beer business

Cut the alcohol, cut the price?

mouht

Some may wonder what your mouth had done to be repayed in such a way.

Chances are you’ve heard Lion are knocking down the ABV on three of their beers. Extra Dry and XXXX Bitter will go from 4.6 to 4.4 per cent while James Boag’s Premium Light will go from 2.7 to 2.5 per cent.

The reason?

This what Lion says: ‘‘to ensure costs remain sustainable and to reinvest savings into initiatives that will reinvigorate the total beer category’’.

Which means this: ‘‘to save us money and allow me to fill in the rest of this quote with meaningless business speak. Blaah, blaah, blaah.’’

To which the beer geeks respond: ‘‘Now Extra Dry will taste even less like beer! Ha, I slay me!’’

But I have a serious question. Maybe I could even call it a philosophical point to ponder, if I was feeling sufficiently wanky.

If the alcohol drops, should the price drop too?

I’ve got a foot in both camps.

The ‘‘yes, they should damn well cut the price’’ part of me thinks that, by removing some alcohol it will be somehow less than it was before. And less should equal a lower price. Also, drinkers of at least Tooheys Extra Dry drink it to get pissed (don’t snigger beer geeks, you drink 10 per cent double IPAs for the same reason. Yeah, like you’d drink craft beer if it was alcohol-free), so Lion is taking away part of the thing they buy it for, so the purchasers should be in some way compensated.

The ‘‘don’t be a dickhead, no way they should cut the price’’ part figures that the volume of beer hasn’t changed, so why should the price. As for the idea of taking things out equals lower prices, it doesn’t happen with low-fat milk or diet soft drinks. Why would it happen with beer? And, finally, alcohol content doesn’t govern price – as an example, Boag’s Premium Light has half the alcohol of an Extra Dry but carries the same price tag.

What do you reckon? Should the price go down or stay the same?

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5 replies »

  1. “As for the idea of taking things out equals lower prices, it doesn’t happen with low-fat milk or diet soft drinks”

    Low-fat milk requires more processing than full fat to remove the fat, so it should cost the same or more. I guess diet soft drink requires expensive chemicals in lieu of cheap-as sugar, so it should cost the same or more.

    Lower ABV requires less fermentables (sugar I would guess in this case) and less time to ferment, so it should cost the same or less. Presumably the ABV was cut to improve margins for Lion off the back of (quickly) declining volumes?

    • Thought about it some more in the shower. If we’re talking economy of scale, I suppose shaving halfpennies off ~1 million+ barrels might lead to cost savings. But I still think it’s a crock of shit. If they need ROI for stakeholders, they should cut the marketing budget or maybe don’t give the executives such large raises and bonuses next year.

      • Something else to take into account is the excise tax, which is much higher in Australia than the US. Here it is calculated based on how much alcohol you have in the finished product. Less alcohol equals less tax which equals more money in the brewer’s pocket.

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