How to Price Draft and Bottled Beer

Whether you’re a craft brewery owner, a bar manager, or an aspiring beer connoisseur, understanding how to effectively price beer is essential. The world of beer is diverse and constantly evolving, with new styles and trends emerging regularly. In this blog, we explain the factors that influence beer pricing, explore the differences between draft and bottled beer pricing strategies, and provide you with valuable tips to help you set the perfect price for your brews.

Why is Pricing Beer Correctly Important?

Pricing beer properly is essential because it directly impacts a brewery’s profitability, customer perception, and market competitiveness. Setting the right price ensures that the brewery can cover its production costs, maintain a sustainable business model, and generate sufficient revenue. Proper pricing also influences consumer behavior and perception, as pricing that is too high may deter customers, while pricing that is too low can undervalue the product and affect perceived quality. Accurate pricing allows breweries to thrive in a competitive industry.

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What is The Difference Between Draft and Bottled Beer Pricing?

Draft beer pricing is influenced by factors such as production and packaging costs, distribution logistics, and keg management. Production costs for draft beer tend to be lower since it skips the bottling and packaging process. However, draft beer requires investment in equipment like kegs, tap systems, and maintenance. Additionally, distribution logistics, including transportation and storage, affect pricing. Keg management is crucial as kegs need to be cleaned, refilled, and maintained. All these factors contribute to the overall pricing strategy for draft beer, ensuring profitability while providing quality and freshness to customers.

Draft Beer Pricing 

Draft beer is an excellent option for any bar. Providing customers with a range of specialty draft beers can help set your bar apart, and be a fantastic source of revenue. But it’s important to get the pricing right as setting too high or too low prices could prevent you from maximizing profits. The general rule for the cost per draft beer is a 40-45% discount relative to bottles and cans. However, if you want to hit a target liquor cost of 20-30%, it may be necessary to tack on an extra markup.

In addition to the traditional cost breakdown, when pricing draft beer there are several overhead costs that should be taken into account. Expenses include keg lines, storage equipment, and labor costs associated with maintaining the equipment. For these reasons, you may find yourself needing to add extra markup on your draft beers in order to cover expenses and still turn a profit. 

Bottled Beer Pricing

One of the more popular methods used by bar managers to set pricing is to use what’s called a liquor cost, which is typically between 20% and 30%. This means that when you purchase a bottle of beer for $1 wholesale, the menu price should be somewhere around $3.35 to $5 depending on your markup. Another way to set prices for canned and bottled beers is by using a fixed markup number for all beers. This adds a service or overhead charge, usually 50 cents per beer or $1, on top of the wholesale multiplier in order to get the menu price.

Factors That Influence Beer Pricing

• Production Costs: The cost of ingredients, brewing equipment, labor, packaging materials, and overhead expenses all contribute to the production costs. Higher production costs generally lead to a higher price per beer.
• Type of Beer: Beer drinkers know that not all beers are created equal. In addition to bottle vs draft beer differences, you also have various other beers on the market such as IPAs, European imports, domestic beer, canned beer etc. Each type comes with various associated costs.
• Brewery Size and Scale: The size and scale of a brewery can impact pricing. Larger breweries benefit from economies of scale, allowing them to produce beer at lower costs and potentially offer lower prices compared to smaller craft breweries.
• Ingredients and Quality: Premium ingredients, such as specialty hops or imported malts, can increase production costs and result in higher-priced beers. Beers made with unique or high-quality ingredients, such as barrel-aged or craft specialty beers, often command higher prices due to their perceived value.
• Branding and Reputation: Established and reputable brands may be able to charge a premium for their beers based on their reputation, perceived quality, and consumer loyalty. Strong branding, marketing efforts, and a positive brand image can influence pricing.
• Market Demand and Competition: Market dynamics, including supply and demand, consumer preferences, and competitive landscape, play a significant role in determining beer pricing. Breweries must consider these factors when setting prices.
• Packaging and Distribution: The type of packaging, such as cans, bottles, or kegs, can impact beer pricing. Additionally, distribution costs, including transportation, storage, and retailer markups, can influence the final retail price of beer.
• Taxes and Regulations: Taxes, excise duties, and other regulatory factors can vary between regions and impact the overall pricing structure of beer. Higher taxes or stringent regulations can lead to increased prices.

It’s important to note that these factors are interrelated and may vary depending on the specific market, beer style, and consumer preferences. Breweries must carefully consider these factors to set prices that align with their production costs, target market, and business goals.

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4 Tips to Price Beer 

Both draft beer sales and bottled/canned beer sales are essential for the success of a business or bar. Both manufacturers and bar owners are responsible for setting a cost per beer. Whilst manufacturers are able to sell to bars at a discounted price, bar managers are responsible for setting beer markups to ensure that their bar or restaurant is able to make a profit. In order to help you create a successful beer price strategy, we put together some expert tips on how to price your beer. 

1. Determine Production Costs

To determine how much it will cost you, take into account the production costs involved in creating your favorite brew. When pricing beer, you need to consider the wholesale cost of the ingredients used, such as malt, hops, and yeast. Additionally, you should factor in the labor costs associated with brewing and packaging the beer. The production cost per pint will help you establish a base price for your draft beer.

When determining the sale price of your draft beer, it’s important to find a balance between covering your production costs and making a profit. Consider the type of beer you’re offering and its popularity among customers. If it’s a specialty or limited edition brew that requires expensive ingredients or additional aging time, you may need to set a higher sale price to compensate for these factors. For bottled beers, there are additional factors to consider when determining production costs. The size of bottles and their associated packaging materials will impact your expenses. You also need to factor in labeling and branding costs.

2. Assess Market Demand

Assessing the market demand is crucial to determine the pricing strategy for both draft and bottled beer. To assess the demand, start by conducting market research to understand what types of beer are popular in your area and what price range customers are comfortable with. This can be done through surveys, focus groups, talking to restaurant owners, or even observing customer preferences at local bars and breweries.

Once you have gathered data on market demand, you can use this information to set appropriate prices for your draft and bottled beer. Moreover, regularly reviewing your offerings based on customer preferences will allow you to optimize your beer menu for maximum sales potential.

3. Analyze Competition

When it comes to setting prices for draft and bottled beer, understanding what your competitors are doing is crucial. Start by researching other beers, from generic brands to specialty beers, and take note of their pricing strategies. Look at the variety of beers they offer, the types of draft lines they have, and the average cost of their beers. This information will give you a benchmark to work with when determining how to price your own offering.

Next, analyze the average pour costs of your competitors. This refers to how much it costs them to pour a glass of beer based on factors such as keg cost, wastage, and spillage. Calculate your own average pour costs and compare them with those of your rivals. If you can offer a similar quality product at a lower cost per pour, you may be able to attract price-conscious customers.

Another important aspect to consider is the markup on beer that your competitors are applying. Take a look at their beer menus and see if there is consistency in their pricing structure or if certain beers have higher markups than others. By understanding this, you can make informed decisions about how much profit margin you want to achieve with each beer sold.

4. Consider Customer Perception

Customer perception plays a crucial role in shaping the success and reputation of your craft beer bar. When it comes to pricing draft and bottled beer, customers often associate higher prices with higher quality. Therefore, it is important to strike a balance between offering competitive prices and ensuring that customers perceive value in what they are paying for.

One way to manage customer perception is by offering a diverse selection of draft beers. By providing a wide variety of options, you not only cater to different tastes but also create an impression of abundance and quality. Customers appreciate having choices, especially when it comes to craft beers, which are known for their unique flavors and styles.

In the competitive craft beer industry, price strategy can make or break a business’s success. While it may be tempting to set high prices in order to maximize profits, it is important not to alienate potential customers who are price-sensitive. Ultimately, striking the right balance between reasonable pricing and perceived value will help ensure customer satisfaction and drive alcohol sales at your craft beer bar.

Invest in a Bar Inventory App 

If you are a restaurant or bar owner, pricing your beer correctly is essential to ensure a decent profit margin. A great way to effectively price your beer is to invest in a bar inventory app. Not only will an inventory app dictate the popularity of craft beer, bottle beers and draft beers to help you understand what sells on a regular basis and what is worth stocking, but it will also help you calculate accurate costs.

The Rapid Bar App is a specialized inventory app that allows you to track your stock levels in real time. It seamlessly integrates with your POS system and allows you to directly order from your suppliers to make it as easy as possible to run your bar. 

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