If you get the pricing right.
How to Price Draft Beer for a Bar
The general cost-per-ounce for beer in kegs is 40 to 45% less than if it comes in cans and bottles. Therefore, draft beer prices in kegs are sold for a much higher profit. From half kegs to pony keg sizes, the profit potential is always there.
But the pricing strategy for draft beer is the same as canned and bottled beer: try to hit a liquor cost of 20% to 30%. But we recommend having higher overhead charges or markup numbers for draft beer. This is because installing and maintaining a draft system equipment can be quite costly, from weekly line cleaning to frequent keg changing and accurate beer keg tracking.
Not only that, but you will also need to purchase CO2 and Nitrogen regularly to best serve your beer. You'll also need to account for spillage, spoilage, and over-pouring also known as pour cost. Those happen more often when serving draft beer than with canned and bottled ones.
How to Price Bottle Beer
Most successful bar managers shoot for a liquor cost of 20% to 30% on their bottled and canned beer. That means if you're paying $1 wholesale for a beer bottle, it'll have a menu price of $3.35 to $5.
How to Price Craft Beer
To calculate the menu price for craft beer, multiply the wholesale cost of goods sold per can or bottle by 2, 2.5, or 3. In most cases, 2 is for higher-cost beers and more than 2 for lower-cost ones.
Wholesale Cost x (2, 2.5, or 3) = Menu Price
Simply round up the result to the next nickel, dime, or quarter, for the final price. For example, if you get $3.32, round it to either $3.35 or $3.50. Using this method, you'll sell a 12-oz bottle of craft beer that you bought for a wholesale cost of $1.27 for at least $3.50.
Another beer pricing method for bars is using a fixed markup number for all canned and bottled beers. This adds an overhead service charge, say either 50¢ or $1, on top of the wholesale multiplier to get the menu price.
Wholesale Cost x (2, 2.5, or 3) + Overhead Service Charge = Menu Price
Some bars have a higher overhead charge, and higher prices for their craft beer, because of their upper-scale locations. This method is sometimes more convenient because you have fewer markup numbers to keep track of and can quickly adjust prices when necessary. Use drink menu engineering to maximize your profits.
What To Keep In Mind When Pricing Craft Beer
Here are a few things that you should keep in mind when pricing your craft beer:
- Use the same price for canned, bottled, and draft beer. Whether you sell craft beer in bottles or on draft, have two beers of similar quality and type at the same price per ounce. Even though they are served differently. This helps increase bar and restaurant sales. Calculate your menu prices for your draft beer then price your cans and bottles to match.
- Pay attention to your liquor cost. Ask yourself “Given a certain portion size and cost per draft beer, what price will allow you to achieve your target liquor cost?” The typical liquor cost range for craft beer is between 20% and 26%. Which means the craft beer profit margin is 74% to 80%. In reality, the liquor cost can be lower (and the profit margin higher!) for high-end bars and restaurants. They have the status and ability to charge more for their beer. Fast-casual establishments and dive bars often have to compete on prices. Know your bar well and price your craft beer smartly.
- Offer a wide variety of prices. Your bar may carry a variety of options for craft beer, from mainstream brands to specialty beers. Naturally, your markup should be different for each, the higher the price, the greater the perceived quality. Offer a couple of beers that cost 50% to 100% more per bottle than the standard craft beer offerings. Customers favoring small-batch beers may be willing to pay more per bottle for the quality and value in it, particularly if they're part of a bar promotion. Conversely, customers favoring mainstream craft beer are often used to paying $6-8 a bottle. They will turn away from having to pay more and dislike attempts at upselling.
What is the Average Markup on Beer?
The average markup on beer is about 200% to 300% when beer pricing for bars. It's similar to wine bottle pricing but there are more profits in the wine industry. But it depends on the type of beer and the type of establishment. Some bottles and cans of macrobrew can be marked up to 500% because they're so cheap wholesale. Alternately, craft beers can be quite expensive to buy wholesale, so bars don't mark them up as high. Ensure your markup is enough to cover lower price times like happy hour.
What is the Profit Margin on Beer?
The profit margin for bottle beer should be around 75%, while the profit margin for draft beer should be about 80%.
Beer Pricing for Bars: Final Thoughts
Your craft beer prices and your markup strategies depend on the products you offer, your bar’s expenses, and what people will pay. Always strive for a balance between profit and customer satisfaction to price your craft beer intelligently and reasonably. And that goes for liquor pricing and wine by the glass pricing, too. Don’t be afraid to try a combination of these strategies and figure out which works best for yourself.
If you find this article helpful, there's more where that came from. Book a free demo with us and we’ll walk you through how BinWise Pro can help you manage your craft beer program more effectively.