It’s not an ambiguous title, so hopefully there won’t be too much confusion.
Last night on Twitter there were a few comments about the price of keg beers being disproportionately high compared to their cask equivalent or simply just ‘more expensive than cask’. It’s true, keg beers do cost more over the bar than their equivalent cask or indeed than most other cask beers. This is down to just two things, cost of production and customer expectation. Keg beers cost more to produce than cask beers and customers at the bar expect cask to be cheaper. There is a third reason, which is more convoluted and it’s the mitigation available to bar managers.
Anyway, the point of this blog is to try to get across, the best I can, exactly why keg beers cost more than cask to the wo/man at the bar.
The example I used last night was of a cask we sell for £95 and it’s 30L KEY KEG equivalent at £85. The key keg element is important here, for reasons that shall be explained shortly.
If the bar manager who buys both works their GP (gross profit, not medical practitioner) on draught beers off a fairly standard 60% (it’s not a rule, but the majority of bars will aim for around a 60% GP across all their draught products, some lower, some higher) the cask beer comes in at £4.08pp (per pint not allowing for waste and inclusive of VAT) and the keg comes in at £4.87. Round up to £4.10 and £4.90. The £4.90 doesn’t seem so bad does it? It’s cheaper than a Peroni will cost and it’s only 80p extra to have that same beer cold (it costs the bar money to chill the beer) and fizzy (it costs the bar and the brewery money to get the beer to the customer fizzy). A lot of people like cold fizzy beer, which is why the entire planet is awash with cheap tasteless lager. We agree then, a comparative bargain?
The perception of price is skewed however when that cask beer hits the bar at £3.50pp. The cask drinker sees the £1.40 difference for the same beer and assume that he/she is being ‘ripped off’ because the keg beer is the same beer but 40% more expensive. How can that be?
It’s because very few bar managers would dare to put a standard cask beer on their bar at £4.10, because the customer expects cask beer to be lower in price. So what if that £4.90 keg beer becomes £5.50, what’s the excuse there? It’s because the bar manager has to mitigate the cost of selling the cask beer at a lower price.
Now, that is a very black and white example, because of course the bar manager can mitigate the cost with spirits or soft drinks should they choose. However, many bars do not operate like that, they have spreadsheets printed out by the tills computer giving the exact GP made on draught beers, unmitigated by cola, vodka, food or anything else.
Back to keg beers. Key kegs: what are key kegs and why do breweries use them. Key kegs are one way containers, a disposable lightweight alternative to steel kegs. There are other one way containers, Ecokeg are one example. Small breweries use these types of keg largely because keg filling and cleaning equipment costs a lot of money. Then you have to pay for the kegs on top of that (or rent them). Then you have to clean them when they come back. All of which costs time and money.
Key kegs, Eco kegs and the like come with their own inherent cost and unless you buy in volume (1600 at a time) each key keg will cost a minimum of ‘about’ £16 per unit. if a brewery only buys one pallet at a time they will cost closer to £20 per unit.
So why are keg beers that are in steel kegs still ‘expensive’? The equipment to fill and clean them costs a lot so the brewery has to pay for it somehow, and shipping empty kegs around the country isn’t cheap either. You can add at least £3.50 per keg just for returning them.
Anyway, going back to the cask at £95 and the keg at £85, if you take away the cost of the keg, and we’ll be generous and say they paid £15 for the key keg, the cost of the beer per litre in the cask is £2.38, and cost per litre in the keg is £2.30. This is despite the significantly more difficult filling method of a key keg (they are filled upside down) and the monetary cost of carbonation and the time cost of getting the carbonation levels right. Even after all the associated costs that particular brewery is actually charging LESS per litre for the beer in keg. This is not standard, which I’ll cover later.
One example that kept coming up on Twitter was regarding a beer by Tempest Brewing Co. The same beer was ‘spotted’ (like this was a criminal investigation) in one bar in Edinburgh (can’t recall which one) on cask at £3.60pp and in another bar, The BrewDog bar, at £6pp. The maths is above, so there is no need to go through that again, but if you take two prices out of context you can easily get a very skewed idea of how pricing is achieved. It would be easy to say ‘Well BrewDog are taking the piss, it’s obvious’ without looking at the reasons why it might be more expensive.
In X traditional cask ale house they might have two cask beers on, the one by Tempest and one by Shittits Brewery (apologies if there is a Shittits brewery, I was going for something ridiculous). Now the Tempest cask might have cost the bar , for arguments sake, £90 and the Shittits cask cost £55 (this isn’t for exaggeration, it happens). The bar manager selling that Tempest beer at £3.60 isn’t making a 60% GP, to do that the beer would have to be on the bar at £3.85. How much is the Shittits beer on the bar for, £2.35 to hit the standard 60% GP? No, that beer is a mere £3.10 or £3.20. A relative bargain, no? Why is the Tempest beer £30 a cask more expensive in the first place? A myriad of reasons: Better ingredients, more hops, small capacity, higher marginal costs, higher demand. It’s a better more desirable beer made by a much smaller company. You can’t compare the two producers or products, but one mitigates the cost of the other.
Take that beer and transplant it in to the BrewDog bar. As we know, key kegs cost between £10.50 if you buy a million and up to £20 if you only buy 30. Tempest aren’t a big brewery and do not have a lot of storage space, so for arguments sake and looking at a worst case scenario, lets say Tempest pay £20 per key keg. So using the same maths as above the 30L key keg should cost around the same, £90? Well, possibly but the example above was an anomaly. Almost every microbrewery that kegs their beer adds a premium for the kegging. The brewery used in the top example doesn’t charge for the extra time, work or associated costs with kegging. The man hours, the gas for carbonation etc. They simply cost on the beer. So in reality that keg of Tempest beer (or any other microbrewery beer in key keg) might feasibly be £10 more expensive than the equivalent cask. So for arguments sake that 30L kk keg that hit the BrewDog bar was £100. That means that if BrewDog were working on a flat and fairly industry standard 60% GP they were ripping off the customer by approximately how much? Well virtually nothing is the answer, that beer assuming it was £100 per keg (which in terms of keg prices for a 6% beer is actually bloody good value) at a flat 60% is £5.75pp.
Then look at that in context, BrewDog were showcasing the best of British beer that night, the cream of the crop. They had Tempest, Summer Wine, Magic Rock, Brodies…. where was the mitigation? What cheap industrially produced beer did they have on to mitigate the costs of those high end beers? (Yes yes, it’s very tempting but I won’t). Even the BrewDog bars won’t get a significant discount from it’s parent company. So in context the reason THAT beer was so much more expensive in THAT bar compared to what is essentially a DIFFERENT product in that other bar is quite simple. It cost more and they have a business to operate.
The reason I sat here and wrote this blog this morning is because I am tired of hearing how certain bars and certain breweries are ‘ripping’ customers off with the price of their kegged beers. They aren’t. Keg beers from microbreweries cost more for a reason, the costs are higher. Someone needs to pay for it and unfortunately you as the consumer who chooses to drink well made, hand crafted, lovingly created, beautifully conditioned, bloody brilliant beer from extremely talented and EXTREMELY hard working brewers because you enjoy drinking hugely flavoursome exciting beers *breathe* has to cover the cost because that is how the world works. It’s called supply and demand. You demand it, and they supply it and as the supply is limited the cost is higher. The supply is limited because Tempest only have a 10bbl kit, Summer Wine a 6bbl kit, Magic Rock a 12bbl kit and Green King have a billion barrel kit, and that is why there dire wastewater costs less than beer from truly innovative smaller breweries. The supply is limited because the hops are limited and increasing almost daily in price, the malt costs are constantly increasing, steel is going up in price, fuel for shipping, you name it it costs money.
These guys aren’t ripping you off, they are providing you with something wonderful. Enjoy it while it lasts.