Craft Draft Pricing

My place is different sizes, different prices for the most part. Except happy hour. Then all taps are 4 bucks a pour and there's not a single BMC on tap - all craft.

The only pour that isn't a full honest pint that I can think of is Choklat but I don't know anyone who can drink the full 16 oz of that sucker.

 

You can't look at it as a "$1 more profit". Take the whole kegs into the equation and it looks like this.....
Normally you can get 115 pints out of a 1/2bbl and 60 10 oz out of a 1/6bbl (with waste). So the Bells yields $357 profit and the DFH yields $240 on my pricing. If I drop the Palo to $5.50 it would yield only $180 profit which is only a little bit more than 50%. So if you look at the end profit why would I even bother putting on Palo? But remember profit is relative, I still have labor, rent, utilities, supplies, keg deposits, line cleaning, card fees, taxes etc. to cover with this profit. People that aren't in the biz don't realize that overall restaurant margins are in the 7-10% range at the end. That sucks compared to say a tech company, clothing store, hardware or other retailer that might earn 20-25%!

 

Yeah, I hear what you're saying, but I don't think your math really works out.

If you have already adjusted the beer for pour size and ABV, and price it accordingly, then all you should care about is your "per serving" profit, not your percent margin on a keg. A smaller percent margin on a more expensive keg can still be more net money.

For example, let's say I go into your bar to drink 4 glasses. With an efficiently priced lineup, you shouldn't care what I choose for those 4 glasses. Be it 4 Bells and 0 Palo, 3 Palo and 1 Bells, or whatever combo. All you should care about is the beer sells before it goes bad.

I get that your overall margins are tiny once you factor in overhead, I'm really just trying to understand. Poor pricing models area a major issue in the Boston area, where most places just markup a fixed %, which leads to really wonky pricing.

 

Except that those costs don't vary based on the cost of your beer. The "cost" of the more expensive keg is just the opportunity cost of the dollars you used to purchase it. If your margins are on the order of 10%, that means the effective cost difference in those two kegs is only 10% of the cost difference.

I actually think that bar owners are missing an opportunity: take advantage of the fact that you can still make a lot of money by selling expensive beer at reasonable prices. Skip the SNPA taps and throw a bunch of $7 pints of Palo-equivalents up there. If you sell the same amount your profit will be the same, and more than likely you'll have beer geeks lining up outside your door to take advantage of your market-beating prices allowing you to sell more and make more profit.

 

The slow mover also gets a higher price because the owners money is tied up in that keg. The bar has paid for the beer (inventory) and also has the keg deposit tied up. A bar with, say 20, taps and 1 back up for each, thats 40 kegs x $50 per = $2,000 just tied up in deposits.

 

A really simple way to figure the price a bar should charge is to take the cost of a keg.Well make it easy and say Yuengling is $100 for a 1/2 BBl. You then multiply that number by 400% to determine the total revenue you expect that keg to generate. So $100x400%=$400. You then take this number divide it by the number of ounces in the keg (1984 in this case) and you get what you need to charge per ounce. So $400/1984 ounces = $0.20 an ounce. Now when you want to generate prices just multiply the size by the cost per ounce. Ie 64oz=12.75 16oz=$3.25 10oz=$2.00. If you follow this structure you can ensure a good margin for your establishment and an equal pricing to your customer.

 

You guys do not seem to understand how business work. It is not as cut and dry as you would expect.

 

You need more choices in your poll.

 

Flat pricing across the board would be great but I don't think this happens too often.

 

Same price, different sized pours for me. I don't need an Imperial Pint of some crazy DIPA. Give me a 12oz tulip and call it good. I love when bars have 8 or 10 oz pour options as well. Get to try more without being totally sloshed. This is why I love The Horse Brass!

 

Who gives a shit. I don't care how business works. I am the consumer. All I care about is whether or not I wish to pay xxx for xxx. If I deem it not worth the price, I'm not going to buy it. It makes ZERO difference what the business reasoning is for that price.

 

I'm guessing the same Cubby from micromatic's site? I'm djc there.

In any event, I agree with you but I care about the business side of it because I want places I go to to still be there, so I always hope the owners understand what they are doing and set prices accordingly. There are plenty of people who go into business doing something they love only to fail because they don't have a good grasp of the biz side of margins, overhead, and pricing. Of course there are places that I don't like and I don't extend the same amount of thought to their well being.

 

TheBeerBoutique explained it perfectly. Pretty much exactly what we do.

 

Im fine with differently sized, differently prices, when its clear what is going on.

 

The reason margin matters is time value of money.

The bar pays in advance, so that is money that cant be used for something else while the beer isnt sold. If say, profit per serving was the same, then there is no good reason to buy the more expensive kegs, assuming they sell at same rate. Standard margin percentage is therefore much more common (although there can be a slight adjustment for fixed costs and stuff, but still, margin percent is the best way to go).

 

No offense, but keeping our jobs and liquor licenses is more important than giving you a "full size pour" of high gravity beer. A 175lb person who consumes a pint of 10% beer in an hour will be sitting at roughly .06 BAC, but probably won't feel or display the effects right away. Drinking a second one within 2 hours will put you over .1, which is over the legal limit. You may have a high tolerance and not "feel drunk", but if you hit something on the way home and fail a breathalyzer you're screwed, and then they come after the establishment for overserving you, and we get screwed as well.

 

What's the time value of money for a bar, 10% APY? That's nothing! It doesn't come close to explaining why a bar needs to make 50% more profit ($/$) on a more expensive/slower moving keg.

The real reason is that it give bars a way to use price discrimination. Any other explanation is either "because that's how we've always done it" or it's bs.

 

If you are paying the same price per ounce, what does it matter if you get 2 10oz pours or 1 20oz pour? I believe it to be borderline irresponsible to pour say TenFiddy in a pint glass. We are currently pouring it in an 8.5 ounce glass. A 16 ounce glass would be around double the price...so what's the difference to you??

 

Well, two things. For one, your benefit to more expensive kegs is attracting patrons with the more exotic beer. For two, the more expensive stuff also usually comes in smaller vessels, so the gross money tied up in a sixtel of a DIPA vs a half barrel of a local Pale Ale is going to be about the same. (and maybe even less) Thus that very argument can work against you - that the more expensive per volume sixtel might have faster turnover and/or lower gross costs than the half barrel.

I just don't think margin percents "work" anymore with the ever increasing costs of high-end craft beer. I mean, they work in the sense that they will make a bar more money, but they will also lead to an increasingly poor value price for the consumer compared to drinking beer at home.

 

I don't use a different profit margin on certain kegs over others unless there was additional cost. A cellared keg has actually cost more in refrigeration and storage and $$.