Cask beer: What price is right?
It may divide opinion, but there’s a great appetite in the pub industry for discussing the price of beer.
In The Cask Report 2017, I touched on the issue briefly, quoting research from respected market analysts Mintel. It found that almost a third of beer drinkers are prepared to pay more than £4 a pint; but also that 20% of on-trade drinkers wouldn’t be prepared to spend more than £3 per pint.
Low price was also found to be the biggest factor when encouraging drinkers to try new beer.
This creates a conundrum for cask beer. Many are of the view that charging a higher price for a pint shows cask beer is a premium product and provides better returns for pubs. Others think it will turn drinkers off and further drive them to outlets where beer is cheaper.
The rise of micropubs is another factor; there’s now an estimated 400 of them in the UK. Martyn Hillier, pioneer of the concept, has recently been quoted as saying he believes this could rise to 5,000 over the next five years.
Part of their popularity is the price point of the beer, typically around £3 a pint. But how feasible are these lower prices, and what is the wider effect on the industry?
“Overall profit on cask beer is wafer thin in free trade and national distribution where we compete against the many hundreds of breweries that operate in this market,” says St Austell head brewer, Roger Ryman.
Cask can be too cheap
“It’s not to say that competition is a bad thing. It often drives excellence in brewing standards and efficiency into a business, but the cask market is currently over supplied, which can drive prices paid down to the lowest common denominator,” he adds.
Justin Hawke, founder and head brewer of Bristol-based Moor Beer, shares some of Ryman’s views but is less convinced that competition is driving standards up.
“My concern is that some brewers are not correctly calculating their costs and consequently may be selling too cheaply. It’s sad that cask generally bears the brunt of this,” he says.
“It’s even sadder that some landlords feel that cask should be sold cheaply to punters because that’s what is primarily driving the category into the ground.
“From that perspective, you could say cask is under threat, and certainly cask that is more highly flavoured. [A brewer can] make cheap, brown, low-alcohol beer, but that’s not what consumers want any more. It costs a lot to brew a highly flavoured, hoppy beer. Brewers need to sell it at a sustainable price. Landlords need to as well.”
Far from being a boost to the pub industry, it seems cut-price cask ale is actually a threat, particularly to brewers making better quality beer who quite reasonably expect to be paid a price that reflects their high standards.
“There is far too much discounting around and it’s driving the licensees’ expectation of cask ale price down,” says Dorset-based Palmers’ head brewer Darren Batten. “If brewers continue to sell cask ale at as little as £50 per firkin, a lot of brewers will soon be out of business.”
Paying the price
The Good Pub Guide 2017 said there was an 87p difference between the cheapest and most expensive pints around the UK – as reported in The Morning Advertiser last autumn.
It found the cheapest pints in Herefordshire where the average price was £3.21 and, unsurprisingly, the most expensive was in London at £4.08.
A tax increase in the Budget and other price rises since then have doubtless pushed these prices up.
One of the key campaigns by the Campaign for Real Ale (CAMRA) is ‘cutting the tax burden on pubs’. It says that typically when you spend £4 on a pint of beer in a pub...
● 15p is business rates
● 49p is beer tax
● 67p is VAT
● And a further 15p is other taxes
(Source: CAMRA website)
This suggests that without tax, the cost of an average pint would be a little over £2.50 and means drinkers are paying some £1.46 per pint in some form of tax.
A self-selecting poll of beer lovers on Twitter, to which almost 600 people responded during its
six-hour duration, found that 44% of drinkers would pay no more than £4 per pint, but 30% of them would stretch to a fiver and 18% would pay even more.
This suggests almost 50% of drinkers are prepared to pay £5 or more for a pint of ‘perfectly served beer from one of their favourite breweries’.
Vicious circle
If the brewers quoted above are correct, then expecting to buy cask for a low price and sell it cheap is definitely a bad thing. On the face of it, licensees may feel they are getting a bargain and turning a profit but the truth is cheap cask beer is just that and it won’t be long before drinkers notice this.
Low-price produce simply doesn’t command respect and both brewers and drinkers feel this has an effect on cask beer quality.
Shane Swindells, founder and head brewer of Cheshire Brewhouse, thinks cask ale is the victim of a vicious circle. “We need the quality of cask beer across the board to rise and this will only happen if producers can make decent margins on the goods they make.
“If we could make better margins we would be able to invest in quality education (training) to help our customers keep our beers in tip-top condition all the time.”
Ryman also makes the point that realistic prices paid by pubs and drinkers is essentially an investment in beer quality and will lead to increased profits for pubs.
“The price of cask needs to reflect the inputs that go into it. In particular, refrigerated storage in the distribution chain – which remains far too commonly neglected – and the skill, training and time that licensees have to commit to cask in the cellar,” he says.
It can’t be denied that price is a big issue when it comes to the future of cask beer but there isn’t an instant solution.
With Brexit looming over us and no certainty about whether it will boost or trash the British economy, it’s no surprise that pubs are circumspect about raising prices. The status quo, however, looks more likely to hinder than help.
Excellence reaps rewards
The most sensible approach is to make sure you know and understand your market and then adapt cask prices to that.
If you have customers who will happily pay £5 for a perfectly served pint of a cask beer they love, as long as it reflects what it cost your pub to buy, why wouldn’t you charge that amount?
Some licensees might fear a backlash but it’s an approach that’s already being practised and, as long as your cask ale is served to the highest standards, one that works.
“We have variation in price throughout our own tenanted pub estate as licensees understand their customer base and price accordingly,” says Palmers’ Batten. “We feel that customers are less price-sensitive and will choose cask ales on quality, provenance, flavour and consistency. If a pint is excellent every time, then it will sell.”
