Tap Rooms and Price of Beer

[Jersey Boss]

Why does beer at the various tap rooms cost twice as much or more when getting it on tap versus purchasing it by the can at the same location or even at a retail outlet? I see costs as being less to the brewery on tap so what gives? What am I missing?

[jedicurt]

Why does beer at the various tap rooms cost twice as much or more when getting it on tap versus purchasing it by the can at the same location or even at a retail outlet? I see costs as being less to the brewery on tap so what gives? What am I missing?

a couple of reasons it could be. if the draft is special to just to tap room, it could be due to the small batch nature when the kegs were made, could be due to the taxes associated with the quantity produced (it can get really crazy sometimes), it could just be supply and demand, people keep buying it on draft and not in cans at the tap room, so the next time it comes up, the price goes up, ect

[shawnw]

(speculation) They have to pay to staff the taproom. Cans are going to be distributed and sold at stores (generally). Perhaps they chose to factor the staffing cost into the non-canned beer or something. Also the glasses aren't 12oz right?

[Jersey Boss]

Yes they have to pay to staff the tap room. I am guessing it is a low wage position as a tip jar is usually displayed. Some of the beers are 12 oz, depending on what it is. Some of the canned beer comes in 16 oz. as well so that is a wash. Conversely there is no fuel or vehicle transportation charge or charge for the labor to transport the product. There is also no middle man retailer to pay either.There is also no cost in cans or operating a canning line. On the surface it looks to be a discouragement to purchase on tap at a tap room.

[jedicurt]

Yes they have to pay to staff the tap room. I am guessing it is a low wage position as a tip jar is usually displayed. Some of the beers are 12 oz, depending on what it is. Some of the canned beer comes in 16 oz. as well so that is a wash. Conversely there is no fuel or vehicle transportation charge or charge for the labor to transport the product. There is also no middle man retailer to pay either.There is also no cost in cans or operating a canning line. On the surface it looks to be a discouragement to purchase on tap at a tap room.

i'm curious which tap rooms you have seen this, i for the most part see them on price with most other places (and usually cheaper than on tap at a bar or restaurant)

[Jersey Boss]

i'm curious which tap rooms you have seen this, i for the most part see them on price with most other places (and usually cheaper than on tap at a bar or restaurant)

Iron Monk in Stilly, 405 in Norman, Elk Valley, Coop. It is usually anywhere from 5-7 for a 16 oz . That would translate to 30 or more for a six.

[jedicurt]

Iron Monk in Stilly, 405 in Norman, Elk Valley, Coop. It is usually anywhere from 5-7 for a 16 oz . That would translate to 30 or more for a six.

that would be right... yeah... i guess i always just compared draft prices to bar draft prices, and never really thought about the price compared to cans, etc.

[Jersey Boss]

that would be right... yeah... i guess i always just compared draft prices to bar draft prices, and never really thought about the price compared to cans, etc.

Well I figured the tap room is geared up differently than bars or such. The tap room is a promotion for that beer and not the same business model as a bar that is promoting itself. The tap room help is probably a secondary duty for someone already employed there. If anything the tap room should be revenue neutral and used as a vehicle to have consumers buy the product at a bar, restaurant or retail outlet. This is especially true as tap rooms have hours more limited than bars as well as restrictions on offering other products. Plus the beer in bars has to go through a distribution chain that increases the price all along the way. The tap room does not bear any of these costs or mark ups.

[BoulderSooner]

Well I figured the tap room is geared up differently than bars or such. The tap room is a promotion for that beer and not the same business model as a bar that is promoting itself. The tap room help is probably a secondary duty for someone already employed there. If anything the tap room should be revenue neutral and used as a vehicle to have consumers buy the product at a bar, restaurant or retail outlet. This is especially true as tap rooms have hours more limited than bars as well as restrictions on offering other products. Plus the beer in bars has to go through a distribution chain that increases the price all along the way. The tap room does not bear any of these costs or mark ups.

tap rooms no longer have limited hours

[WhoRepsTheLurker]

Iron Monk in Stilly, 405 in Norman, Elk Valley, Coop. It is usually anywhere from 5-7 for a 16 oz . That would translate to 30 or more for a six.

Some beers just cost more to brew, especially some stouts and barrel aged products. Over Thanksgiving, I brewed 20 gallons of beer with my in laws, two separate styles (Milk Stout and Quad) and the ingredient cost for those two beers was about $90 for ten gallons a piece.

Well I figured the tap room is geared up differently than bars or such. The tap room is a promotion for that beer and not the same business model as a bar that is promoting itself. The tap room help is probably a secondary duty for someone already employed there. If anything the tap room should be revenue neutral and used as a vehicle to have consumers buy the product at a bar, restaurant or retail outlet. This is especially true as tap rooms have hours more limited than bars as well as restrictions on offering other products. Plus the beer in bars has to go through a distribution chain that increases the price all along the way. The tap room does not bear any of these costs or mark ups.

I would disagree with this statement. Not all products brewed are meant to hit the distribution market. As for the help, most of the tap room help is separate from the brewery and have outside jobs. Many of the breweries around OKC are focused on direct-to-consumer sales via a taproom. Research is starting to show this method is more sustainable for the smaller beer companies. The brewery gets the benefit of higher margins on these retail sales and can generate additional sales from merchandise, gift cards, and events. Also the craft beer industry is coming around to the value of fractional pours aka tasters.

[mattyiceokc]

Well I figured the tap room is geared up differently than bars or such. The tap room is a promotion for that beer and not the same business model as a bar that is promoting itself. The tap room help is probably a secondary duty for someone already employed there. If anything the tap room should be revenue neutral and used as a vehicle to have consumers buy the product at a bar, restaurant or retail outlet. This is especially true as tap rooms have hours more limited than bars as well as restrictions on offering other products. Plus the beer in bars has to go through a distribution chain that increases the price all along the way. The tap room does not bear any of these costs or mark ups.

So, you're saying that breweries shouldn't make a profit off of the beer they sell at their own location? In what world does that make any sense? Breweries have a variety of different business models. Some start with a focus on distribution first. Some start as contract brewers and dont have their own location. Some literally only have a tap room and don't send anything into distribution. Here in Oklahoma, all of our older breweries started with the distribution model since they couldn't have tap rooms. Newer breweries typically choose to go with tap room only sales to start, because that is where the most profit is. For example, American Solera in Tulsa was exclusively tap room only for at least the first year. They've slowly started to release kegs and bottles into distribution, but I'd guess 90-95 percent of their sales come from the tap room. American Solera has turned their brewery into a destination. They are known around the country as a world class brewery. When people ask for suggestions on what breweries to visit in Oklahoma on facebook, reddit, or any other social site, American Solera will always be recommended by multiple commentors. And since most of their products are brewery only, they keep the entire profit. In conclusion, taproom profits allow breweries to expand and grow much quicker than profits from distribution.

Also, most taprooms have staff that only work in the taproom. It's not like pre August 2016 when breweries couldn't sell full strength beer from their taproom and had very limited hours.

[gopokes88]

Is this a serious question?

Do you also wonder why wine costs more at restaurants than liquor stores?

Or why coors is $1 at the C store but $3.50 at BWW?

You are paying for the environment, and the beer. That environment has costs. Those costs are reflected in the price of the beer.

[gopokes88]

“Revenue neutral” lol.

I’ve invested in craft breweries, and if any of my guys said they were going to do anything “revenue neutral”, I’d recall my capital before he finished the sentence.

If you’re using your own cash, you wouldn’t do anything revenue neutral. A successful craft brewery is in for 3 years of losses. So you’d accelerate those losses by making a significant chunk of your business revenue neutral.

All these types of ideas work great in PowerPoint, go get your hands dirty and you’ll see it’s a horrible idea that ends in tears.

[onthestrip]

I've wondered the same. At prairie, they sell bottled and canned (packaged) beer, along with whats on tap. Their packaged beer is always higher than the same beer thats sold at Byrons. You'd think selling direct to customer, rather than going through distributor and liquor store, it would be a little cheaper at the brewery. If you by a Prairie Bomb at the brewery, I think its $9/bottle. At byrons, its usually less than $7.

[TheTravellers]

... If you by a Prairie Bomb at the brewery, I think its $9/bottle. At byrons, its usually less than $7.

WTH? So they make it, and transport it a few hundred feet (never been there, so not sure of the layout) and then sell it for $2 more than if it went out the back in a truck, to a distributor, then to a retail outlet, with everybody adding their own profit to it at each step?

[gopokes88]

I've wondered the same. At prairie, they sell bottled and canned (packaged) beer, along with whats on tap. Their packaged beer is always higher than the same beer thats sold at Byrons. You'd think selling direct to customer, rather than going through distributor and liquor store, it would be a little cheaper at the brewery. If you by a Prairie Bomb at the brewery, I think its $9/bottle. At byrons, its usually less than $7.

Well that’s just brilliant.

You usually walk into Byron’s stone cold sober.

If you buy some package beer at prairie, you are probably doing it after you’ve had a few at the taproom and therefore less price sensitive. You are also paying for the convenience of not having to go to Byron’s after you’ve had a few at the taproom.

Volume also matters here, Byron’s is possibly their #1 buyer on the retail side, if not they’re at least top 5.

[jerrywall]

Volume also matters here,

Not really. Retailers all pay the same price for the product.

[onthestrip]

Well that’s just brilliant.

You usually walk into Byron’s stone cold sober.

If you buy some package beer at prairie, you are probably doing it after you’ve had a few at the taproom and therefore less price sensitive. You are also paying for the convenience of not having to go to Byron’s after you’ve had a few at the taproom.

Volume also matters here, Byron’s is possibly their #1 buyer on the retail side, if not they’re at least top 5.

Sure, for the irregular visitor that might happen. I know I will never buy a packaged beer from them, unless its something limited that you cant get at a liquor store. So they might win some but they also lose some with this pricing.

[mattyiceokc]

WTH? So they make it, and transport it a few hundred feet (never been there, so not sure of the layout) and then sell it for $2 more than if it went out the back in a truck, to a distributor, then to a retail outlet, with everybody adding their own profit to it at each step?

I'm pretty sure that Bomb! is made in Krebs. I'd imagine that everything that goes into distribution is made in Krebs. The set up in OKC seems much to small for the large distribution that Prarie has across the world. I think the only beers made at the OKC brewery are the limited release, small batches on tap in OKC. I've never seen a canning or bottling line at the brewery in OKC.

[mattyiceokc]

Sure, for the irregular visitor that might happen. I know I will never buy a packaged beer from them, unless its something limited that you cant get at a liquor store. So they might win some but they also lose some with this pricing.

All of the local breweries typically price their package beer at the brewery close to, or a little more than what liquor stores are selling it for.

[TheTravellers]

I'm pretty sure that Bomb! is made in Krebs. I'd imagine that everything that goes into distribution is made in Krebs. The set up in OKC seems much to small for the large distribution that Prarie has across the world. I think the only beers made at the OKC brewery are the limited release, small batches on tap in OKC. I've never seen a canning or bottling line at the brewery in OKC.

Yeah, my bad, forgot about Krebs. So a bottled Bomb! has to go from Krebs to either a distributor or Prairie's taproom, still weird that the taproom sells it for $2 more without either a distributor or retail markup that has the beer selling at $7 at any liquor store I go into (I buy all kinds of their Bomb! line, so I check anytime I go into a liquor store anywhere, but I generally patronize Modern on 28th/Penn, which is your standard mom/pop place, not a huge warehouse-type place like Byron's or Grand Cru, and a regular Bomb! is $6.97 there). Is it just Prairie thinking they can just get $2 more because it's a "while I'm here, I'll pick up some" situation? Major ripoff, IMO.

[mattyiceokc]

Yeah, my bad, forgot about Krebs. So a bottled Bomb! has to go from Krebs to either a distributor or Prairie's taproom, still weird that the taproom sells it for $2 more without either a distributor or retail markup that has the beer selling at $7 at any liquor store I go into (I buy all kinds of their Bomb! line, so I check anytime I go into a liquor store anywhere, but I generally patronize Modern on 28th/Penn, which is your standard mom/pop place, not a huge warehouse-type place like Byron's or Grand Cru, and a regular Bomb! is $6.97 there). Is it just Prairie thinking they can just get $2 more because it's a "while I'm here, I'll pick up some" situation? Major ripoff, IMO.

It's not that big of a deal to me and this scenario is pretty typical for alcohol. While not the exact same situation, I've been to several beer bars across the country that have hundreds of bottles for sale. These bars allow you to purchase the beer either to go, or for on site consumption. If you choose to drink it in the bar, they typically charge $1-2 more for that service.

You're paying a premium for the experience. You can buy a Bomb! at Byrons and drink it at home, or you can buy Bomb! at Prairie for a couple dollars more while you're enjoying a night of brewery hopping with friends.

[jerrywall]

I'll say this, as a product creator, you don't want to devalue your product. Samples are one thing, but if you sell a beer at $3 or $4 a pint, then that's what it's worth, even at a regular bar, and people won't buy it for $6-10. You would want to keep your tap prices comparable to bars/restaurants. It's not about making money (ok, yes, at the end of the day it's ALL about making money), but it is a disservice to the bars that give you room on their taps for their product if you, in addition to directly competing with them, also undercut them. I know if I had a bar I'd be less likely to give up one of the spots on my tap to a brewery who was selling the product down the street themselves for significantly less.

[jedicurt]

I'll say this, as a product creator, you don't want to devalue your product. Samples are one thing, but if you sell a beer at $3 or $4 a pint, then that's what it's worth, even at a regular bar, and people won't buy it for $6-10. You would want to keep your tap prices comparable to bars/restaurants. It's not about making money (ok, yes, at the end of the day it's ALL about making money), but it is a disservice to the bars that give you room on their taps for their product if you, in addition to directly competing with them, also undercut them. I know if I had a bar I'd be less likely to give up one of the spots on my tap to a brewery who was selling the product down the street themselves for significantly less.

very much this

[Jersey Boss]

I'll say this, as a product creator, you don't want to devalue your product. Samples are one thing, but if you sell a beer at $3 or $4 a pint, then that's what it's worth, even at a regular bar, and people won't buy it for $6-10. You would want to keep your tap prices comparable to bars/restaurants. It's not about making money (ok, yes, at the end of the day it's ALL about making money), but it is a disservice to the bars that give you room on their taps for their product if you, in addition to directly competing with them, also undercut them. I know if I had a bar I'd be less likely to give up one of the spots on my tap to a brewery who was selling the product down the street themselves for significantly less.

This comment and perspective offered the best rationale for this pricing disparity. Thanks