Cost vs. Value

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In December of 2012, I got word that the LCBO was stocking something wholly unprecedented: Westevleteren XII. This beer which had historically only been available from the remote Trappist brewery in which it was made, was being released once worldwide to pay for renovations to the Abbey. With this advanced notice, I had been given the rare opportunity to sample the beer without making the pilgrimage to Belgium; a beer which consistently ranked as #1 on many aggregate review sites. But I didn’t bother. Why? The price: $80 for a six pack of 330 ml bottles. That, of course, didn’t stop others and apparently the limited quantity the LCBO had sold out in less than 5 minutes (http://life.nationalpost.com/2012/12/13/westvleteren-12-sells-out-in-four-minutes-at-lcbo-stores-but-who-really-cares/)

When I think back, I find I’m confused about what actually stopped my from buying it. At the time, I could rationalize it by saying I was a University student, being supported by my wife and such a purchase was out of the question. But that wasn’t quite right. I am blessed enough to have a partner who, knowing how much beer means to me, would definitely have supported even a purchase of such extravagance and made room in our budget. No, it would be more accurate to say that when it came down to it, I just didn’t believe it was worth the money.

This seems highly hypocritical for one who has taken to preaching the virtues of craft beer and trying to establish its worth as equal to that of wine or fine spirits. How could the (arguably) best beer in the world not be worth as much, litre for litre as a lower-mid priced wine (roughly $30 for 750ml)? The question then became, was I undervaluing beer or overvaluing wine? The answer, I think is both.

It is easy to say that beer shouldn’t cost as much as wine because it is easier to make, can be made in large volume, and can go from  the start of production to sale more quickly. While at first blush, this argument appears sound when discussing, say, a macro lager, it weakens significantly when we think of more complex styles of beer. Indeed, let us consider one of the most hyped craft beers in the world: Three Floyd’s Dark Lord.

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Here we find a beer which requires an initial investment of $30 merely to get the opportunity to buy it in the form of tickets to the Dark Lord Day event. Then, an individual bottle is sold for  $15 for a ‘basic’ 15% ABV Espresso-filled stout or $50 for the insanely limited barrel aged versions. Bottles are later re-sold by purchasers on sites such as ebay for $50-$70 for the basic ,and upwards of $250 for the limited releases.

At first instance, any of those prices sound outrageous. As the lingering bottles of Panil Enhanced on LCBO shelves can attest to, few are willing to shell out even $15 for a single bottle of malted beverage. But if you look at what goes into Dark Lord, things start to seem more reasonable.  Anyone who has home brewed or knows a bit about the beer making process can attest to the fact that getting a beer to 15% ABV the old fashioned way takes an immense amount of resources and time. It’s tricky too: a beer can very quickly go off when being brought to such an extreme strength purely through fermentation. Add to that the specialized ingredients going into the brew (including hundreds of pounds of local espresso, imported molasses and vanilla beans) and the tribulations faced by a wine maker begin to look a bit trifling. And, we haven’t even discussed the cost and space taken up by barrel aging, something which drives the price of fine whiskies.

Obviously, Three Floyds is selling at a profit, and no doubt a healthy one. However, the event they organize supports local charities, creates a tourist attraction in their community and offers a place for beer fans to meet and discuss their hobby. That’s not something that gets factored into the price of a single malt Scotch.

I will concede that I have picked a somewhat extreme example. Many may point to certain breweries who package rather ‘standard’ beers with straightforward production in large bottles and charge a premium. I wholeheartedly agree that some brewers (especially large multinationals) have taken advantage of the premium beer craze to perversely create demand through increased prices. My argument is simply that one needs to truly understand the process of beer making to make a defensible claim on a product’s ‘value’ as distinct from what people might be willing to pay. The same kind of mark-up gets applied to other beverages without the same kind of scrutiny.

Are we in danger of having beer prices catch up to other drinks? I doubt it. Some select, specialty products might start to reliably creep towards the seemingly astronomical $20 mark, but I find it hard to believe, given the general public’s conception of ‘worth’ that a six-pack of ‘normal’ beer will ever cost more than a bottle of table wine. Ironically, So long as I remain a beer drinker first, I guess I will continue to benefit from that fact.

P.S. I am planning on attending Dark Lord day this year so I’ll be able to give the final verdict on it’s “worth”.

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2 thoughts on “Cost vs. Value

  1. Hi Kevin,

    I came across your blog via your Youtube channel. I think the reason why the $10 dollars is a huge barrier to people is simply because it’s only one bottle of beer.

    Paying $30 dollars for a bottle of wine is equated to quality, but at least you get 4-5 glasses out of it. $100 dollars for a bottle of scotch is the same thing, and you can get several drinks out of it. But the cost per ML skyrockets when it goes up to close to $10 dollars for 750 bomber of Lake of Bays.

    Personally, I think these craft breweries are making a huge mistake – in an attempt to put themselves in the upper echelon of craft beers by raising their prices that high, they’re actually creating a huge barrier to entry for people looking to try their product.

    Why would I buy one single bomber of Lake of Bays when I can buy three Mill Street tall cans for the same price? At $8.95, they’re kind of pricing themselves out of range of a lot of new craft beer drinkers, or those looking to get into craft beer.

    • Hi Ian,

      Thanks for the comment. I hadn’t thought about it from the side of cost vs. number of drinks but you are totally correct. The fact that a bottle of beer is a one shot deal does play a role in assessing relative value. I also agree that craft breweries are taking a risk by up-charging for the sake of up-charging. Unfortunately, as you point out, LoB is a really good example of this. The beer they sell in large bottles is, on the whole, unremarkable and way out of step with other breweries’ prices. I agree that this is a likely turn off to new drinkers who might try it and decide craft beer as a whole is a rip-off.

      That said, I still feel brewers face much more scrutiny over pricing that producers of wine or whisky. For instance, Ardbeg is free to charge $100 for a basic 10-year old whisky and it flies off the shelves with no real explanation of why a Glenfiddich 12 year is half the price or an Aberlour of the same age is less than half. Yes there are reasons such as volume to explain some price difference, but it doesn’t even seem to register with most buyers.

      Similarly, with wine we see bottles of things like Opus One reliably hit over $700. Considering that a basic bottle of wine can be had for 1% of that, the disparity between a $3 can and a $10 bottle of beer seems much lower.

      I agree that craft brewers need to price conscious, it just doesn’t seem like wine or whisky producers face an equal restraint.

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