Talk about liquid assets. At the new Big Board burger joint on H Street NE, you can watch beer prices rise and fall in real time on a large digital screen mounted to the wall. The more pints you buy of any particular brew, the farther its cost will drop. So you’re left standing there, frothy glass in hand, staring at the screen, kind of like a trader tracking equities at the New York Stock Exchange—only slightly less drunk.
That’s the idea, anyway.
On a recent visit, I was stoked to see that New Belgium Ranger IPA, a popular Colorado product that is relatively new to the District, was down 50 cents to $6.50 per pint. You know the saying: buy low. Bartender! Pour me a Ranger! It turns out the discount comes at a high cost. The keg is already kicked. Bummer.
My next two choices, Chocolate City Cornerstone Copper and Allagash White, have a similar story: The price had dropped until the keg ran dry. Double bummer. I hemmed and hawed, scouring the prices of somewhat less compelling libations. Yuengling for $4.50, Peroni at 75 cents off—no thanks. I finally settled for a Guinness. Price: $7. No discount.
“Isn’t that depressing?” grumbles the guy beside me at the bar. “I switched to whiskey.”
Modeling your bar after the running dogs of Wall Street might seem like a terrible business plan in the current cultural moment, with protesters occupying Zuccotti Park and ricocheting stock prices imperiling 401(k)s everywhere. But in D.C., evoking the glory days of the bubble seems apt. Around here, the cost of suds generally seems to go in one of two ways: high and higher.
I had just gotten back from a trip to Asheville, N.C., where craft beer is cheap, around $4 or less on draft at most places. That the rustic watering holes of a sleepy town in the Smoky Mountains charge less per pint than the finer establishments in the nation’s capital should come as little surprise.
But I’ve experienced similar sticker shock in San Francisco, where cost-of-living markers, including the average rent ($2,305) and average home price ($808,481), exceed even those of the pricey District. I nearly blew a bottle cap one night at a Haight Street bar called Toronado. One Flemish red ale, the Bockor Cuvee de Jacobins Rouge, was priced at $5. At D.C.’s Smoke & Barrel, the same beer costs $9.
Rare imports, of course, can be expensive anywhere. What’s most outrageous, though, is the difference in local beer prices. On my trip to San Francisco, many of the West Coast beers hovered around $4 or $5 a pint—and not just at the divey Toronado, either. Even the more upscale Monk’s Kettle offers local drafts for a Lincoln or less: Sierra Nevada Foam Pilsner for $5, Lagunitas Little Sumpin’ Wild for $4.25.
Yet, in Washington, where drinkers can now sample D.C.-brewed beers for the first time in 50 years, even the local brews aren’t particularly cheap. DC Brau Public Ale costs $6 on draft at The Big Hunt. At Tonic in Mt. Pleasant, the price is $7. The local brewery’s second effort, DC Brau Corruption, runs $6.50 on draft at both Meridian Pint and ChurchKey. All this for a brew that doesn’t even have to cross the District line!
Ask craft-beer folks about prices and they tend to stress their product’s artisan quality. Of course you can find some cheaper swill, the logic goes. But it’ll be made with rice or corn instead of barley and other fine grains. A can of National Bohemian, for instance, will set you back just $3 at Smoke & Barrel—and a mere $2 at the Raven. To craft devotees, that’s like opting for a McDonald’s burger.
“You can buy a very cheap hamburger, one that’s full of flour, oatmeal, and soy protein, but it’s not a hamburger,” says Jim Caruso, CEO of Flying Dog Brewing Company. “If you want a steak burger, you pay for a steak burger. They are two entirely different products. The former is produced to be as inexpensive as possible. It’s a commodity. It’s automated.”
And yet, sanctimony about quality will only take you so far. A pint of the popular Belgian-style ale Flying Dog Raging Bitch from Caruso’s Frederick, Md. brewery costs $7 at Meridian Pint. Go to Baltimore, pull up a stool at Magerk’s Pub, and you can slurp down a pint of the same superb suds for just $5.
Why is good beer so frickin’ expensive in this town? I gulped down the rest of my $7 Guinness and tried to find out.
Three basic components make up the beer economy and account for its prices. There are the breweries that make the stuff. There are the wholesalers and distributors that carry it to your corner. And there are the retailers that sell it.
Let’s start at the source: your local brewery.
Here in the District, with its fledgling brewing industry, you and your fellow beer drinkers are chipping in on the financing of these emerging producers, which have to cover the not-inconsiderable costs of opening a brewery.
Consider D.C.’s own Chocolate City. At a launch party at RFD in August, its first batch of Cornerstone Copper Ale ran on special for just $4 per pint. RFD now regularly charges $6 per pint. “We had to buy all our own equipment. So, our first beer was the most expensive,” Chocolate City’s Jay Irizarry says.
Chocolate City also needs to recoup the more prosaic costs of doing business. For locals in Washington, rent may be the most formidable. Add to that utilities, ingredients, packaging, shipping, and labor.
Then there’s the alcohol excise tax the District requires brewers and distributors to pay. Of course, the rate here (nine cents per gallon) is actually lower than it is in most places, including California (20 cents).
Likewise, D.C.’s new breweries don’t face especially steep labor costs, as many businesses in this high-wage market do. DC Brau, for one, employs just four people. The rest of the work is done by volunteers. They’ve also saved money on packaging. Rather than grapple with the rising costs of bottles and cardboard, the firms are choosing the cheaper option of aluminum cans for their six packs. Chocolate City and 3 Stars, meanwhile, are distributing their own beer, which should cut costs in the long run.
On the other hand, the local breweries around here—in an area where the industry is still burgeoning—have higher costs that stem from their newness. One of the biggest factors in how much you pay for locally made beer is the scale of production. Each of the District’s breweries is technically operating at a “nano” level, meaning the amount of beer they make is minute, even compared to others defined as microbreweries.
“We have a 15-barrel system while a much larger brewery like Flying Dog makes 50-barrel batches,” DC Brau’s Brandon Skall says. “We have to brew three times to accomplish what they do in one brew.”
Chocolate City’s seven-barrel system is even smaller, producing just 30 or 40 kegs a week. “As small as we are, we can’t afford to drop the prices of our kegs right now,” Irizarry says. “If our volume were to grow significantly, if we were to jump up to 100-barrel fermenters, I could more easily guarantee that the price will come down.”
The kegs themselves represent a big cost, and are a particular peril for small operators. “If we have kegs out in the market that haven’t come back, it can cost us $100 per keg a week,” says DC Brau’s Skall. “Right now, we have a bright tank full of beer and no [kegs]. We try to buy more kegs every month, but with our profit margins we can only buy so many.”
This is all to say that just because something is produced locally doesn’t necessarily mean it can be had at a substantial hometown discount. “You wouldn’t say this chicken wasn’t delivered from far away to Whole Foods, so it should be cheaper,” says Skall. “You take into account the size of the farm, the amount of labor it took compared to much larger farms.”
The biggest factor in the price of the locally produced beers, though, was determined before the new breweries even got into the game: An existing culture of high beer prices.
The modern craft beer movement began in California. Pioneering breweries, like Anchor and Sierra Nevada, have been in operation since the late ’70s and early ’80s, when lower-priced mass market brews set the tone for the industry. In contrast, D.C.’s beer scene came of age much later and grew out of the rising popularity of Belgian beers, which tend to fetch higher prices to begin with.
With imports and microbrews from other places already priced at around $6 per pint or higher, it makes little sense for a newcomer to charge less, even if that producer is local. “If you start pouring beers at $7, then that becomes the way of the world around here,” Irizarry says. “We’re not looking to take a $4 shirt and sell it for 50 bucks. We need to be competitive.”
But a local brewer in San Francisco or Asheville wouldn’t be able to make the same calculation.
If the local guys are simply taking their cues from the larger market, then maybe it’s the middle men—that is, the wholesalers and distributors—who bear the most blame for the high price of beer in the District.
The distributor’s job is to get beer from the brewery to the retailer. With this role comes the brunt of transportation and storage costs. Transportation is already a heady investment, but it becomes more expensive as the price of gas goes up. Beer requires refrigeration, which adds another layer of costs. Then there’s the issue of health care.
“The first rule of beer is beer is heavy,” says Larry Bell of Michigan’s Bell’s Brewery. “A case of beer weighs 36 pounds. You look at a keg of beer that’s over 150 pounds. This is tough stuff and consequently, you see a lot of beer truck drivers get a lot of back and knee injuries.”
All these expenses (plus a modest profit margin, of course) add up to an average wholesale-level markup between 30 and 35 percent above what breweries charge.
Distributors from a range of both large and small wholesale and importing companies in the area say they are discouraged from charging more simply because of competition. “We have pretty much the same margins as other distributors; otherwise, a brewery wouldn’t go through us,” says Tim Schliftman of Maryland-based Legends, Limited. He adds, “The breweries don’t want their product being price-gouged by someone who makes a million dollars off something they are trying to sell for ten bucks.”
Still, there is room for finesse. “Sometimes we’ll put an extra margin on a case of beer, so we can bring the price of a keg down,” says Chris Turner, sales manager at Hop & Wine, one of the larger import and craft beer distributors in the area. “Say fake brewery Duff comes to us and they want to be a competitive player in the India Pale Ale (IPA) category,” Turner explains, referencing the phony beer brand from The Simpsons. “Let’s say Duff’s IPA costs us $120 a keg. If we use the standard markup that keg would be pretty expensive for our customers. But maybe Duff has a beer in bottles that is only $48 a case and the category average is $50. Since we sell so many more cases than kegs, if we mark up the cases a bit we can sell the kegs at a lower price and make the margin up that way. It’s little tiny amounts, fifty cents here, a dollar there. These things make a huge difference in the distributor world and a little money adds up to a lot over time.”
Another big factor impacting the price of craft beer at the distributor level is the bigfooting influence of Big Beer. Regardless of whether you drink Anheuser Busch-InBev or MillerCoors’ brews, these corporations still carry tremendous sway over beer prices. “When the big guys take price increases, they’ll encourage their wholesaler to raise the prices of beers in the rest of their portfolio—even when those [smaller] breweries aren’t asking for an increase,” says Bell.
In other words, when the price of Blue Moon, a Coors product, goes up a buck, your beloved Bell’s Two Hearted Ale may suddenly suck up another one of your singles, too.
Craft aficionados, of course, love to gripe about the middleman. And it makes sense: The distributor isn’t anyone’s beloved local beer bar, and he’s not anyone’s innovative craft brewer, either. But every one of the complaints leveled against wholesalers and distributors could be leveled in other markets too. To understand D.C.’s price situation, it makes more sense to look at those snazzy, beer-focused taverns that have sprung up here over the past decade.
The biggest markup on that cold one in your hand generally takes place at the retail level—the bars, restaurants, shops and supermarkets that sell beer directly to consumers. Here’s where D.C. propels local beer prices into the stratosphere.
Notice the tin ceiling overhead, the exposed piping, the dusty brick? The operators of this hip watering hole paid a pretty penny to make it look so stripped-down and shabby chic. How do they recoup those costs? You’re drinking it.
And the reason you’re drinking it is that the tavern owner figures you can afford it.
“The recession never really hit D.C.,” says Brian Kruglak, beer director at Jack Rose Dining Saloon in Adams Morgan. “There’s a lot of affluence....If you look at the beer bars—ChurchKey, [Pizzeria] Paradiso—they’re all aesthetically very pleasing, and their clientele is the same. Jack Rose is no exception. We charge certain prices and bring in certain products because we want to bring in that crowd.”
The operators, of course, point to the high costs of things like real estate and the vicissitudes of the food economy.
“It’s not uncommon to see rent at $20,000, $30,000, $50,000 a month,” says Thor Cheston, former manager of D.C.’s Brasserie Beck and Mussel Bar in Bethesda. “When you break that down with other expenses and overhead, and you divide that by 365, you see opening daily operational costs in the tens of thousands of dollars sometimes.”
Likewise, food costs tend to fluctuate more than booze. Restaurateurs here and elsewhere compensate by using drink prices to subsidize meals—just as meals become more important to beer establishments thanks to the gastro-pubbing of Washington.
Sometimes, even beer prices are leveraged against other beer prices. Pizzeria Paradiso bar manager Greg Jasgur, for instance, says he sometimes increases the price of common, cheap beers in order to lower the cost of exotic, expensive brews. He cites one keg in particular that would normally cost patrons $18 per glass. He sold it for $10. To make up that differential, the price of another brew goes up. One extreme example, according to Jasgur: A beer that should have cost $2.60 was marked up to $6. He didn’t say which brands.
The District’s neighborhood politics—which make it very easy for local residents to get in the way of liquor licenses, adding new costs for retailers—also pushes prices above where they’d be elsewhere. Washington may have seen a gastro-pub population boom, but many of those births required tavern owners to hire pricey lawyers to navigate Advisory Neighborhood Commissions, who are able to wring sometimes costly concessions from new establishments. The overall effect also reduces competition.
Most retailers I spoke with point to a standard mark-up of 40 percent on beer. But sometimes even that substantial margin doesn’t begin to cover the high rent and overhead. “A markup of 1.4 times the cost of the product is suggested retail price, but that figure in D.C. is pretty rare to find,” says George Aguilar, manager of D’Vines wine and beer shop in Columbia Heights and De Vino’s in Adams Morgan. “It’d be very difficult to survive. The cost of living is too high.”
Add to that 40 percent figure a 10 percent sales tax on alcohol in the District, and us brewhounds are paying nearly 50 percent over wholesale prices for each six pack.
If it’s a rare brew, the rate can go even higher. Thanks to D.C.’s lax import laws, some retailers choose to go outside the traditional distribution channels and bring in unusual beers from all sorts of far-flung places. Those beers tend to cost extra, not only because of the added cost of procurement and transportation but also the value of scarcity.
“When I first started getting crazy beers that weren’t yet on most people’s radar, the temptation was strong to jack the prices up,” says Al Lo, manager at Connecticut Avenue Wines & Liquor in Dupont Circle. “The logic was that the people who wanted them would pay for them. The few shops around town who had them would charge a whole lot. So we figured the market could bear it, and we aligned our prices accordingly. After a while, a spirit of fairness settled in. We’ve come back from the dark side.”
If some confluence of D.C.’s economic stability and its beer-drinking folkways push prices above those of other high-rent markets, there are also some unique stories that help explain the cost of beer.
Perhaps the most egregious pricing scheme on beer in the District involves the limited release and specialty brews that producers put out in small quantities.
Brewers generally attribute the higher retail price to exotic and more expensive ingredients. “With our bigger beers, the difference is that we’re often using twice the amount of barley and up to ten times the amount of hops,” Flying Dog’s Caruso says. Or sometimes the ingredients are incredibly rare. “We brewed a batch of beer with El Dorado hops, of which there was only 1.5 acres produced in the entire world,” he adds.
But here, too, the scarcity can prove tempting to retailers, who might not think twice about racheting up their price guns.
Consider Hopslam, the heavily hyped winter release from Bell’s Brewery that has gone up as much as $20 per six-pack in the D.C. area over the past two years. According to Bell’s Mid-Atlantic sales rep Derek Zomonski, the average retail price of Hopslam throughout the local distribution area, including D.C., Virginia, Pennsylvania and North Carolina, was $19.99. But in D.C., most drinkers paid $24. One shop was reported to have been selling six-packs for $34, more than double the wholesale amount.
There’s been much speculation about why Hopslam is so pricey in D.C., and fingers have been pointed at nearly everyone involved
Some blame the brewery. The double India pale ale is packed with honey, malt, and hops, which makes it very expensive to make; it’s one of the highest priced beers in the Bell’s portfolio. The Michigan brewery sells the stuff for about $16 per six-pack at its in-house retail shop; it is illegal for the brewery to charge less than wholesale. Operator Larry Bells says he charges the same flat rate to every distributor regardless of state and that price hasn’t gone up since January 2009.
In Virginia and D.C., Bell’s beers are carried exclusively by Hop & Wine, a situation ripe for monopoly-style gouging. But sales rep Chris Turner denies any undue price inflation on his end. “Just because I’m the only one who can sell it, I’m not going to jack up the price,” he told me. “That’s just ethically wrong,”
Hop & Wine currently charges $60 per case for Hopslam, up from $43 before Bell’s raised its own prices in 2009. But that figure hasn’t budged since, Turner says.
Pricing gets creative at the retail level. Because Hopslam is such a wildly popular beer, shopkeepers are desperate to sell the stuff. Yet the limited supply means that not every retailer can get his hands on it. Bell’s produced more of the suds than usual this year, but it still wasn’t enough to meet demand.
Some retailers tried to squeeze as much money out of every bottle as possible—literally, every bottle. Usually, Hopslam comes in six-packs. D’Vines and De Vino’s offered individual bottles for $5 to $6 a pop—prices you’d normally see in a bar, not a carryout. The shopkeeper will tell you that selling individual bottles is a great benefit to the consumer, allowing more hopheads to get a taste of the rare brew. But the incentive to the retailer is also clear. At that rate, a six-pack would cost $30 or more.
“Our market is special,” says Hop & Wine sales rep Turner. “We have the federal government to thank for not being in economic decline. We are in an isolated little bubble.”
Maybe so. But every bubble eventually bursts. And consumers can apply the needle.
It’s outrageous to have to pay more per pint than suds-sippers in super-pricey San Francisco. No matter what the excuse—the kegs are too damn heavy, the rent is too damn high—there’s no justification for the significant price discrepancy between such comparably expensive and sophisticated cities.
Beer lovers like me, who are usually okay with paying a little more for the good stuff, share some of the blame. Prices will continue to rise as long as we keep handing over the cash.
Here’s one way to protest expensive beer prices: Fill up some growlers. Think of it as having five draft beers per half-gallon jug at $2 a pop—not the $6 per pint you pay at the bar. DC Brau offers filling hours every Saturday afternoon. Chocolate City and 3 Stars are expected to follow suit.
In the meantime, brewers say, prices are likely to get worse—in Washington and everywhere else. “We are likely to have the lowest barley harvest since 1881,” says Flying Dog’s Caruso. “This global grain crisis is going to affect every single craft brewer because there is going to be a shortage and the price is going to go up significantly. Barley is being harvested now. We are all on pins and needles.”