Pricing Beer 101 : How to Price Beer in an Ever Changing Market
There’s been a huge shift in beer distribution and how brewers are selling and bringing beer to the market. We’ve touched on how the shifting tasting room model and how self-distribution are becoming more and more popular with breweries. With this shift in the industry, how do you properly price beer in order to maintain revenue, while keeping current with the market?
Pricing Beer 101:
- Keep an eye on the market
- Know your costs
- Price based on your bottom line
- Drive loyalty & price through trust
- Use historical data
Keep an Eye on the Market
When taking a beer to market, it’s easy to simply look at how other similar beers are selling in order to gauge a price, but is this an efficient way of selling and pricing beer?
The short answer is no.
While you might easily see an emerging trend in pricing within certain styles of beer, that does not necessarily mean that similar pricing will help your brewery meet its bottom line. You shouldn’t be taking the price point of other breweries and using that as a benchmark. It’s poorly planned business decisions like this that could be losing you money or creating a sky-high profit margin that leaves you appearing dishonest with your consumer.
Know Your Costs
When pricing beer, the number one way to get an accurate price gauge is to know how much that beer is costing you. From raw materials to labor and packaging, you should be calculating how much a beer actually costs to make and price it accordingly. You should be pricing your beer so it covers all of your costs, while leaving some additional profit to help enable growth and innovation.
Price Based on Your Bottom Line
In order to deliver the best beer to customers at a price point they are willing to accept, you have to make sure you are utilizing methods that ensure a great quality product while controlling your cost. This isn’t to say you can’t have beers at different price points, as you should be getting a return on any beer you produce.
If you used an expensive hop in your new Hazy IPA, that should be reflected in the price of your beer. Price according to your bottom line, not the market trend. Your core beer should be less expensive than a barrel aged beer. Know how much a beer costs you to produce and price it accordingly.
Drive Loyalty & Price Through Trust
Beer prices fluctuate because the market for ingredients is constantly changing. Just a few short years ago, hops were hard to acquire without a contract. Even though the hop market has become over saturated, new hops are being introduced into the market and the demand for them can be high, thus the price can be expensive. Hop contracts are one way to mitigate these cost risks.
Consumers understand pricing when it comes to a great quality beer. Breweries have the ability to drive brand loyalty through trust if their consumers don’t feel their brewery is simply pricing their beers to gouge them to keep up with other beers in the market. Creating that layer of trust means if they see a 4-pack priced at $15 from their favorite brand, they don’t think they are going to get ripped off. They know that their brewery will deliver them a great quality beer at a fair price.
Use Historical Data
The price of your beer should be determined long before you interact with the customer at your brewery waiting in line for a 4-pack, or before you even tell your distributor about the new beer you are bringing to market. Utilizing tools like OrchestratedBeer allow you to drill into the direct cost of your beer from the very beginning, from the 15 pounds of malt the brewer accidentally spilled on the floor when brewing, to the cost per ounce of beer you are about to sell.
Know the business information on the back end before you simply price accordingly to the market. It’s important to know your profit margins in order for you to make the best business decisions for your brewery.
The bottom line to pricing beer is to price based on your bottom line & what your customers accept as a reasonable price. Utilizing tools like OrchestratedBeer makes determining the cost of bring your new beer to market easy as it allows you to drill into the direct cost of your beer from the very beginning to when it is ready to be sold.
Download our brochure to learn how OrchestratedBeer can effectively track your beer costs. Whether your brewery needs better tracking and reporting throughout production, inventory, sales and/or accounting, OrchestratedBeer provides a single source of the truth to help you make the best business decisions.