Sunday, March 2, 2008

A note on beer prices.

You may have noticed that our beer prices are drifting towards $6 recently. Though I don't get out as much as I used to, I bet other bars are also raising beer prices. This price ascent isn't due to sheer bar owner money-grubbing; it actually has a complicated backstory. I wanted to give a brief economic-historical explanation as to what's going on.

Several years ago, a hop surplus drove down hop prices and left many hops unsold, hitting growers hard and causing them to reduce their hop acreage in order to use the land for other purposes. But the microbrew industry kept expanding rapidly, and beers that packed in massive amounts of hops were the most successful. Nearly every microbrewery began competing to out-hop each other to win the hearts of hopheads. The reduced US hop acreage couldn't keep up. Hop prices soared, doubling, tripling, and so on. It's now so bad that many brewers simply can't get the hops they want. Hop growers are maxed out just honoring their existing contracts; they can't even sell to new microbreweries. So you can imagine how much the breweries that are actually winning the fierce competition for hops are paying.

Not about to take a fiscal soaking, most brewers have recently decided to raise keg prices. Distributors (the middlemen between breweries and bars), no less desirous of eating extra unit cost, have raised their prices in turn. So bars like ours are now paying much higher keg prices. The end result is that, while we'd like to keep most of our beers at $5, the profit margins just don't work any more. Welcome, consumers, to the $6 beer. At least it's not as bad as the gas situation.

The good news is that US hop growers are madly increasing acreage again. In a couple years, it's very likely that hop prices will drop significantly. At that point, it's up to the brewers and distributors to drop their keg prices; if they do, I think bars will happily follow suit and drop pint prices, hoping to make beer more affordable to their customers. For our part, we promise we will. Hopefully your newfound knowledge of hop scarcity will encourage you to savor every precious hop as you drink your beer in the meantime. Ask us if you have any questions.


Rudy said...

...not to mention that barley malt prices have skyrocketed.

Bryan said...

yeah because that's what a capitalist does, once things shift back they rush around correcting prices to take care of the consumer.

you're in it for money we're in it for getting drunk ,laid ,beer muscles, beer IQ, etc...

nothing wrong with either side


If you're exclusivley committed to greed, there are much less tortuous ways to accumulate wealth than to open a bar in Brooklyn at the onset of a recession. Examples: investment banking, government contracting, collecting recyclables, mugging, busking.

But even a single-minded, experienced capitalist would want to lower prices to attain competitive advantage - consumers tend to prefer lower prices, and the loss of profit per unit could be compensated by volume and (expected) long-term benefits of greater market share.

That said, I'm of the personal opinion that these guys are quixotic enough to lower beer prices (in the event that distributors lower keg prices) just because they enjoy sharing good beer with fellow Brooklynites.