Piss and Vinegar: Why Is Beer So Expensive in Oregon?

Why is beer so expensive in Oregon? Let me tell you A Tale of Two Six-Packs.

Last October when The New School posse was doing some post-GABF beer shopping at a Denver liquor store, I was excited to find six-packs by Dry Dock Brewing. It was a Colorado brewery I hadn’t heard of before that trip, and I had really enjoyed their gold-medal winning mild ale at the festival (they won 5 medals in total at the 2013 GABF). Checking beer in your luggage is easier when it’s in cans, so it was a no-brainer to pick up a sixer of Dry Dock’s Hop Abomination IPA. Even better, the price was right: $6.99. And that was not a sale price, that was the regular price of the beer.

The big orange-blossom hop nose and intense piney flavor of Hop Abomination called to mind delicious NW IPAs, like, for instance, Oakshire’s Watershed IPA. But instead of that $7 Colorado price tag, the regular price of Watershed cans is $10 a six-pack — about 40% more expensive. Sure, sale prices might be a dollar or dollar and a half lower, but you’ll never find a sixer of Watershed for $7. Two similar six-packs; vastly different prices.

I chose Oakshire to compare to Dry Dock because the beers seem to be of a similarly high quality, and the breweries are about the same age and have similar output (Oakshire reported they produced 6,500 barrels in 2012 and planned to grow to 9,200 barrels in 2013; Dry Dock planned to grow from 3,300 barrels in 2012 to 12,000 barrels in 2013), and both began canning their wares in 2013. But really this complaint could be about any Oregon beer in cans — the price hovers around $10 a six-pack (and usually even more for tallboy 4-packs which deliver 8 ounces less beer). How did we end up paying this premium for beer in cans?

It’s not just cans and Colorado that make Oregon beer prices look bad. Bottles ain’t cheap either. A commenter on a recent installment of the Portland Beer Price Index noted that 12-packs of Oregon beer are cheaper in Minnesota than they are here:

At discount stores in Minneapolis, the tax-included six pack equivalent for Widmer (and other large regional/national craft) is $6.06 when you buy a dozen. Every day. Try to find that as a sale price just up the street from the brewery at the Plaid Pantry in Overlook, or Freddy’s in Arbor Lodge, never mind the 60 cent deposit I surrender to the convenience of curbside recycling.

There’s something strange about Oregon beer prices.

It’s not taxes. According to this map by the Tax Foundation, Oregon and Colorado had the same (very low) excise tax on beer of 8 cents a gallon. Minnesota actually has a somewhat higher tax of 48 cents a gallon. Neither amount to much on a six-pack — 4 cents in Oregon and Colorado vs. 27 cents in Minnesota, but it shows that taxes aren’t the source of Oregon’s high prices.

I don’t think it’s supply and demand. According to the Brewer’s Association, Oregon and Colorado have about the same number of breweries, with Oregon having more per capita. Piecing together various sources — since the BA omits Widmer from its “craft” brewing statistics — the two states produce a similar quantity of good beer.

My best guess is that Oregon’s three-tier distribution system — recently discussed in some detail here on the New School — has created a small handful of distributors who are able to act somewhat as a monopoly in setting beer prices. Each brewery deals with a single distributor, so there is no competition between distributors for any given product. On the other hand, with so few distributors in the game, they don’t need to explicitly conspire with one another to keep prices high. The lack of competition lets them all enjoy the ride without worrying that one of them will undercut the rest.

If you have any insight into why Oregon beer is so spendy, leave a comment on this post, or drop me a tweet or an email. Any evidence of distributor pricing shenanigans? Please spill the beans (we will keep you confidential unless you request otherwise).

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Bill Night

For the last several years Bill Night (twitter: @itspubnight) has been writing a Portland-centric beer blog called It’s Pub Night, named after the ritual weekly phone call or email rounding up friends for a night out: “Hey, it’s pub night!”. Despite his advanced age, he is lending a hand to the New School with a monthly rant called “Piss and Vinegar”. The name of the column comes from the British colloquial phrase “taking the piss” — making fun — and the sour character of Bill’s rants. He continues to maintain It’s Pub Night, and he invites you to take a look at some of the fun things over there, like the Beer Review Generator, the Portland Beer Price Index, and the Six-Pack Equivalent Calculator.

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Discussion

  • Mark! Doin ok?
    Mark! Doin ok?
    Thu Feb 13, 2014 1:57 PM

    Yes, I agree, the beer in Oregon is over priced. It’s not just the beer though. Everything in Oregon is ridiculously over priced, especially housing. Oregonians are a great bunch of people & I kinda feel sorry for them. I wonder if they are even aware of how much they over pay for things. I think you hit the nail on the head with the distributors being to blame for “gouging”. I’m curious to hear whether you received a more definitive answer.

    • Notteham
      Notteham
      Thu Feb 13, 2014 5:06 PM

      There’s a discussion to be had about beet prices, but housing? Really? ” I wonder if they are even aware of how much they over pay for things.” Overpay for what, not living in Idaho or Nevada? Oregon falls right in the middle of the nation’s housing market and well beneath Washington, California, Alaska and even Colorado. When you trade down, it gets ugly in a hurry.

      • ElGordo
        ElGordo
        Thu Feb 13, 2014 5:43 PM

        The consumer price index for Portland pretty much conforms to the national urban average, putting the Portland region right on the median for cost of living in urban areas. Some things seem higher-priced, some seem lower, but on balance, we’ve got it pretty good here, at least compared to Seattle.

        http://www.mrsc.org/subjects/finance/cpiu.aspx

      • SnobRitch
        SnobRitch
        Thu Feb 13, 2014 3:44 PM

        Good article Bill. Mark, I blame the migration of Californians for the housing prices, probably the beer too.

        • The Hamzinger
          The Hamzinger
          Thu Feb 13, 2014 4:45 PM

          I just hope the DOJ nails InBev to the wall over their acquisition of Morgan and we can put this idiotic 3-tier distro system out of our misery once and for all.

          • Unknown
            Unknown
            Thu Feb 13, 2014 5:29 PM

            It comes down to economics and some quirks. The consumer is willing to pay $9.99 for Oakshire IPA (or any other beer) so that’s where it’s sold. It varies state to state and that is typically driven by what the big boys do. An interesting example in beer pricing is the Washington draft market compared to Oregon from a wholesale to retail side. In WA the big breweries have kept draft pricing to retailers very low yet pint prices to consumers in WA are high. A keg of Red Hook, Pyramid or even Pike in Seattle will be sold to a bar for roughly $130 and most bars charge $5-$6. The same kegs are sold to a bar in Portland for $145 and the bar then sells a pint to a consumer for $4-$5. Overhead for the bars are virtually identical. Folks in Seattle are just willing to pay more for draft than folks in Portland. It’s a funny game.

            As for who’s making the $, with package or draft you can think of it as the brewery getting half with the remaining half split between the distributor and the retailer and you’ll be pretty accurate.

            • Muruwai
              Muruwai
              Tue Sep 29, 2015 6:26 AM

              Noticed the hike in beer 3+ years ago when it was easy to find Outlet Stores with 6-packs less than $6. Now it’s all gone from Oregon. Greed ? Of course. It’s the ebola of the nation now for everything and no real need for any of it in the northwest where voting against taxes have long been regarded as the way to close down the schools. Food,full of salt and bad for your heart now costs twice as much. What are they really telling us ?
              Do what we did. Don’t buy it if it’s above $6 for 6 bottles. Costco can do it and they are no longer a cheap place to buy foods.
              Tell the brewers that they are NOT producing expensive single malt scotch or high priced French or German wines.
              Use the oldest consumer move in the book. Walk out without buying any. They’ll get the message very quickly.

              • Moto
                Moto
                Wed Jul 27, 2016 12:09 AM

                Muruwai is spot on. With most good beer around $9 – $10 a sixpack, I stopped buying it. A few years ago I set my limit to $6, then raised it to $7 last year. $9 is way too much.
                The craziness won’t stop until we use the power of the free market to bring prices down. Why not use this opportunity to learn more about wines? There are a lot of very drinkable wines for under $10.