Playing the Secondary Beer Market | Craft Beer & Brewing

Playing the Secondary Beer Market

When it comes to rare or sought-after beers, some customers enjoy the thrill of the hunt and the satisfaction of opening and tasting the beer. Others seek get these treasures at the retail price, then resell them on the secondary market for profit.

John Holl a month ago

Playing the Secondary Beer Market Primary Image

Cory King, the founder and brewer at Side Project Brewing in St. Louis, Missouri, isn’t shy about the fact that he regularly checks on his beers’ ratings on Untappd. Like other brewers, he wants to monitor customer reaction, make sure that retail locations are serving beers properly, and make sure various beers are still pouring and presenting as they should.

Scrolling through the site can be an exercise in humility: gratifying when the reviews are kind, frustrating when they are not. So something struck King as odd a few months ago when he was looking at reviews of O.W.K., his 15% ABV imperial stout that is a blend of several recipes aged for 15 months in 15-year-old Willet Family Estate bourbon barrels and finally rested on Ugandan vanilla beans before bottling. The suggested retail price is $50 per bottle.

The reviews for 2018 O.W.K. are overwhelming positive. As of press time, it had a 4.94 (out of 5) rating, and the comments largely center on the excitement, love of the vanilla character, or good times had at a bottle share where it was opened. But the review that stood out for King was a 4.75 rating, where the user praised the beer but knocked it for the price.

“He said it cost him too much to get,” King says. Indeed, when you dig into the reviews, even the highest scoring ones, you’ll see mentions of the beer costing $3,000–$3,500 for the bottle. That’s a hell of a markup, but that’s the reality of the secondary market.

Opportunistic sellers in the alcohol space are nothing new. It’s been commonplace in wine for decades. The same is true for spirits. But the craft-beer industry’s relative age coupled with an increasing number of small breweries that are creating world-class beers in limited quantities means there’s a demand for the supply. For those lucky enough to get their hands on a bottle or two, the temptation to sell it well beyond the MSRP is often a pull too strong to resist.

ADVERTISEMENT

“It’s a part of consumerism that I really don’t understand,” King says. “At Side Project, we make high-quality beer and as much of it as we can, but it’s really about quality over quantity for us. We’re releasing stouts for $50—that’s how it’s been since day one—and these beers have a lot of expenses behind them, so we’re not making a big profit margin.”

When he sees his beers on the secondary market, “it takes the control out of my hands, and I like the control because I wish those dollars were ours. We put the work into the beer. Still, I’m able to give our employees health insurance, and everyone is well taken care of at our existing prices, and that’s most important.”

Many brewers wish that beer could return to the simpler times where breweries set fair prices and customers paid those prices and then enjoyed the beer themselves, knowing that the price was worth it for rare beers—especially ones that have spent months in barrels or are loaded with specialty ingredients or just demonstrate the supreme skill of an artisan.

Unfortunately, there’s no going back. At breweries such as Hill Farmstead in Vermont on special release days, many people try to skirt the bottle-limit rules so that they can quickly turn the package around online for a profit. Folks bring spouses, uninterested or on-the-wagon friends, even grandparents with them to snag extra bottles that they have no intention of drinking. There are even websites and forums where people offer to stand in line for others—for a substantial fee—so that the secondary-market traders don’t even need to leave the Saturday-morning comfort of a couch and pajamas at home. Brewers have tried a variety of ways to mitigate these situations to help the true fans, the ones who actually want to drink the beer at the price they paid. They’ve tried measures from mandating pre-orders, where driver’s licenses are checked against a list and then customers are presented with hand-numbered bottles, to other verification methods.

But those measures don’t always foil the traders. O.W.K is one such beer that is hand numbered, in the lower-right corner next to the release year. Scrolling through Untappd, you’ll see full bottle shots with the number intact, but more likely than not, you’ll see strategic bottle shots where the bottom part of the label is out of the frame. In truly egregious cases, the number has been cut or torn from the label completely.

“That’s the telltale sign of a secondary sale,” King says.

ADVERTISEMENT

While he and other brewers can monitor the sites and posts, trying to ascertain the identity of the original seller, there are actually fan networks that exist around breweries that do the policing.

This was the case in a recent release from Floodland Brewing, a Washington State brewery that has a hard-to-get membership. Beers were showing up on the secondary market, and Brewer and Owner Adam Paysee took to the Internet to rail against those who went against the rule he set up for his beer releases. In what is best described as the shit storm that followed, both sides of the debate took up arms, hurled insults, and looked for ways to justify their position. Later, in a brief email, Paysee would call it “kicking the hornet’s nest.”

But it brings up the question of who owns the beer once the brewery has sold it. Once a beer has been purchased, isn’t it the right of the beer’s owner to do with it as (s)he pleases? This is the case with other consumer goods—from cars to sneakers to electronics.

If someone buys a bottle at MSRP but then offers it at ten times the price to someone who is willing to shell out cash, isn’t that just a personal prerogative?

Some brewers think so. Derek Gallanosa of Moksa Brewing Co. in Sacramento, California, who often sees his beers on the secondary market, sees it as a marketing tool.

ADVERTISEMENT

“If secondary sales bring attention to your brewery and can demand a certain amount of attention to your beers, I don’t necessarily see it as a bad thing,” he says. “We don’t necessarily encourage it, but you know it’s going to happen, and you can’t prevent it, so you adjust and adapt.”

This has meant limiting the number of bottles sold to a single customer and spreading out the release dates and times. “We sell at a price that we’re comfortable with, that gives us a decent margin to expand business, and that allows us to play with nice ingredients.”

King, on the other hand, says that one of his bigger worries about the secondary market is that it raises expectations too high. He uses wine as an example.

“A $100 bottle of wine didn’t cost $100 to make,” he says. “But there’s a mental impression that happens when you drink that bottle. You expect something special. When the prices get super jacked up, it’s harder to meet those expectations.”

The same is true with beer, regardless of skill and flavor. “When the price goes sky high, it’s hard to appreciate it as it was intended because part of you is looking to justify that $1,000-dollar price tag rather than just enjoy a beer with friends.”

ADVERTISEMENT

John Holl is the Senior Editor of Craft Beer & Brewing Magazine®. Email tips and story suggestions to [email protected].

ARTICLES FOR YOU