And if you’re not careful, you might be paying 22 dollars for a 7 dollar bottle of wine.

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Quality Ingredient

Now draft beer.  I am going to stick to explaining draft beer here because beer bottle lists sometimes behave like wine lists.  And most of the time draft beer is superior to the bottle (unless you are in a dirty bar that questionably cleans their tap lines, then bottle beer would be better…or just avoid dirty bars, ok?  A discussion for another time).  The standard way that beer is purchased is in 1/2 barrel kegs which have approximately 1984 fluid ounces.  The works out to be 124 16oz beers.  Except….the pressurized system for extracting beers doesn’t give a full yield.  There will be beer left in the keg and also you have to factor in things like foam-over and general human error that can occur in pouring.  Let’s be generous and estimate that you get 90% out of the keg or 112 beers.  A keg of a normal craft beer costs in the range of 160-190 dollars.  So most pints cost the bar 1.43-1.70 a pint under ideal conditions and most of those beers are costing 5-7 dollars in that price range.  That amount works out to 4-5 dollars profit for the bar (give or take).  That may appear to be a similar cost to the bar as other beverages, but there are also a lot of more tangible costs to consider for the bar owner who serves craft beer.

The consensus is that beer stays fresh in the keg for 30-120 days under optimal conditions.  Unlike wine and spirits you can’t just buy a large amount at a low cost and toss it in the cellar and hope that is keeps for a long time.  You are under pressure to sell it or else it goes bad.  In the case of some IPAs, they might only stay fresh for a month meaning that you need to sell it all otherwise you have to dump what you don’t use.  1/2 kegs aren’t portioned like wine or spirits so the loss of even 1 keg is a huge hit for a bar while 1 lost glass of wine is more irrelevant.

Beer tap systems need maintenance in a way that wine and liquor don’t.  The line cleaning I referenced earlier needs to take place to ensure the consistent quality of the served product.  Tap lines have to be cleaned at least every 2 weeks which is a cost that bar has to weather in time and money.  If a bar doesn’t do this, beer will start to taste sour and could get people sick.  Cleaning the lines increases the loss of beer in the keg because the beer in the line cannot be put back in the keg.  Some bars have gotten smart and started unhooking their kegs and offering the beer in the lines at a dirt cheap price to defray to cost because the beer in the tap lines ultimately gets poured down the drain anyway.  So, perhaps my 112 beer estimate was a tad off when you consider all these factors that go into serving beer.  All of that eats into the cost of the product.  If you are out at a bar the serves beer, you know you are getting a top quality product served in manner that requires attentiveness.

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Not on Bar Rescue

Beer is a much better value overall when you look at the  costs that go into serving it when compared to wine or spirits.  There is a good reason that Jon Taffer of Bar Rescue always recommends that owners turn to liquor to increase profits.  He rarely ever encourages a bar to become a craft beer bar.  A bar that serves craft beer is giving you a better value money wise and they are putting more care into the product than just pouring a beer.  If you want to get a quality product at a good value, in my opinion, craft beer is the best option and it is disappointing that more people don’t see it that way.  If you have tried beer and just plain don’t like it, I can accept that.  But if you are turning away from craft beer because you think it’s a better value to go with wine and spirits, you really need to think about the numbers.  I hope this gives you all some enlightenment on this subject and stay tuned for my next post.

Cheers!

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