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The cost of beer, part iii: solutions

2019. June Greg Kieckhefer
the cost of beer, part iii- solutions - Gravity Brewing Taproom in Budapest Branding

Welcome to Part III, the final piece of our series on the cost of craft beer in Budapest. In Part I, we followed our flagship Red Shift from ingredient costs to its departure from the brewery and looked at a few emerging issues with the Hungarian brewery scene. Part II took us to the bars which sell our beers, where we examined the recent upset of consistent pricing in Budapest.

Here’s what we’re doing about it.

The simplest weapon we have in our arsenal is Recommended Retail Price (Manufacturer’s Suggested Retail Price, if you prefer the US term). RRP is no more than the suggestion of a price floor or ceiling on the resale of our beer; in this case we’re concerned with imposing a ceiling, because we want our beers to be affordable to everyone, not just tourists and beer geeks.

The market norms and legality surrounding RRP vary somewhat by country, but in the case of Hungary (and the EU), the absolute most we can do is ‘recommend’ pricing. If a bar decides to charge its customers double our RRP, we cannot legally retaliate by refusing to sell to them in the future. We can’t even really discuss the matter with them, for fear that we will be seen to be influencing retail pricing. Competition law is anti-consumer in this case, and hugely frustrates our efforts to prioritise fair trade.

RRP is a toothless suggestion, then, and a nearly pointless one in in our situation. It does have one benefit, however, which is transparency. If the free trade doctrine which prohibits us from enforcing price ceilings is motivated by the blithe assumption that information will cure the market, we are going to lean hard on that information.

So from now on, when you visit the Beers page of our website, or any of our social media announcements, you will see our stated RRP for each beer. These may vary over time, of course, but they will always reflect our gross price per liter standardised to a 4dL craft pint. We may not be able to control how much you pay for our beers, but we will happily tell you how much we sell them for.

Here’s the thing, though: this information won’t be enough. Even with our RRP readily available on multiple platforms, very few of our customers are going to see it, and even fewer will act on it. Most people, understandably, will simply go to their preferred bar, buy our beer at whatever price is demanded, and then judge whether Gravity beers offer value based on criteria outside our control. Any downward pricing pressure will be minimal, and beer prices will continue to rise despite our best efforts. We need something more.

the cost of beer, part iii- solutions - Gravity Brewing Taproom in Budapest

What you’re looking at is the new home of Gravity Brewing. 210 square meters of converted bunker in the city center, which will house our 120 liter pilot brewery, 600 litre production brewery, and 40-seat taproom. You’ll be able to see the entire brewery from your seat at the bar, and our staff will be familiar with all aspects of the beers they serve – because they’ll help brew them. They’ll tour you through the facility, show you what we’ve got in our tanks at the moment, and tell you what they’re most excited about in our constantly evolving lineup of core range and prototype releases.

We hope you’re excited by all that – we certainly are – but what does it have to do with the past months’ economics posts? Well, we own the space. The brewery. The bar. No landlords, no investors, just brewers. That means we don’t have to worry about rent hikes, investment returns, or other bars’ tap markups. Keeping our costs down is going to allow us to put more value into your glass and take less cash from your pocket.

the cost of beer, part iii- solutions - Gravity Brewing Taproom in Budapest Hungary

We’ll continue to supply our beers to a few partner bars, but this is a huge shift for us. We’re leaving the distributed sales model behind, and adopting a formula that’s brought stability and consistency to so many excellent US and UK breweries. By selling our beers primarily on-site, we can grow in the direction we choose, with the same lightweight structure, and avoid the volume concerns that plague so much of the industry.

In addition, every pint we sell at Gravity will live its entire life in ideal conditions, under our obsessive watch. We want to encourage people to drink our beers as they’re meant to be served, and so we’re flipping the price structure back to the way it should be: every pint poured in the new Gravity Brewing will cost 100ft less than our RRP.

We hope you’ll come back when we post again in 2020 about our new space and our experience with converting a city centre bunker into a brewery and taproom! In the meantime, take a look at our social media channels to find out how our build is progressing!

The cost of beer, part iii: solutions