Wednesday, October 8, 2014

The Cost of Craft Beers

For true craft beer drinkers, price is never a concern. For everyone else, seeing a store or restaurant charging what they do for their craft beers causes many to turn up their nose and blame the producers for the markup. However, there is much more that goes into the cost of making these wonderful brews.

Everybody has a dream, and those in the craft beer producing industry are no different. Creating their own beer may often begin as just a hobby. But add some encouragement from family or friends who have tasted it, and soon they see it as an opportunity to turn their dream into a reality. It is not long after that they realize the financial investment that goes into making their beer.

The small microbreweries face a disadvantage with nearly every ingredient.  We have seen the corporations taking over the world... nowadays, you can go out to buy your groceries, eat and fill up your tank all within the same parking lot. This same big corporate world often holds the advantage in the beer-producing business. 

According to a recent article, here are a few of the highlights on the key differences between micro and macro breweries...

Raw Materials
The four basic ingredients in beer are water, hops, malt and yeast. Macro breweries obviously have a size advantage, and this size helps determine the cost of materials. Microbreweries also use traditional barley in their products (better quality, but more expensive) than the big guys who use corn or rice. The difference in the price and amount used of the malt and hops is quite substantial as well. It can be half or more of what is used than the big corporations. This corporate flavor is often referred to as "watered down," but for some reason, we keep buying the stuff.

Storing and Packaging
According to the numbers, packaging is a lot more than we think. It may be the biggest expense the brewery incurs. Glass bottles or aluminum cans add as much as $1.50 per six pack of beer. Then when you figure in time and space needed to store the product, costs increase even further.

You need to get the product to consumers right? Well, shipping can vary from time to time over the course of the year. Weather and the price of fuel are all relative to this part of the process.

Government Taxes
We all know about the government wanting their share. All alcohol products are taxed by both the state and the feds. On the federal level, small breweries actually pay less than big corporations; however on the state level, they vary greatly. Example: 
62 cents per barrel in Wyoming versus 33 dollars in Alaska.

Since prohibition, all liquor must pass through a distributor. Not only do beer distributors just deliver the beer, they also help to promote the product and teach the best pouring techniques. This is often the highest cost that is involved with the beer. A distributor's markup can be as much as 50% of the beer.

So as you can see, there is a lot that goes into making these craft beers. It makes it a little harder on the bottom line for those smaller breweries in search of the dream.

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