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.”