The Beerage (or From Rags To Riches?)

   “I leave the home of a lifetime, like any son. I have hope and good intentions.                   And wandering into the daybreak, I learn as I go. To fall laughing into the water….”

(“From Rage To Riches” – The Blue Nile : clip “Andy McKenzie” on YouTube)

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What are you willing to pay for your pint? For your Schooner? Your bottle or can?

This shit is important. Especially in an age where the choice has never been so great. What I’m about to say, may be counter-intuitive to those with “market” sensibilities, but I’m going to say it. Because I truly believe it.

Beer is too cheap.

Given that I’ve not been struck down by an emissary from Bacchus, I’ll say it again. Yes, I believe that……

Beer is too cheap.

Why do I think that? Ask almost any micro brewer.

It kind of hit home when I phoned a brewer early last year to arrange the return of a cask from #ISBF2015. At the end of the chat, he told me that he wanted me to hear it from him, rather than from the grapevine. He was selling the brewery. Not because he was losing money, or owed a mountain of debt. Far from it. He was solvent. He also loved what he did, which was make great beers with passion.

But love wasn’t enough. There was a family. And bills to pay. And the old job that had been left behind paid far, far more.

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3 or so years ago, price was all to me. I’d go out into Manchester with £20, CAMRA Wetherspoon vouchers in my pocket and go home with plenty of change from 5 or 6 pints. And that includes the £4 bus fare.

Now? The CAMRA vouchers are in the bin.

I have nothing against ‘Spoons per se. But you have to ask yourself, how do supermarkets keep their prices cheap? And Wetherspoons IS like a draught beer supermarket. They keep their costs down. And, other than their “Zero Hours” contracted staff, what is their biggest outlay? Yup. Beer. And regularly, they want the beer so cheap from the suppliers that often, there is no profit (or very little) for the brewery.

And when you are working near regular 80 hour weeks for precious little reward……Why would you sell to ‘Spoons? Why would you want to get into brewing at all?

I’ve been asked a number of times, “Do you fancy getting into brewing yourself?” The answer remains the same. I have bills to pay and – as little as I do “earn” – I couldn’t afford the pay cut, as I remember a figure from a few years ago about the average Micro Brewer earning £20k.

£20k for 80 hour weeks? Sod that!

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In an era where there are over 70 breweries in the greater Manchester area – and more opening monthly (check here for the current picture) it seems – these people need to make money. For every Cloudwater and Vocation – with substantial backing, there are a number of breweries that take out substantial loans to realise their dream. And those don’t pay for themselves.

There are a number of ways that a brewery can increase their income (presuming that they can sell all that they make – of course)

  • Increase capacity (With – for many – the cost of funding via loans etc…)
  • Ownership of outlets (Tied Estate – Again, funding dependent)
  • Brewtaps/Events
  • Increase in the Progressive Beer Duty reduction (not whilst Moorhouses & Adnams draw breath though…..)

The first two of those involve significant additional expense and are simply not feasible for all.

Several local Manchester breweries regularly open their doors, from Wilson Potter in Middleton (for a couple of years now), through Black Jack, Beer Nouveau, Track/Squawk and do fairly well doing it. But it doesn’t solve everything. So we’re back at my original point.

The price of the beer in your glass.

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“Good people drink good beer.” as Hunter S Thompson said. And good beer costs good money to make.

I like big Stouts (and I cannot lie…..), I like US/Aus/NZ hopped Pale Ales and IPAs. The hops in these beers don’t come cheap, when you can get them. The more of these hoppy flavours that you want in that beer, the more expensive it is to produce.

Yes. If you want to, you can drink Sam Smiths Old Brewery Bitter at £1.80 or so a pint. If that’s your bag, fill your boots. I truly can’t stand the stuff. Never could.

As stated above, we have a phenomenal choice of brewers and beers in the Greater Manchester area (even if too many never see the bars of the city centre), but unless they can make enough money to make this worthwhile, this number must surely soon start to decline. Whilst I admire the optimism and financial bravery of the clutch of new breweries that have recently opened (and those that are soon to do so), I fear for their bank accounts.

Some will argue that the odd penny off beer duty will help. It won’t. It’s pissing in the wind.

We all enjoy choice on a bar. Many enjoy a full flavoured hoppy citrus or roasty pint. We love the fact that we have so many breweries to choose from.

It’s quite simple really (to this simpleton anyway). Breweries sell beer to pubs and bars. The brewery needs to make enough money to pay its bills and employees. The pubs need to make enough money to pay theirs also.

In summary, if this “Golden Age” is to continue, maybe we need to pay more for the beer, so that those who make it can make an actual living from their efforts.

Give me YOUR price suggestions below.

I’m off to the bomb shelter.

33 comments on “The Beerage (or From Rags To Riches?)

  1. What about those breweries without the city on their doorstep? Those that were out in the shires years ago producing great beer? The market is increasingly in the city, which is attractive for the startups but not everyone who brewed more than two years ago should be overlooked in favour of the new more local options “just because” either… perhaps not so much the emporer’s new clothes as being too near the emporer’s new tailor?

    • Fair point. Obviously, I speak with a Mancunian perspective, but am not unaware of the issues of market availability.

      Manchester is – as I’m all too aware – a bit of a bastard to get beer into. A point which was – in part – addressed by my pal Deeekos in his recent posts.

      And there are plenty of breweries within this “county”, distant from the “centre” who also have limited access. Breweries which have been brewing truly great beers for years, who still get few accounts.

      I’ll keep knocking on those (few) doors that are open to suggestion.

  2. A year or two ago I had the pleasure of sampling three separate pints of well kept cask Hophead in three towns cites within seven days.

    One in Huddersfield charged £2.80. One just off Trafalgar Square in London charged £3.20, and one in Manchester, a shining light in the beer scene, decided that £3.60 was reasonable. All are making a great living from all you can garner when you visit.

    Until we actually have some idea of whether what we’re being charged is reasonably consistent how can we decide what is reasonable? While the pub in Huddersfield will have lower overheads its prices are set at levels that they obviously feel comfortable with and yet are eminently fair. Are they screwing the breweries? I very much doubt it.

    Did the Manchester bar simply push the price to the maximum knowing enough people would pay it? London is closer to Dark Star, I accept, but allowing for wages, rent etc how can it be 40p cheaper?

    There has to be some sort of base line, some consistency, before we’re asked to pay more (or ask for reductions!).

    • I get your base point.

      But there are a number of institutions that take a slice of the beer pie before your money hits the cash register.

      The Treasury.
      The Distributor/Wholesaler.
      The Pub Co.
      The Pub.

      Which, by the time you’ve enjoyed that cool concoction of malt, hops and yeast, leaves little for the brewer. Realistically, there are few areas above that are likely to change soon in terms of their “take”.

      Hence my argument. With which – I’m not THAT naive – many will disagree.

  3. Good article, J. Unfortunately the enormous disconnect between people who know how hard brewers work and those who don’t care seems to be ever present.

    IMHO, outside the craft bubble people won’t pay more for their beer unless there is a corresponding increase in their take-home pay…which isn’t going to be happening soon with this shower in charge.

    • Completely agree. What I have noticed is, that with younger (or “craft”) drinkers, quality matters most. They are flavour driven. And will pay for it.

      They are the future of beer drinking. Not those in small rooms in Sam Smiths houses huddling over a £1.80 pint.

  4. In Belfast, if I’m able to pay less than £4 for a pint I’m pleasantly surprised. As said above, prices vary so wildly its impossible to judge whether you should pay more

  5. So we think that an an increase in the price of a pint will filter all the way back to the breweries? Not in my experience. Or at least not proportionally anyway. The problem? Too many micros for the size of the market. Best solution increase the size of the market. The new beer scene must expand away from its niche position and become more mainstream. It is/has happened in the States. Brewdog, love them or hate them, are trying to make this happen. Why not here? Pubcos strangulation and control of access to market by the bigger brewers? Yes some toss a bone to the micros, but it is tokenism. How to make this happen. Ahhhh that is the problem. Any answers?

  6. i get what you say about the spoons, it’s not a place to enjoy beer, on the odd occasion we got there to eat, the beer is never ever anything special, just a pint, and i know that not everywhere you are going to go you will be inspired, but they are the tesco (or morrissons) of pubs

    • Jim,

      The real issue is wholesale price not bar price, you see far more landlords driving round in 7 series BMW’s, Audi RS’s, Range Rovers etc than Brewers, or their Customers!

      If I had a pound for everytime I get Told “your far too expensive I can get X for £50 a Tub” or “Did I hear you say if I buy 4 I get one free?”

      Sadly there are many that will fulfil these requests and that’s usually because someone in the chain isn’t getting paid! & Honest businesses can’t compete with that!

      Putting the price up on the pump will only reduce the volume.

      For the bubble to not just burst overnight, wholesale price needs to rise, and the retailers need to cut their GP expect ions into the 50’s rather than the 80’s (as some I know) spoons work to at least 62% GP even at their low prices as far as I can see!

      The thing is though I think to sort the market out, the Bubble does need to burst in a big way, reducing the amount of suppliers massively, so the ones who are left after beermageddon can take control of the bull by the horns again and charge a realistic price for their quality product, until then it’s going to carry on being a hard road to travel on!

      • Ah. Captain. My point was aimed at wholesale prices, if not explicitly stated then I apologise.

        I checked with a small Micro (before publication) about the impact of beer duty on an increased wholesale price (WP) and realise that for each additional £10, (within the stated production limit – PBD) there would be little or no increase. Hence a WP rise is probably the best answer for Micros. Which *shouldn’t* lead to a MASSIVE price hike at the pump.

        Irrespective. I think that there will be a thinning of the herd. It’s inevitable with a finite market and increasing supply. Unfortunately, some good beer will fall with the bland cheap stuff.

        And that saddens me.

      • I have no idea who these licensees in flash cars you speak of are, but as a licensee of two freehouses in the South East, where beer is most expensive, I don’t recognise the picture you paint. I do not try to push down prices from microbrewies (I would rather buy the best, pay what it costs, and charge accordingly). I can say that I’m approached almost every day by breweries trying to undercut the others, and I’ve been offered thousands of pounds extra discount by one well-funded micro to delist a small regional and replace it with theirs.
        The overwhelming majority of tied licensees earn well below minimum wage for the hours they work and many are dependent on tax credits. The tied pubcos charge up to double the open market price for beer and dictate the list prices and SIBA list prices to all that supply them. Only tied pubs pay list price, breweries operate on discounts that frequently are never printed, so actual wholesale beer prices are never opaque.Duty rises were always applied as percentages to the list price, further increasing the difference paid by tied and non-tied licensees.
        GPs were traditionally between 60 and 65 per cent, depending on style of operation (a large pub with a good fresh food offer, employing 20 staff needs a higher GP than a tiny wet-led pub for instance) but very few licensees get that now. I know of no operators with beer GPs in the 80s – I can only assume that if they are any then beer would be a tiny proportion of their sales. For most operations, apart from small, busy wet-led, a GP in the 50s would indicate a pub that is would be extremely vulnerable to any drop in sales or rise in costs and anything below that is simply not viable as the primary source of income stream.
        If, as you state, Wetherspoons are operating on a GP of 62 per cent then they are sourcing their beer for around cost, or below cost price.
        It’s also worth noting that anyone calculating GP for setting prices on 72 pints a cask is overstating their GP – because of sediment there is only around 68 pints of saleable beer per cask and this is all the Brewers pay duty on.

    • Dave,

      I don’t detest Spoons as such, but they are a part of the problem. They serve a purpose for some. Some (in Manchester) do stock decent beer, but probably won’t be paying full whack.

      Interesting to note that in Peterborough, the Spoons sometimes stock local Micro Bexar County. A bonus.

  7. Excellent article Jim …. written like a true brewer – it must be all those collaborations!! I wonder how many drinkers truly appreciate that breweries receive less than a third of the actual cost of a pint. So for £1 a pint (or less) the brewery buys all the raw materials, brews the beer, stores the beer, delivers the beer, collects and cleans the empty barrels. Not forgetting staff wages, heating, lighting, cooling, fuel costs, rent, rates, beer duty taxes, etc.

    With so many breweries out there, quite a few independent pubs are beginning to dictate the price that they are willing to pay for beer (almost akin to Wetherspoons). As such, to remain competitive, many brewers feel that they cannot increase their costs even though their actual production costs have increased. For example, most recently, the introduction of the Living Wage.

    Sadly, I see only one outcome to this – unless breweries somehow get a larger slice of the ‘pie’ then we’ll see quite a few brewery closures over the next 12 months. Due to economies of scale, I feel the larger, well-funded breweries, will survive the best. The medium and small breweries are most at risk including many established breweries. Is the boom over?

  8. Huge amount of snobbery against Spoons on here, sorry. Going to one of their pubs is what got me into beer in the first place! If you dismiss the whole chain then you’re also dismissing hundreds of thousands of ‘ordinary drinkers’ outside the rarefied craft bubble who can still love a pint of cask.

    Yes, they’re going to be pushing for economies of scale in beer purchasing, but I imagine some well known names who rely on the regular orders Wetherspoons provide.

    • Not quite snobbery on my part. Not enjoying a place does not that equal.

      And many brewers won’t sell to Spoons because of what they pay. And what is paid to brewers, wholesale, is the point of this piece.

      If you want wide choice, you’re either going to have to make brewing worthwhile, or drink mass produced beer. And THAT’S where I become snobbish.

  9. Cracking post again Jim. Couple of points:

    I agree that it seems margins are very thin to non existent for many brewers, given how the price of a beer is split. I try to buy from those breweries, pubs, bars, bottle shops that I think emphasise smaller local producers and champion quality & as a result am happier paying higher prices. Also, some knowledge of what goes into making beer (both ingredients & graft) helps me at least approximate what a fair price for individual drinks should be. The problem generally is that this approach relies on some level of beery knowledge (& ability to pay) that may be untypical.

    The second point is ‘price gouging’, basically higher prices because the ‘market’ will sustain an inflated cost which often goes only to the seller, not the producer. I’ve seen plenty of examples of this, and occasionally fallen for it, but then it reinforces for me my decisions about what & where I drink. However, I’m not sure joe bloggs would be able to know which ‘higher price’ is genuine?

    I guess while the process of who gets what is opaque all we can do is use proxies to make decisions on where higher prices are justified in the hope more or ‘enough’ ££ goes to the brewer.

    • Thanks J. I take your point about pricing at point of sale. It’s difficult to judge quite why one premises may charge £2 a pint more for the same beer when the premises are 300 yards apart (for a recent example – referenced by Deeekos).

      Rent? Staff costs? Who knows. I certainly don’t and wouldn’t seek to criticise without facts. My criticism is implicit by my absence.

      I truly agonised over writing this piece and believed that I would take a kicking over it. It’s a thorny topic. But (isn’t there always…..) I do have a certain level of engagement with Northern Micros – some of whom I regard as mates now – and there is a consistent theme (but not for all) of struggle to make ends meet. It is a hell of a job. Long, long hours, tail chasing for (frequently) little reward. People need to understand the true cost (in all ways) of the beer they drink. My effort here won’t reach many. But I tried.

  10. Something has to give somewhere along the line. Whilst I love these beers produced by the micro breweries we the paying punters have only so much to spend on it. An evening out in Manchester costs a fortune and most have to save up a few weeks before indulging. I know the ingredients are rising but please be sensible with your pricing else you will kill that golden Goose.

  11. Good piece.

    There needs to be an open market for brewers to get their great beers into pubs without the middle man pubcos taking all the profit away from everyone in the supply chain who do all the work.

    How many pubs cannot sell good, well brewed, delicious local beer because they are tied to one of the #Pubco’s?

    How many of them would buy this beer if they could?

    How many small independent good beer brewers are delivering their beer directly to some of those tied pubs through the national SIBA DD scheme or some other Punch Taverns / Enterprise Inns et al supply chain trickery where the publican orders through the pubco supply chain and the pubco sends the order to the brewer the brewer delivers the beer? The pubco pays the brewer £55 (?) per cask the tied publican pays the pubco £120 (?) the pubco does none of the work the pubco makes all of the potential profit available in the entire supply chain.

    Iv’e come across a few people who got into brewing who didn’t find out they couldn’t sell the beer they were projecting to brew, and distribute to a range of local pubs, until they actually were up and going with their new business venture and knocked on the doors of local pubs only to discover three out of four of them were tied as above and couldn’t buy local ales… and the two out of four of the remaining pubs do Carling only.

    The beer tie is NOT the only problem in the whole of the market but it is the biggest problem.

    The pubco’s are blood suckers, leeches, vampires, parasites. They bring NOTHING positive to the market and they need to go.

    Currently the pubco’s are all running around bullying their tenants to sign new contracts because of the upcoming Market Rent Only legislation coming into place in June.

    • Cheers Mark (may I call you Mark?),

      What you say may be part of the solution – long term. And very valid point also about levels of knowledge of sales issues BEFORE new breweries commence brewing. I truly fear for new guys setting out on their journey in brewing. It’s a hard game, in more ways than one.

      There are a myriad of solutions possible to this problem of earning a decent living. And I have – I completely accept – merely scratched the surface. It would take someone far better than me to conduct a thorough analysis, I’m afraid!

  12. Perhaps a lot of breweries are too small and not efficient enough? If you have no economies of scale you will struggle to make money – this is true of any business.

  13. Great article.
    Unlike many industries, Micros have, over the last 3-4 years seen a huge increase. Real ale drinkers have too increased but not at the exponential rate of Brewers which leaves us with fantastic choice for the consumer, but an ever increasing job for the Brewer.
    I started two years ago with a 6 barrel plant with ambitions to take on the world with our ales. And we produce some belters. But getting into towns outside your own is hard work. You simply can’t be out there selling, brewing, delivering etc. So you employ a delivery driver, brew yourself and have someone selling. Any sales person worth their salt will want £25-30 k. A delivery driver and other £20. £45k in wages alone to find is a lot of brewing. Not to mention your own money, investment etc. We are in it for the love, but live don’t pay the bills!
    I personally hate Wetherspoons and would rather pour my ale down a drain than feed their ego any more. And in turn I feel I’m doing a tiny amount to help the micros. We should all stand together on this one and say ‘no to Wetherspoons’.
    When they got in touch they informed how much they paid for their ale. £47 for 4% firkin. Do the maths. Unless your knocking beer out in 20bbl plants, you’re making no money from Wetherspoons. They, unless we do something , will be the first nail in the micro industry.
    I have a pub, and we shift 15 firkins a week in there and 10-15 go out to others. It makes enough as there’s only me doing the lot. The beers good, we get what we need for it and it only goes in to great outlets. But it’s my pub that gives me the luxury of having a micro. Not the other way around.
    Camra have done an amazing job over he years raising awareness. But the micros are on the cusp of being masters of heir own down fall. And there’s one coming, you mark my words. Plenty will close, there’s just not the customers out there willing to pay what you need. To until then, keep brewing and enjoy it for as long as you can. Only the fittest will survive!

    • Thank you Justin. All very valid points with a greater level of understanding than I, because you are living it.

      A small tied Estate is one of the answers that I floated. I truly believe that that is A way forward. But one with inherent costs which isn’t feasible for many. But I do see/hear increasingly of breweries – slowly – picking up premises in which to sell their wares.

      Keep on keeping on buddy.

  14. I sort of mix my costs. I know about and drink the good supermarket based craft beer and I assume they provide a brewery a baseline level of security facilitating more costly brewing! When out I try to drink decent beer and as I know the associated costs I am prepared to pay to taste. I recently paid Nearly £7 for a pint of Marble Damage Plan in Chorlton. I could have drunk a half or chosen an alternative but I enjoyed & appreciated the quality of my purchase. My savings come from not drinking overpriced beer in sporting venues or some silly trendy bars. I drink bottles, cask and keg – I attend brewery tap bars – I follow bloggers I respect – I drink Manchester brewed beer – I buy some bargains and sometimes I pay amounts I would previously never have dreamt about eg £11 for a 660cc bottle of imperial stout. Very very rarely am I disappointed by my overall experience of the price/value for Monet balance. Sometimes I even wonder about how they make such good quality beer at the price I am paying! I also drink in spoons especially when I venture outside Mancunia.

    • People seem to have picked up on my Spoons comments. To be honest, I really (as an individual drinker) don’t dislike them as such. I just recognise them for what they are. Draught beer supermarkets.

      They are also a bit like tradesman, in so much as there are a lot of rubbish ones out there and a few golden nuggets. You tend to stick to the golden ones.

      Waterhouse in Manchester is one of the few that I trust. But, with so many excellent pubs and bars around, I rarely go now.

      • But that’s a nil sum game Jim. What happens when more and more do that and fight for the same limited market?

        Too many brewers and not enough free entry to market is the main issue. That will change a bit by brewers giving up when they can’t make money and maybe PubCos will be forced out of the market eventually, but that doesn’t look likely. Market rent only is a partial answer but Mark Dodds can tell you why that isn’t going to really work.

        There is too much supply and not enough demand. Pubs have the upper hand where they are free to choose from whom they like. The cheap wholesale prices are there. They’d be poor businesses if they didn’t take full advantage of it.

        And you can’t really feel sorry for brewers. They know the score. It is dog eat dog out there.

  15. True that re the “Nil-Sum game” P. But they see it as a way (perhaps temporarily) to stay in “the game”.

    I do feel some sympathy for the brewers. (Perhaps I’m being patronising here) I truly think that some go in with their eyes wide shut, full of hope and optimism that the product will sell itself. When – as we both know – this particular local market (Manchester as an example) is simultaneously both large AND small and simply cannot sustain the volume being produced. And I DO get that.

    Quality doesn’t always survive. In the beer market at least, Darwin was wrong.

    And no. Most pubs aren’t free to choose what they want – unless they are free of tie – the pubco decides. A deceased equine that I have no intention of flogging.

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