• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer
  • Advertise
  • About Craft Brewing Business

Craft Brewing Business

Professional Insight, Unfiltered

Craft Brewing Business Craft Brewing Business
  • News
  • Business & Marketing
  • Packaging & Distribution
  • Equipment & Systems
  • Ingredients & Supplies
  • Webinars & White Papers
  • News
  • Business & Marketing
  • Ingredients & Supplies
  • Packaging & Distribution
  • Equipment
  • Webinars & White Papers
  • COVID-19

Craft beer pricing pointers: How to set beer prices in a growing market

August 28, 2014Chris Farmand

Craft Beer Prices
Pricing becomes trickier as more competition enters the market and the success of your brewery isn’t a sure thing.

Pricing a product in a competitive market is hard work. The most valuable team members at companies such as UPS, OfficeMax and Southwest Airlines are their product pricers. Why? Because their work must appeal to millions of people in a highly competitive market. Now, let’s talk about pricing beer — how do we typically price our product? Does the distributor set it and we conform because we don’t want to undercut the neighborhood bar? Do we guess? All these pricing methods are happening and, in my opinion, must change as the craft beer industry becomes more competitive.

For starters, answer this question: Who is your customer? Let’s examine the two customer types most craft breweries encounter: Distributors and Patrons.

 Pricing with a purpose will ensure you have enough profit to run the brewery successfully.

Distributors are necessary for geographic growth. Good distributors will learn about your product so they may better sell it. Distributors typically add 30 percent to the top of their cost, and that is what they sell to retailers. To ensure they get their 30 percent and leave a little for the retailer, distributors do what I call “price coaching.” This is where they tell breweries the most they will pay for their beer.

Patrons (on-premise consumption) are the folks that belly up to the taproom bar or purchase packaged sales. Patrons are less price sensitive because they are showing up for a fresh beer and an experience. They typically respect the craft beer efforts and don’t mind paying a little extra for it.

Now that we know our two customer types, how do we price for them?

Distributor pricing

Distributors begin with the retail price. They determine what product price point the end user (bar, restaurant, liquor store, etc.) will set. From there, it’s a formula to get back to the price they will pay for your beer; plain and simple. Breweries are free to charge what they want for their beer, but at the end of the day, the beer must 1) sell and 2) ensure all parties profit. Flagship beer prices will remain steady and realize minimal increase in profits as efficiencies occur. Specialty or seasonal beers that make it into distribution are an opportunity for breweries to charge a premium for the exclusivity.

Patron Pricing

I typically like to look at the product mix and determine what is a “flagship” beer and what is a “specialty” beer. Flagship pricing, once set, usually will not change. The profit margins on these beers will increase as the brewery scales up in size and efficiencies happen. Since your taproom should offer a better experience than the local bar, charge for it.

Charging as little as $0.25-$0.50 more per pint than the local competitor, cumulatively, will add serious profit to the business over time. Specialty or one-off batches are a different story altogether. Think about it: these are highly sought after specialty brews that do not last very long. Also, given the small production run, they cost more to make. Patrons do not mind paying a little extra for bragging rights. I suggest charging 20 to 25 percent more than the highest priced flagship for speciality batches.

Be sure to read all of Chris Farmand’s insightful features

Profits

The profits generated from each customer type will vary. Profits from taproom sales will certainly be higher than sales from the distributors. However, the distributor will be purchasing far more quantity than the patron. This doesn’t guarantee more profit, but it is a larger inflow of cash when compared to the daily sales. A successful taproom can generate enough profit to pay the bills of a production brewery, and if this is accomplished, the profit generated from distribution sales will remain available for expansion, investor distributions or salary increases. It’s hard, if not impossible, to give profit examples on certain types of beer. There are so many factors that go into determining the cost per barrel, it would be misleading to attempt this.

Your brewery success is not an assured conclusion. Pricing becomes trickier as more competition enters the market. This is an aspect of the business that needs close attention as your brewery grows. Successful breweries will focus on pricing over cost controls. Pricing with a purpose will ensure you have enough profit to run the brewery successfully.

Chirs Farmand Small Batch StandardChris Farmand is the founder of Small Batch Standard, a CPA firm helping craft breweries across North America. Chris has more than 10 years of tax and accounting experience, with the last 3 years dedicated to the craft brewing industry. Small Batch Standard believes brewery owners should have reliable financials while focusing on what they do best, making beer. He can be reached at [email protected].

beer fridge
RTD pricing is crazy high, even in states that lowered their taxes
Beer money cans
How do you determine the price of a craft beer? (price to distributor, price to retailer and price to consumer)
top 4 craft beer storylines
Top 4 craft beer business storylines from 2016
beer bottle and money
Best beer business lessons in 2014

Reader Interactions

Comments

  1. SacBeerGarden says

    January 18, 2017 at 12:31 am

    Love the pricing aspect but we found a app and website that prices our beers so the bar owner gets the best profit. Called Draft Price Calculator and all bar managers use it. web is http://www.draftpricecalculator.com/ but they also have a app.

    Log in to Reply
  2. Chris Farmand says

    May 17, 2015 at 10:51 am

    Chris Farmand liked this on Facebook.

    Log in to Reply
  3. Phil Smith says

    May 17, 2015 at 10:51 am

    Phil Smith liked this on Facebook.

    Log in to Reply
  4. Heather Belmonte says

    May 17, 2015 at 10:51 am

    Heather Belmonte liked this on Facebook.

    Log in to Reply
  5. KenBurgin says

    August 30, 2014 at 10:36 pm

    RT @PricingProphets: Craft beer #pricing pointers: How to set beer prices http://t.co/8qKb3UKBRa | cc @thehoneybar @KenBurgin

    Log in to Reply
  6. PricingProphets says

    August 30, 2014 at 5:30 pm

    Craft beer #pricing pointers: How to set beer prices http://t.co/2GoY4Quemx | cc HONEY Ken Burgin http://t.co/YIGAjTijiH

    Log in to Reply
  7. PricingProphets says

    August 30, 2014 at 5:30 pm

    Craft beer #pricing pointers: How to set beer prices http://t.co/8qKb3UKBRa | cc @thehoneybar @KenBurgin

    Log in to Reply
  8. FarmPlate says

    August 29, 2014 at 6:37 pm

    FarmPlate liked this on Facebook.

    Log in to Reply
  9. Brewery Ferment says

    August 29, 2014 at 6:37 pm

    Brewery Ferment liked this on Facebook.

    Log in to Reply
  10. Craft Beverage Expo says

    August 29, 2014 at 6:37 pm

    Craft Beverage Expo liked this on Facebook.

    Log in to Reply
  11. Jones' Farm- Home of Bad Bunny Hops says

    August 28, 2014 at 10:22 pm

    Jones’ Farm- Home of Bad Bunny Hops liked this on Facebook.

    Log in to Reply
  12. Danny Danny says

    August 28, 2014 at 10:06 pm

    Lol I thought the same Michael. I figured they might put the smallest amount of effort in and shown what regional,averages are per pint and per growler, etc

    Log in to Reply
  13. Michael Blevins says

    August 28, 2014 at 8:33 pm

    This article has no useful information , and contains some misinformation.

    Log in to Reply
  14. Heather Belmonte says

    August 28, 2014 at 6:07 pm

    Heather Belmonte liked this on Facebook.

    Log in to Reply
  15. Brewery Insurance Program says

    August 28, 2014 at 6:07 pm

    Brewery Insurance Program liked this on Facebook.

    Log in to Reply
  16. Phil Smith says

    August 28, 2014 at 1:52 pm

    Phil Smith liked this on Facebook.

    Log in to Reply
  17. Chris Farmand says

    August 28, 2014 at 1:07 pm

    Chris Farmand liked this on Facebook.

    Log in to Reply
  18. cfarmand says

    August 28, 2014 at 12:48 pm

    RT @CraftBrewingBiz: Craft beer pricing pointers: How to set beer prices in a growing market: http://t.co/FXM1tCOdZh @cfarmand

    Log in to Reply
  19. crsimp01 says

    August 28, 2014 at 12:41 pm

    Craft beer pricing pointers: How to set beer prices http://t.co/tSfnZec5hX via @craftbrewingbiz

    Log in to Reply

Trackbacks

  1. Craft beer pricing pointers – How to set beer prices | Craft Brewing Business : Pricing News says:
    September 4, 2014 at 9:35 am

    […] Craft beer pricing pointers – How to set beer prices. […]

    Log in to Reply

Leave a Reply Cancel reply

You must be logged in to post a comment.

Primary Sidebar

Latest News

  • Cheers to 10 Years: We should all strive to be Arizona Wilderness Brewing Co.
  • Watch famed gonzo illustrator Ralph Steadman discuss his Flying Dog beer labels
  • The all-new Papago Brewing taproom opens Friday
  • Michigan’s Dog Star Hops wins Chinook Cup for second year in a row

Sign up for our newsletter

unsubscribe from list

Most Popular Today

Recent Features

  • Arizona Wilderness BrewingCheers to 10 Years: We should all strive to be Arizona Wilderness Brewing Co.
    February 2, 2023
  • Watch famed gonzo illustrator Ralph Steadman discuss his Flying Dog beer labels
    February 2, 2023
  • Michigan’s Dog Star Hops wins Chinook Cup for second year in a row
    February 1, 2023
  • fort point both-ciders-3Fort Point Beer debuts cider line, explains why ciders instead of seltzers
    January 31, 2023
  • Watch a drone release insects over hop yards for sustainable pest control in this Yakima Chief Hops video series
    January 30, 2023
  • Distro update: Connecticut’s Two Roads Brewing goes to Colorado + news from Surreal, New Sarum and more
    January 30, 2023

Footer

  • Email Newsletter Sign Up
  • About Craft Brewing Business
  • Contact Us
  • Advertise on Craft Brewing Business
  • Media Kit Download
  • Privacy and Terms

© 2023 · CBB Media LLC