How to Price Draft and Bottled Beer

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Jan 13, 2020 // by Jordan Brydges

Topics: Liquor Cost

"Come on in!  The price (can be) right!"  Customers don't want to come to your bar thinking they're playing The Price Is Right when it comes to your beer prices. 

 

Speaking of beer prices, bottled and draft beer are priced differently and it's not because of the fancy cans and bottles they come in.  It's because they have different pour costs, which we noted in a previous post, is the ratio between the costs of products purchased and the revenue from products sold. 

 

While the average pour costs for bottled beer sits around 25%, draft beer sits close to 20%, and is the highest margin menu item for restaurants. 

 

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How to Price Draft Beer

 

The great thing about draft beer is the flexibility it brings to your bar.  With a wide selection and rotating handles you can keep your menu fresh and adjust prices along with serving sizes. 

 

With the proper pour and storing technique, draft beer can be one of the highest profit margin items in your bar or restaurant, with profit margins as high as 80%, and the cost-per-ounce being 40-45% lower than bottled and canned beer.

 

Below we will go over a couple things to consider when pricing draft beer.

 

Overhead Costs 

 

Draft beer has more overhead costs than bottled beer, from equipment and maintenance to spillage and spoilage, it requires more upkeep which means it costs more.  Nitrogen and CO2 also need to be purchased on a regular basis to keep your beer fresh, so adding in an overhead charge-per-glass will allow you to leverage the higher profit margins by adjusting prices. 

 

Different Keg Sizes 

 

One important thing to consider when pricing draft beer is the keg size.  The typical keg size in the U.S. is a half barrel, which is about 15.5 gallons, then there are European imports that are typically around 13.2 gallons, and a quarter keg that holds about 7.75 gallons. 

 

Typically a domestic keg will run a bar around $100 and craft beer kegs are in the range of $100-200. The price you should charge will be based on how much the keg costs and the serving size of the beer. 

 

The typical serving size for a beer is 14.5 oz of liquid and 1.5 ounces of foam. 

 

Calculating Prices for Draft Beer

 

You might think you need some big confusing formula to figure out the percentage costs for draft beer, but turns out all you need is a couple numbers and it's fairly easy.  

 

  • First, determine how many beers are in each keg by dividing the number of ounces in the keg by serving size.

 

The typical keg size is 15.5 gallons or 1,984 ounces, and the typical serving size is 14.5 oz of liquid which will yield about 136 beers (1,984 ÷ 14.5) 

 

  • Next, we'll take the cost of the keg and divide by your desired pour cost to get the retail price of the keg.

 

  • Lastly, we'll take the retail price for the keg and divide by the number of beers the keg holds to get the cost per pint.

 

Let's look at an example.  Say a keg costs $120 and your desired pour cost is 20%.

 

Keg size ÷ serving size = 1,984 oz ÷ 14.5 oz = 136 pints per keg 

 

$120 ÷ .20 = $600 (Retail Price for Entire Keg)

 

$600 ÷ 136 pints = $4.41 per pint (Round up to $4.50)

 

You can round up to the nearest nickel, dime, or dollar, whichever you prefer.

 

How to Price Bottled Beer

 

Bottled and canned beer are a little easier to price because you aren't dealing with finding the serving sizes. 

 

It can be as easy as taking the wholesale cost per bottle and multiplying by 2.0, 2.5, or 3.0, rounding to the nearest nickel, dime, or quarter.  If you wanted, you could add on a fixed overhead service charge of 50 cents or a dollar on each bottle sold. 

 

Or, you can take the wholesale price paid for each individual can or bottle and divide it by the desired pour cost.  

 

Let's look at an example.  Let's say you purchase case (24 bottles) of Budlight for $25.99 and your desired pour costs is 25%. 

 

First take $25.99 ÷ 24 bottles = $1.08 per bottle.

 

Next, you would divide $1.08 into .25  and get a retail price of $4.32 for one bottle of Budlight, which you could round up to $4.50. 

 

The great thing about bottled and canned beer is there is less spillage and waste.  The percentage cost is consistent since there is no variation in the serving size like with draft beer that might be poured with too much foam or too much liquid. 

 

A final note, your beer prices and markup strategies can vary depending on the products you sell, the concept of your bar or restaurant, and how much people are willing to pay so play with these strategies to see which works best for your restaurant.  

Jordan Brydges

About the author, Jordan Brydges

Jordan is a marketing intern at Backbar and a business student studying marketing. She has been working in the restaurant industry for 8 years and developed a passion for cooking and a love of red wine.

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