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What if beer were a commodity at the bar?

Rebecca Sheir Dec 21, 2011

Kai Ryssdal: There are all kinds of places in this country where you can trade stocks. We have the New York Stock Exchange and the blue chips; the Nasdaq for tech stocks; the Chicago Mercantile Exchange for commodities. And now, a place in Washington D.C. where your investment is truly liquid.

From WAMU, Rebecca Sheir reports.

Rebecca Sheir: It’s Friday night at the Big Board, a new bar and restaurant in D.C.’s H Street neighborhood. Customers chat, chomp on burgers and sip from glasses.

Sheir: What are you drinking?

Female patron 1: I am drinking the Ranger IPA.

Of beer on tap.

Sheir: You’re drinking a beer — what are you drinking?

Male patron: Uh, Kilkenny?

But here’s the thing: since these patrons bought their beers, most of the prices have changed.

Sheir: And how much did you pay for that Ranger IPA?

Female patron 1: It was $5.50 at the time, and now it’s gone up to $6.50.

Sheir: How much did you pay for that Kilkenny?

Male patron: This was actually $5.75 a little while ago. The price has fluctuated a great deal.

All this talk of “price fluctuations” — we’re at a bar, right? What’s going on here? Well, it’s kind of like a commodities exchange in reverse.

Eric Flannery: The simple essence of it is the more type of beer that somebody orders, the lower the price goes.

Eric Flannery co-owns The Big Board. And there actually is a kind of big board — a flat-screen TV, showing what looks like a stock chart; you can see it on the bar’s website, too.

Mark Flannery is Eric’s brother. He explains the board’s first column lists the “product,” or draught beers:

Mark Flannery: Guinness, Chocolate City, Yuengling Lager, Ranger IPA, Peroni Lager, Alagash White, Kilkenny and Miller Light.

Then there’s the market price…

Mark Flannery: Which is whatever price the beer is being sold up at that moment.

And the base price.

Mark Flannery: The Base Price is what we’ve decided that no customer will ever pay more.

And there’s a Floor Price — what no customer will ever pay less than. Each floor price is set individually, and could, theoretically, be zero. To make sure that doesn’t happen, the Big Board resets to the base price every hour.

Mark Waldman: And that keeps somebody from coming in with 1,400 of their closest friends to drive down the price of beer.

Mark Waldman teaches finance at D.C.’s American University. I went there to find out whether the Big Board’s beer exchange was just a gimmick or good business. And who better to ask than students — all members of the prime beer-drinking demographic.

Sheir: What do you think of this business model as a business student?

Male student 1: I think it’s fantastic. It commoditizes beer, and it would certainly draw a lot of people in to the establishment to see what they’re gonna order and what they would pay for it.

Male student 2: Um, you can sort of have this crowd mentality where it’s like, “Oh! You lowered the price by 20 cents! Let’s drink some more!” But the margin of profit on beer is so high, especially on draft beer, that this is a win-win.

Eric and Mark Flannery say The Big Board is packed every night. And customers aren’t just ordering beer — they’re collaborating with their fellow beer drinkers. And that, one patron says, is what really sets The Big Board apart.

Female patron 2: This gives you more of an opportunity to interact with the bar itself, with the establishment, and I haven’t been anywhere else that has done that.

But while it may be a ton of fun for customers, it’s a bit more work for the staff. Since the price of beer fluctuates so often, The Big Board doesn’t yet have a point-of-sale computer program that can keep track. So for now, servers and bartenders have to punch in all the beer-exchange transactions by hand.

In Washington, I’m Rebecca Sheir for Marketplace.

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