An artisanally crafted blog curated by Cooking Lager for discerning readers of beer bloggery

Thursday, 8 October 2015

On price, on value.

These discerning ladies understand the value of what they hold.

Of course the main point in writing a few blogs is getting some stuff off my chest; it’s not hoping that some of you might start offering me free stuff again. But heh, if you want to, I love free stuff and will always write up that the free grog you send me is fantastic.

This one started off as a rant about price. Then I binned it. Some of it was worth repeating as an introduction to why I think some value beer more than others.

The rant began with the old adage that price is what you pay, value is what you get. Something I first heard as an undergraduate student. The idea gained more clarity after a kindly boss gave me a book called The Intelligent Investor by Ben Graham, with the comment “This is pretty much all you need to know in life, grasshopper”, a statement that is almost actually true. If not all, it’s a hell of a start. Two stints at university, going through the motions and my education began after I got a job.

It is not relevant but this boss was a kindly soul that saw me as a younger version of himself, a bright(ish) working class kid figuring out how to pretend to be a professional middle class man and have all that material bollocks even people that say they don’t want actually do. He bought me many pints and taught me how to fiddle my expenses and taught me the single most important lesson of the job we were doing. That was, keep the missus sweet and you can pretty much get away with anything you like. A true Zen master to a young impressionable lad.

This books main point is that there is a difference between price and value. That a notional Mr Market will daily ask you to trade at a given price and never be offended by refusal. Your job in the game is to calculate value and buy when price is below value and sell when price is above value. Including margin of error. Then you reply to Mr Market. The book is about stocks, shares, equities, whatever your preferred nomenclature but can be applied to pretty much any commodity. Despite being a book from the 1930’s it really is a corker. Never read it? Do you no harm, grasshopper.

This was my basis of an argument on price. That price is what it is and you and me as punters only get to figure out value. We can be in the market to get value, or simply to trade our stake higher. As most of us buy grog to drink, we seek value. Apart from that capitalist Arfur Scargill, who buys to trade.

To me good value may be a six pack of Steinhauser lager in Aldi for £3.99. A tasty drop of lout that suits me and comes in at a price I consider far below value. To the beer geek seeking that elusive and exclusive taste of something few others will ever taste, a £10, £20, £50, £100 bottle of beer is actually of a value above the price. To them, if not to me. So a market will exist for that sort of crap. Even if I don’t get personally why people would do that.

To me, beer gets better at smaller price increments. Pay a little more, you can get better beer. The difference between a 50p bottle of beer and a £1 bottle of beer may very well be worth the extra 50p or 100%. (not always, sometimes) Sometimes I might go for that and buy beers that cost a couple of quid each. I am still buying something I think of as value being greater than price. But that’s how I see value. At higher increments of price, say a £12 bottle of 12% abv grog in a fancy bottle, please forgive me, but I drink it and don’t often actually like it. I gag slightly and think, what is this crap? The value falls way below price. But heh, I’m an undiscerning commodity drinker without your sophistication. I like most of the cheap stuff, even if there is cheap stuff I think has no value.

Like a bottle of scotch, I think a £20 bottle of malt is better than a £10 blended, and might buy either depending on pocket or what I want to do with it. Sip it or mix it. I might even see a £30 one as something to give a go to. I’m not sure where the value lies in a £100 one as I’m not an enthusiast seeking out obscurantist experiences, flavours I can write about, people to impress, or a wider community of enthusiasts to engage with. The £100 bottle to me lacks value justifying the price, but to others clearly doesn’t.

So the question for me comes down to what is the value others clearly see that I don’t? I can mock people for paying through the nose for beer or I can seek to understand why they do.

As far as I can make out it is a combination of many different motivations. For some it is a genuine enthusiasm for new tastes and experiences. For others I think it’s a collection exercise, albeit more expensive than nicking beer mats or my hobby of nicking beer glasses. I think there are those that enjoy the exclusivity, those that want kudos and to impress their fellow geek. For a price you can be more discerning than others. Snobbery is part of this if not a factor for all, certainly for some. The value is more than the taste of the liquid in the glass.

In my time of mixing with beer enthusiasts I’ve met people that seem to genuinely love their hobby, spend a lot of money on it, have a right laugh but never look down their noses at those that don’t share their obvious passion. I’ve met others that appear to get less fun out of it and do look down their noses at people for whom price is a factor in their choice of beer or pub. Simply buying pricey beer is not a factor, more the type of person they are that they bring to their hobby. People that say “people who only drink to get drunk” types to describe the regular drinker.

I think the bigger question isn’t so much why some beer costs more; it’s more what value those that pay it get from it. For sure there will be piss taking brewers creating artificial scarcity to milk a captive market of enthusiasts with fat wallets. The really interesting question is what motivates someone to think a bottle of beer has a value worth a £100 price tag.

That’s the question I throw back at you.


Anonymous said...

Just pray Melissa Cole sees this. Her blood will boil and maybe she'll explode

Gary Gillman said...

Good to see you blogging again, I recall a post a few years ago which was a "guest" return but looks like it's permanent, I hadn't realized this.

I agree with your premise but would simply add that one can't execute on it until one has had a reasonable experience of what is available to buy. Only when you've had a certain number of beers of the main classes, of malt whiskies, etc., can you form an idea of the value/price proposition you explain.

Many people spending large amounts don't yet have this knowledge and automatically associate price and value.

So, I would say, before one can apply the theory mentioned, you have to spend a certain of money needlessly so to speak, but you'll save more later.

Second and different point: most beer, certainly that of the main types purchased (draft lager, say), has the same amount (or essentially) of alcohol, and many people buy simply on unit price of alcohol. To them, beer is the alcohol content, not more. I'd guess there are more of such buyers than craft beer enthusiasts! So they are not affected by the theory because the products have no essential differentiation.


Cooking Lager said...

For sure Gary, with beer, value will always be subjective. Ben Graham wrote about a specific method of calculating value based on a business return. What return you get from beer may well be how you appreciate it, pleasure, not a formula to apply.

It's interesting though, I think when I see bloggers arguing over price, what they are in fact saying is how they value something and valuing something as "more" don't always make 'em right anymore than me saying "less"