Beer Pricing 101 - How to Price Beer in an Ever Changing Market
Developing a successful beer pricing strategy can be difficult without the right information and tools. Check out these top 5 beer pricing tips to learn how you can make more informed, pricing decisions.
March 23, 2018
With many taprooms having to be closed during shelters-in-place, there’s been a huge shift in beer distribution and how brewers are selling and bringing beer to the market. Many breweries are diversifying their distribution channels to ensure their beers still can sell even when they can't sell on their own property.
Selling in new distribution channels brings its own challenges as their are more costs to be considered when self-distributing or utilizing distributors or retail. With this shift in the industry, how do you properly ensure your beer pricing is optimal in order to maintain revenue, while keeping with current trends in the market? Fear not, as we have five top tips that can help you determine your beer pricing strategy:
Top 5 Tips to Consider When Creating a Beer Pricing Strategy
1. 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, as those beers selling in your area may have different costs than you due to ingredients, distribution method and stocking fees.
While you might easily see an emerging trend in beer 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 because they maybe using different ingredients, distribution methods or have different stocking fees. 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.
Instead, your beer's pricing should be based off your costs and how much your customers are willing to pay for your beer. You need to ensure your beer is priced in order to maximize your margins.
2. 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.
One way to keep an accurate reading of your costs is to use our software, Orchestrated. Orchestrated integrate the cost of every raw material and beer you produce in the system to provide an accurate picture of the cost of the beer you produce, making it easier than ever to ensure you get the most dollars out of the beers you sell.
3. Your beer's pricing should be 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.
4. Drive loyalty & beer pricing 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.
5. Use historical data to determine beer pricing
Your beer's pricing 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. Like we said before, utilizing tools, like Orchestrated, is a must as it allows 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 beer pricing is to price based on your bottom line & what your customers accept as a reasonable price. You can determine your costs easily and effectively by utilizing tools like our software, Orchestrated.
Speak to one of our experts to discover how Orchestrated makes determining the cost of bringing your new beer to market easier than ever by drilling into the direct cost of your beer from the very beginning of production to when its ready to be sold.