Which beers are most profitable?

True, consumers are only concerned with the final cost they pay, and the quality and quantity they get. Margin plays into that cost though.

 

Margin does not typically include fixed costs. It is the difference between the costs of goods sold and the selling price. This is also called gross profit.

What you are describing is net profit.

The OP's question (as I understand it) refers to the margins / profits of the brewer and does not include wholesale or retail margins or profits. Including those makes the question vastly more complicated.

 

I would guess the highest margins are beers like TG's sell-by-lottery stouts, with the highest being KBBS, (which sells from the brewery at, what, ~$100/12 oz bottle?).

 

They could do 10x the volume, charge half the price, have limited distribution, and they'd make a lot more profit off KBBS (presuming profit is a goal). I don't think it has any unicorn in it.

 

You are correct that my response was not right. Look at:
https://www.indeed.com/career-advice/career-development/what-is-retail-margin
According to Indeed, the margin is defined for retailers (resellers). For direct to consumer manufacturer retail, the term does not seem to apply well since there is no defined wholesale price.

 

The water has disolved O2 stripped out. Many larger breweries will have Deoxigenated water for use throughout the brewery.

 

Jeff, would you happen to know the DO value (units of ppb) for a brewery's deoxigenated water?

Cheers!

 

I know... just a silly joke.

 

Margin = Sell price - COGS.

The margin will be different for a small brewer per channel.

Probably highest for direct sales to consumer on draft at their pub, lower for direct sales to consumer of packaged beer, lower still for self-distributed to a retail outlet, and lowest of all for sales to a distributor (all of the above is my assumption & it likely varies in specific situations).

 

Yeah but then no one would care about it and it wouldn’t sell.


As is probably glaringly obvious from others comments there’s a lot that goes into this answer, I am sure. But I would say for most small scale craft breweries the answer would probably be IPAs. Easy and quick to make and typically sold at higher costs.

Plus if the answer was Czech Dark Larger I’d imagine the shelves would be flooded with mediocre examples of this style as opposed to the IPA situation we see now.

 

I thought Stouts would have a better margin against a NEIPA/IPA that requires a lot of expensive hopping (alcohol is not expensive but hops are). They do seem to sell for a similar price.
Based on this survey, apparently I am wrong.

 

That's a good point. One of my local breweries makes a "light ale" that is very tasty and about 4.2% with a nice hop bite and it sells like hot cakes in the summer. The margins on the $6 pints their cranking off their draught system have got to be pretty insane.

 

As your cpa I strongly advise you against taking the beer related economic advise of a group of people who actively debate things like how many $45 bottles of stout they can arrange to be clandestinely ferried from the other side of the country.

 

Our goal was to take 33% GP (cost X1.50) and would deal on really competitive brands and flavors. No absolute rules. We were legally not able to give quantity discounts, but many did. Shipping costs really dictated so much of pricing and we tried to build that in, but it was always just so variable. Beer is retail price sensitive and the product is time sensitive. It is a difficult business.

 

Well, as you might imagine this is a complicated answer. There's so much more that goes into this than "X beer cost this much to make, but we charge this much for a 4 pack."

There's labor costs that go into it, tank time is a huge factor, ingredient cost, rate of sell through is huge, and risk.

Risk comes into play with something like a BA stout. Sure the margins are nice from a cost to retail price perspective, but we take a risk that what we put into barrels will come out great on the other side. If it gets infected, all that time, effort, and money goes down the drain.

Obviously with lagers tank time is a big issue. We could turn two, maybe even three ales in the time a proper lager takes depending on styles. Lager yeast generally costs more because you need a higher cell count, so if a brewer doesn't harvest and re-pitch that yeast they can be expensive to make. Thankfully we brew enough lager, and with the same yeast, that we can keep a pitch going through multiple generations. Sell through then becomes the challenge. They move great in the taproom, but selling lager in a crowded retail market is tough.

IPAs, especially hazies, are more expensive to make, but generally have quick sell through and at a good price point so they are generally better from a profitability standpoint. Though if you brew one that doesn't move as well, that cost of ingredients is an ass kicker.

I'd imagine a great margin beer would be something like a Golden Ale or blonde that you can turn fast with low costs and move in decent volume. We went the lager route instead so I wouldn't know first hand.

That being said, I can't stress enough that all this is working against the enormous initial overhead cost of starting a brewery, plus typical monthly expenses. I don't know anyone getting rich off this these days, and if you hear otherwise please let me know what I'm doing wrong!

 

I would take offense to this if I knew what clandestinely meant.

 

No data, but i thinks it is low single digits ppb.

 

How do you factor in longer tank time in your pricing? Do you price your lagers higher to recoup the cost of longer tank residence time?

Cheers!

 

Not really. People will only pay so much of a premium for a craft lager despite the extra work that goes into it. I get it, I'd certainly balk at a $15 four pack of Pilsner or something when I can get a dirt cheap six pack of High Life.