Friday, 20 March 2009

Quality and price

My mother, god bless her, was prudent with money. Her parents, my grandparents, even more so. After all, my mother was one of 9 children and was born during the war, these things necessitate questioning of any expenditure. My paternal ancestors were perhaps slightly better off but none the less had a high appreciation of good value for money. 

Despite some very clear cultural differences between the families they all left me with an underlying and enduring sense of the value of quality. Spending a little more, occasionally, on something more expensive, if the quality justified it and it could be afforded, was acceptable.

It seems then, strange to me, that keg products are able to command a higher price generally. Standard British "lager" typically sells in most pubs for at least 10% more than the same strength cask, despite it's large scale production benefiting from economies of scale. Guinness typically is easily 20% more than cask in most pubs.

This would seem to indicate a lack of appreciation, by cask ale drinkers, of the product being delivered. However, my own experience would contradict this.  A piece of advice I was given when I started in business was to work out the required markup necessary to cover overheads and simply sell products at this markup. If a product costs more to buy in then the supplier has to be confident the quality of the product matches the asking price. It should not be up to the retailer to absorb price differentials.

When starting here we believed that there was a maximum price customers would pay for beer. For that reason some breweries never featured in our line up. That changed when I tried Coniston's beers. They were more expensive than Jennings and would have resulted in too high a selling price at my pub, so I thought. I tried them and put my normal markup on. The price difference didn't stop Coniston's beers from out selling Jennings. Consistently, I have found that if I put a good quality beer on next to a poor quality beer the good quality sells even if it is a little more expensive. Sadly, Coniston has slipped a little down the pecking order as newer and more exciting beers have emerged from the likes of CLA and Keswick, but still, it's a good beer so we'll have it again someday.

Venue also has a part to play in price sensitivity. Why else does Wetherspoons have to charge such low prices? I charge typically £2.50 a pint and upwards, the remote location and seasonality justifies more, but I'm too soft. The quality of my own brewed beer it seems, mostly, justifies an even higher price. My Tenacity has gained significant approval from nearly every single customer. My own beers outsell every other beer I have on the bar irrespective of price or style. Perhaps that is just the novelty factor. I don't sell it anywhere else.

I find the poll, and it's emerging results, on Curmudgeon blog interesting and useful. There clearly is a spread of opinion about the acceptable price of beer. Jeff Pickthall has been banging this drum for sometime. Personally, although every business needs to keep an eye on appropriate pricing, I also think the industry needs to concentrate on quality across the board. Good staff, good furniture, good decor and the best beer all cost a little more. Giving the customer a quality experience will avoid Tandleman's gripes and justify a higher price.


Paul Garrard said...

I never understand why beer often defies most retail norms, where mass produced shite sells at a higher price than a hand crafted product. Shame as the world would be wonderful if Morgans were cheaper than Fiats.

Curmudgeon said...

It goes back many years, to when mild and bitter were the staple products, and lager and Guinness were exotic upstarts that merited a price premium.

But, in the generality of pubs (obviously not in the Woolpack) ordering a pint of cask beer is still a hit and miss affair. Sometimes it is good, sometimes it is OK, sometimes it is crap. Carlsberg and Guinness are at least more reliable.

Until top-class beer can be assured at least 95% of the time, cask beer will not be able to command a price premium,

Tandleman said...

I agree with most of this and what Paul and Curmudgeon say. To paraphrase Mr Clinton "It's the offer Stupid".

Get that right and you can command a good price. Get it wrong and in these times you will see the pub close.