Beer is the everyday cure for insanity early on: drinking a bottle takes 12 off your insanity. Brewing your own waits on Brewing and a Brewing Stand. It comes from Januarius, who keeps 10 bottles for sale, and there is one in the chest in your yard.
Insanity builds up as you do grim work, and every point of it lowers your maximum energy. An ordinary night’s sleep does not bring it down, so Beer is what keeps your energy bar long. See Energy, Sleep and Insanity for the other ways to lower it.
Larry asks for 2 Beer in Comrade Donkey, to get the donkey talking. Keep two back once his story reaches that point.