Thursday, June 14, 2012

Craft beer economies of scale

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In the restaurant setting, craft beer pricing has much more in common with wine pricing than it does with macro-brew beer pricing. So look to your established wine-pricing formulas when establishing your guidelines for craft beer pricing.

Bottled Beer

For many better restaurants, the majority of craft beer sales will be by-the-bottle. For some restaurants, beer list pricing can mean simply taking the wholesale cost per bottle and multiplying by 2.0 or 2.5 or 3.0 (often 2.0 for higher priced products and more for lower priced beers). Don’t worry too much about odd pricing numbers. Just round each up to the next nickel or dime, like $4.32 up to $4.35 or $6.36 up to $6.40. Craft beer customers expect quite a bit of variance from type to type and brand to brand.

An alternative pricing strategy is multiplying the wholesale cost of each beer by a fixed mark-up factor, say 2.0, then adding on a fixed overhead service charge of something like a fifty-cents or a dollar per bottle, and then rounding up to the five or dime.


A 12-oz bottle of craft beer with a wholesale cost of $1.67 is fairly sold for up to $4.25 or so.

A 22-oz bottle of craft beer with a wholesale cost of $4.50 is commonly be sold for $9.00 – $12.00.

A 750-ml bottle of craft beer with a wholesale cost of $8.00 could be priced up to $17.00 on a beer list.

If your restaurant still sells bottled versions of Bud-Miller-Coors macrobrews, there is no need to change your existing pricing formulas for them. Some restaurants set a minimum selling price for even the cheapest beer and price beer there even if their normal mark-up formula would have the beer selling for less.

Variations from market to market do exist as to what is customary for craft beer mark ups. Some locations have much higher overhead (rent, labor, taxes, etc.) than others, so beer pricing will justifiably vary from area to area. Price yours fairly for your market and you will make your customers happy.

Draught Beer

The cost-per-ounce for craft beer in kegs is roughly 40-45% less than the same beer in bottles. You can see how selling craft beer on draught is a good profit opportunity if handled properly and efficiently. The general pricing strategy for draught beer is similar to those described above for bottled beer, but a higher mark-up rate is customarily utilized.

Since the overhead cost for draught beer is higher — draught system equipment depreciation cost, system maintenance/supplies (CO2, nitrogen, adjustments, weekly line cleaning, keg change-outs, etc.), spillage, and potential spoilage — it is customary to factor in a higher overhead charge-per-glass than would be charged for bottled beers. In practice this should bring the regular sale price-per-ounce to roughly the same point as the bottled version of the same beer. This higher regular price also allows room for periodic special pricing on draught beer, such as during early evening hours when business is typically slower.

Rule of Thumb

If most of your craft beer business is by-the-bottle, calculate your selling price for the bottles and then price your draught beer similarly (ounce for ounce, similar product category). Conversely, if your craft beer business is predominantly done on tap, determine your draught beer sales prices and price bottled beers comparably. That means that two beers of similar quality, type and style should sell for a similar price-per-ounce even though one is bottled and one is draught.

Price variety important

Having price variety among the craft beers on the beer list is a good thing. Craft beer customers, like fine wine customers, understand that product costs vary greatly. They expect each product offering to be priced based on its underlying cost. When offering two beers in the same style category, it works best to have one of them a more exclusive brew at a higher cost than the other to encourage a trade up to higher perceived quality (and higher restaurant profit).

As with wines, the price of a craft beer is a proxy for its quality. The higher the price, the greater the perceived quality. It is a good practice to offer at least a couple of beers that cost 50% to 100% more per bottle than the standard craft beer offerings. Similar to offering a grand cru Bordeaux, a 98-point-rated Cabernet Sauvignon, a Barolo or high-end Champagne, offering one or more of the world’s very best beers sets a premium tone for the entire beer list.

For example, the Belgian Trappist beer Orval, widely considered among the world’s best beers with a wholesale cost around $4.00 per 11-oz bottle, could be fairly priced on a beer list at $8.50 to $9.00. In comparison, a standard offering from a quality craft brewery like Bear Republic, Boulder, Bells or Brooklyn would be fairly priced at about $4.00-$5.00 for a 12-oz bottle. A 12-oz bottle of Dogfish Head’s revered 120 Minute IPA can easily bring $13 or more on a restaurant beer list. Consult with your distributor for help with comparison pricing in your market.

Using the above pricing examples, the tab for a typical craft beer customer consuming two 12-oz. bottles with dinner will range from $9 to $20. In this example, if beer costs are running around 38% to 45%, the sale would generate a gross profit of $5.70 to $11.00 per craft beer customer. If serving craft draught, your profit should be even greater.

Saturday, March 10, 2012

Dark Horse Brewery wants your opinion


Whatshouldwedo?????We received a call today from a producer guy out in Hollywood. It turns out that a big famous rock band wants to use our beer in their video that’s being shot in two weeks. This band is super popular and I’m sure the video will get tons of airplay. The guy on the phone said, “we’d like to have your delivery truck pull up to this frat party and wheel up a bunch of Dark Horse, then we’ll get some crowd shots of the kids holding your cans”. Aaron replied “we don’t do cans we have bottles”, the guy said that would be fine. It’s obvious that this would be a great opportunity for us and maybe get some mainstream youth into craft beer rather than the swill. However, none of us at the brewery really care for the band (or frat parties) so our knee jerk reaction is “no thanks”. But how cool would it be to see our beer in a video?Aaron said, “Why cant it be some cool band like Slayer?” The guy that called said the lead singer is familiar with our brand. What does that mean?Does the lead singer of Nickleback drink craft beer?Anyway we have until Monday to give them our answer. While we think about this we’d like your opinion. What should we do?

Tuesday, December 20, 2011

Randall the Enamel Animal

Take note Atlanta Craft Beer Stores:

DFH Presents:

Randall the Enamel Animal

not my words but interesting none the less:

Saturday, December 17, 2011

the 2011 beers of Christmas

many folks get together with family for the holidays. I am fortunate enough to have family that loves craft beer. we get together every year, and we share more than just good tidings and gifts. we each bring our favorite cold weather beer. This is the 2011 list. posted live by phone so sorry the descriptions suck.

first up
09 and 11 anchor our special ale
finally Alpha Klaus

grand cru

smells like vinegar and bold sour cherries, some barnyard but not
much... taste is much more subdued. I expected more sour funk and leather from a Flanders but it delivered for a easy to find sour. color is a nice golden brown with mocha head. retention is outstanding with champagne carb and thin mouthfeel. very congruent with the style.

backwoods bastard

testing out my new mobile app.

Thursday, November 10, 2011

Cold weather steak, potato & beer crock pot recipe

Steak and Potatoes with Beer 1 large onion, sliced 8 medium potatoes, quartered 1 1/2 to 2 1/2 pounds round steak, cut in 6 to 8 serving-size pieces 1 tablespoon brown sugar 1/4 teaspoon ground nutmeg 1/4 teaspoon ground black pepper 1 envelope beefy onion soup mix 1 can (12 ounces) beer I use duck rabbit brown 1/2 teaspoon salt, or to taste Combine sliced onion and potatoes in bottom of crockpot. Arrange steak over vegetables. Combine brown sugar, nutmeg, onion soup mix; sprinkle over the beef. Pour beer over all. Cover and cook on LOW for 8 to 10 hours, until beef is tender. Taste and add salt to taste. Serves 6 to 8.
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