Friday, January 15, 2010

Beeronomics: Economies of Scale?

In the past year or two, under the 'Bond Street Series' moniker, Deschutes has sold a marvelous beer in 22oz. bottles: Red Chair IPA. I used to find it in my local Safeway and New Seasons for about $5.50. I loved it, but would buy it infrequently as the price was pretty intimidating. Now Deschutes has rechristened it 'Red Chair Northwest Pale Ale' and has placed it into their seasonal line-up and is selling it in six packs. A few days ago I bought a 12 pack for $12 in my local Safeway.

In the 22oz bottle it was going for $0.25 an ounce, now it is selling for as low as $0.0833 an ounce. First off, this is a fantastic beer selling at a regular price and I can't be happier. Second, unfortunately this is a Jan through April release, so start hoarding now - I don't think there is anything 'seasonal' about this beer and it should sell year round. But lastly, what can possibly explain the fact that the new price is 1/3 the old? Partly this has to do with niche marketing - going from a specialty beer aimed at the top of the demand curve to a mass market beer aimed at the heart of the demand curve. But, it probably has a lot to do with scale as well. Estimates exist of scale economies in brewing overall (i.e. the size for the brewery), but I wonder if any beer geeks can enlighten me about scale economies when it comes to producing a particular beer? It seems to me that this must be a big part of the story.

Finally, some gripes: I am pretty sure that it was I that came up with the whole concept of the 'Northwest Pale Ale,' I have been advocating for a long time for smaller but hops infused beers - hoppy beers don't have to be super-big. In fact I have been trying to perfect this concept in my kitchen and decided to call the result a 'Northwest Best Bitter,' the idea being a best bitter taken to the land of hops and given a re-education but with about the same alcohol content of an English version. I have every intention of creating a new category of beer. Of course my result pales in comparison to the Deschutes offering, but I await my royalty check for the NWPA idea.

Anyway, Red Chair is one of my favorite beers ever and the Deschutes move to more mass production is wonderful - so thanks Deschutes!


Bill said...

My guess is that it didn't cost Deschutes any more to produce the early batches than the later ones. It's just that people have become accustomed to paying more for 22-ounce bottles, so the producers and distributors can use that psychological trick to command a higher margin on them.

I can't recall recently seeing a 22-ounce bottle for under $3. But a $12 12-pack like you saw equates to a $1.83 22-ounce bottle. Makes it hard for me to plunk down my money on those bombers.

Jack R. said...

I am mystified by the high price of bombers; but, in their defense, the purchase of a disappointing 6er leaves you 5 beer to 'work off' or 'pass off'.

Other factors for economic consideration:
a) 3 varieties of Full Sail beer are available at $7.49 per 6-pack in SW Fla. grocery stores
b) 3 varieties of Widmer Bros. and 3 varieties of Kona beers are brewed at Redhook's brewery near Portsmouth, New Hamps., and available in SW Fla. grocery stores

Anonymous said...



Beer Valley Brewing of Ontario, Oregon has a great pale called the Pigskin Pale. I've seen it going for around $2.99 a bomber. By far the best bang for your buck. Solid pale, too.