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.