One Price Fits All? Nice Try.

By April 16, 2018Industry Stuff

Remember Saturday Swap Shop? All pretty harmless fun, lots of small kids phoning in and swapping toys and getting rid of what to them had probably become junk, an answer to their problems. Panini Mexico 86 Swaps. Hmmm. Anyway, Beer Swaps by all accounts are the answer to every small breweries problems to….

We recently got dug out by someone – a bar in fact – on Mark Zuckerberg’s very non-private forum who decided they’d provide a bit of “feedback” by name about a few breweries who’s starting cask prices they didn’t like. All fair game really being in such a public industry but definitely something to digest when you’re a newish brewery owner. Just a pity we weren’t tagged to make it a fair game. Do you respond? Yop.

Now, and I’d love the opinion of other breweries on this, beers swaps are where it’s at and breweries with firkin prices over £80 can really expect to be run out of town. Really? Well it got me thinking about where we are as a brewery and where we are particularly with cask beer at the moment.

Firstly, swaps. Being a new ish brewery understanding our cost base has been one aspect of a huge learning curve during the last 18 months. Don’t get me wrong swaps for breweries at certain levels can no doubt be useful in enhancing reach, but at our volumes and stage in development swaps aren’t currently part of our plans for a few reasons. (1) They potentially dilute lots of hard work we’ve been doing with our own brand. Also it’s important for us to manage any potential affiliations carefully in line with the direction we’d like to move as a brewery. (2) Our focus has to be getting people enjoying OUR beers. (3) At present swaps would fly in the face of our efforts in trying to gain and maintain workable margins on our cask beers from day one. We also know the numbers on our own beers and what creates those numbers and our bottom line. (4) Most importantly, while our brewery is still growing and learning, swapping in and then having to sell beers we’ve had no involvement in making and don’t have a passion for doesn’t really do it for us on numerous levels, we’re not a pub/bar looking to get better prices out of swaps at this point.

So far as prices go, this place couldn’t see our business model, or the cost base we have to work from, but we’ve generally felt it important not to sell at all costs just to shift beer. There’s been lots of homework around pricing, specifically into the breweries we aspire to get our beers alongside in pubs and bars. It will ultimately be a case of horses for courses around who stocks our beers, while the majority of places we sell to can pretty easily achieve margins of 60%-65% on our firkins. If places care to buy from us in quantity they’ll see a reduction in per cask (and keg) rates but the stated margin is achievable without discounts. Thankfully – perhaps due to or maybe despite our pricing – to date we’ve managed to get our beers with regularity in to some superb outlets and all being well this progression will continue.

On cask beer itself, as more breweries weigh up stepping completely away from the format, for what it’s worth in my short experience there’s no doubt this is due to some oversupply but in the main its down to unrealistic price expectation on cask. Comparing some cask beer now is like comparing apples and bananas yet the price expectations some outlets have versus the actual costs of making the types of beers that people are now enjoying can be eye-watering.

We’ve been asked to sell firkins for £50-£60 yet we’re working with ingredients costs of circa £30, sometimes more, a firkin. Throw in beer duty of £16 on even a 4.7% beer, other fixed overheads and we’re in a situation where our cask beer can cost £50 before it’s even got out the door. There’s a very good reason the big family breweries can get beer out for £50 a cask and it’s not all economies of scale. It’s because they’re not paying £25-a-kg for the very best hops like citra. mosaic, simcoe, galaxy and the like. That’s their model, it works, but it’s a different product.

I’m not complaining as there’s better margins to look for in bottles, cans, kegs, holding our own brewtaps and selling t-shirts, it’s just a bit sad as we all enjoy cask beer, particularly now. Alongside other formats cask beer is in the best state ever in terms variety, flavour and general choice breweries out there. Places cry out for variety but then want it at standardised prices. How does that work? Not sure it does. Something will give.

The good thing is there’s lots of people and places getting to know modern cask beer – and what goes in to it – well. For others, what will it mean for their cask beer in the next couple of years? Suppose it depends on the business model.

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