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London bar defends selling pints at £13.40
A London bar that specialises in craft beer has defended itself for selling Cloudwater double IPA at £13.40 a pint, after drawing accusations that it was ripping off its customers.
The Rake in London’s Borough Market
The Rake bar in Borough Market is run by the founders of specialist beer merchant Utobeer, Richard Dinwoodie and Mike Hill. Founded in 2006, the bar stocks around 130 beers at any one time, with seven kegs and three cask ales on constant rotation.
The average price of a beer in London is around £4.99, and most expect to pay a little more in the city. However the craft beer specialist drew the ire of social media for offering a pint of Manchester-based brewer Cloudwater’s 8.2% ABV North West Double IPA for £13.40 a pint.
One Twitter user suggested that “either this keg was hideously expensive for them to buy or ridiculously marked up”, while another ranted: “£7 quid is a very expensive pint of beer. £13.40 is bonkers, stark, raving, bonkers.”
In response to criticism of some that it was making “vast profits, dragging the industry’s name through the mud and gouging our customers,” The Rake released a statement on its website, telling its customers that it wanted to reply “calmly and candidly”, rather than getting drawn into an argument on social media.
“We are not making ‘vast profits,’ we work to a margin like all businesses and if we stopped we’d start losing money and eventually go out of business,” the statement read. “Cloudwater will not deliver directly to us unless we order a pallet from them and if you know The Rake, you’ll also we do not have the space to store a pallet; so this being the case we have to order through a distributor who will obviously put their margin on it.”
“Whilst we always endeavour to keep the prices as keen as possible, the DIPA being a 9% beer is never going to be a cheap. Being charged £130+ for a 20L keg by the distributor, we’re always going to struggle to keep the price down but we love Cloudwater beers, most of you know they are some of the best in the country right now and we want to showcase them and spread the love.”
“Hopefully the good folks at Cloudwater are aware of the prices their distributors are charging but for the record we are also looking into other options for delivery to try and minimise the cost so that everyone can continue to enjoy some of the best beers the UK has to offer.”
The beer in question: Cloudwater’s 8.2% abv DIPA
Distributor Euroboozer also weighed in on the debate, posting a breakdown of the costs involved. While Euroboozer buys in this particular 20l keg for £110, they sell it for £132.89, making £22.39 per keg they sell.
“Once you factor in that this beer probably costs 3-4 times more to make than another ‘standard’ beer, you’ve factored for the increased malt bill for the abv, the flakes malts for the mouthfeel, the 300% more hops for the late and dry hopping, add to that the tank time and then Cloudwater’s overheads, which will be huge,” said Euroboozer, justifying the costs incurred by the brewer initially.
Retailers then price the beer to cover their overheads. For a London pub or bar, gross profit has to be in the region of 70% to be sustainable, according to Euroboozer.
At 35 pints to a keg, that’s £3.79 a pint, before you take into account overheads.
At £13.40 a pint, with roughly 35 pints to a keg, that’s £469, versus a £132 sale price, working out at around a 66% gross profit margin for The Rake.
Beer writer Melissa Cole also defended the beer’s pricing noting on Twitter: “The Rake has been at the forefront of serving the best beer in London for over 10 years, it’s not about to start screwing customers over now”.
This is a ridiculous show of the ignorance that sadly still surrounds the beer industry in this country. Cloudwater beers are not made to be drunk by the pint, rather sipped and savoured like a top-end wine. The sooner we move away from the attitude of deciding whether a beer is worth buying based on how much a pint costs, the better. People don’t complain about the price of a glass of a top-end wine and even top-end beers like this pale in comparison to fine wine prices.
The quantities produced by cloudwater are tiny and they make some of the most complex beers currently on the market. You can’t have your cake and eat it.
I don’t have a problem with the £13 a pint.
My issue is with £10 profit per drink.
There is no more time or labor put into pulling a pint.
Use a bit of common sense and a sliding scale.
You would end up selling more and putting more £££ in the bank.
The margin might look good on a spreadsheet but it’s the cash you are putting in the bank.
Hi rob
Sorry mate but you need a little clarification on the industry as it would never be £10 profit. Firstly Vat needs to be taken out
13.4 becomes 10.72
Then the cost of the product (assuming no wastage or ullage) -3.79
This gives a gross profit of 6.93
Out of this usually 20 -30% is staff costs aprox 2.5
Then expensive rent in borough market
Rates..electric..and 30 other ways to deprive businesses of profit
Usually on a business like this the operating profit is aprox 10-12%
You are not meant to buy these in pints anyway!!! When you hit strengths of 7%+ you are looking at 2/3s or 1/2 a pint!
Patrick,
I understand where you are coming from and perhaps profit was a poor choice of word.
My point is they wouldn’t mark up a pint of Stella by £10 so why do it for another beer?
Flat margins across all products mean that high end inventory remains just that.
If you want people to drink something specia/unique you need to price it in a way that is going to encourage the to do so , especially if that is the raison d’etre of your establishment.
Rob,
You’re looking at cash margin when this is about GP%. Pubs aim for a certain GP% – in this case London pubs are usually aiming for GP70%.
They’re paying about £130 / 20L keg of Cloudwater DIPA. That’s about 33 pints (if you take into account losses caught in yeast / hop matter). That’s £3.93 a pint, cost price. 70%GP on this is actually £15.72 a pint, of which £2.62 if VAT. The Rake were charging £13.40 which is 64%GP. The reality is it appears the Rake have actually taken a HIT on this. As Patrick says, GP is supposed to cover a variety of other costs outlined above. Like wine, there is a growing community of craft beer fans that are prepared to fork out a little extra because they know what they’re getting is going to be good – why should the brewer or the pub have to take even further hits to try and convince penny pinchers to try it?
In terms of Stella and other mass produced beers, no, they wouldn’t mark it up by £10 because I don’t think many pubs work on cash margins but GP% which is applied to the cost price of the beer. I think you’ll actually find that mainstream lagers give a greater GP margin than any decent craft beer.