The Cost Of A Pint...

There was, not long back, much made in the media of the arrival of the £4 pint in 2008. Much of this was blamed on increasing raw material prices, with a jolly old dash of increased beer duty.

So is it really true?

Well yes - if you go to expensive clubs, where I suspect four quid a pint is possibly old hat. But for the rest of us peasants in the real world? Well, never say never. So what exactly is going to happen with beer prices then, I hear you ask. Oh, you didn't ask. Well never mind, I'm going to tell you anyway....

1. Raw Materials
I have alluded in the past to price hikes in our ingredients, well, we now know what those hikes are. Malt, which is the secondest largest ingredient (water is of course the first) has, in our case, risen in cost by around 20%, mostly as a result of the poor harvest of 2007 but of course fuel & energy costs increases have played their part as well. This translates, approximately, into a little under a penny per pint extra on our costs on a 3.8% beer (slightly over a penny on a 5.2% beer). Hops have gone up a lot more - mostly they have DOUBLED in price, some have TRIPLED, others just aren't available at all. This equates, again on the costs of our 3.8% beer, to around 4p extra per pint. The amount hops used varies somewhat according to how much hop flavour/aroma/ bitterness we want, so heavily hopped beers are hit more than the more lightly hopped ones, but that 4p is about in the middle.

The rise in hop prices is for the same reasons as the malt - but hops have been harder hit. It would be fair to add that in both cases a constant squeeze on the price paid to farmers for both commmodities has resulted in acreages of malt and hops decreasing faster than is sustainable, otherwise the situation would not be as grim. (Sadly this squeeze is from the large players in the industry, not us small guys who have always been happy to pay a fair price. But it is always the small man who suffers most in the end). So the situation might not improve for a few years, whatever future harvests are like. It takes but a few hours and a few pounds to grub up an esatblished hop yard (a hop field in laymans terms). It takes much, much longer, at a much higher cost, to put the hop yards back again. Indeed, if supplies of malt or hops do run out before the next harvest - which is not impossible - then prices will rise again.

So to recap, we have already added 5p to the cost of a pint.

2. Brewing / Delivering Costs
This is all a little harder to fully quantify, as over the last two years we have tripled the number of casks of our beer we have delivered, but at the same time reduced overall mileage as almost all that growth has been local. Likewise as production goes up, so does efficiency, so the potential for savings rise with the costs. But we all know that electricity and gas have increased immensely, as has the cost of fuel, so there is still an issue here of above inflation increases in costs. And of course all our suppliers have this problem, and so there prices rise to reflect this as well - which is yet another cost burden spread down the line. I think it would be fair to say that 2-3p per pint to counter this is about right. As I said, it is difficult to accurately quantify all this as our increased production makes a year-on-year comparison meaningless. Of course we don't have the time to sit down and do the comparison sums properly. I'm not saying you the reader isn't worth the effort, but frankly, we don't have the time just for the benefit of this blog - although it would be interesting to find out.

3. Admin / Staffing
Red tape is much discussed, especially in terms of how it is strangling industry. But, to be honest, I don't think (for us at least) it's a big problem. But we are smaller than the threshhold for much of the many rules and regulations, so as we grow this may well change. That said, I never will understand why we get more visits from people checking text heights on bottle labels than from people checking we aren't poisoning drinkers. But as both are all nice folks, I can live with it (no really, they are, and rules are rules and are worthless if they aren't enforced).

We don't have staff at the moment (we did, but he left to do wonderful things with herbs - and cook breakfast), so once again we don't have a social life (limited that it was), but when we did have a life, that too suffered from these extra costs, so we need to take more money out just to pay bills. I worked out once that every penny on fuel probably actually costed us as a business up to 1.5p as a result of all these indirect costs.


So, where are we now, 8p or so a pint on our costs. Allow something for us to reinvest, take a pay rise - or even just get paid, and 10p is the ball park. That is one hell of a percentage increase on our trade prices (we are neither cheap or expensive), and of course your average landlord has to bear a raft of other costs as well, be it above inflation rent increases, the increased costs of the new licencing laws, staff costs, their own energy bills, and so on. A few years ago I would have made reference now the extortionate running costs of their Jags as well, but I've though about this - and I am struggling to think of any of our regular, and not-so-regular, customers, that has a new car, let alone a Jag. Well maybe one had a Jag until recently, but it doesn't count. It certainly didn't start.

So if we put our prices up by 10p a pint, and the landlord will add a bit on because his costs have risen massively as well (believe me, running a pub is not as much fun as it was). This may then be another 5p, maybe 10p. I reckon the average price around here at the moment is around £2.50. So if we add our 10p, and another 10p for the landlord (we'll be kind), we hit the dizzy heights of £2.70. Then there's the March budget, and God forbid it should happen, but lets assume the doom-mongering media-hyping State Nannies decide to ramp up beer duty to stop us all from smashing up Woolworths every Friday night. Shall we say 10p on a pint (please, no).

That's £2.80. Still £1.20 short of the predicted £4.00. What do you reckon? Give another 20p to the Nannies, in the hope they'll spend it on another seminar and fail to ever come back? That leaves a whole pound. Well, 40p to the lanlord, 40p to the brewer, and 20p left to give the Police a reasonable wage (they should try the Army - they get shot at slightly more often for a lot less), in return for arresting a few more criminals.

I can't speak for anyone else, but that extra 40p will be well spent here. Probably on a plane ticket to somewhere where the beer is a little cheaper....