The popularity of craft beer is rising. And beer margins have always been pretty healthy.
Offering your customers a wide variety of options—craft and not—can be a huge win for your bar profitability.
If you get the pricing right.
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 restaurant wine markup 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%.
Draft Beer vs Bottled Beer Pricing
The profit margin of beer, as a whole, hovers around 80%. But margins and pour costs are different between draft and bottles. While that doesn’t change pricing strategy, per say, it does mean draft beer has a few more variables to consider.
Let’s take a look.
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.
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%. Here's a great guide to using liquor cost to set drink price.
But you may want to mark up draft beer a little higher. Because draft beers have higher overhead expenses.
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.
Utilize Draft Beer Keg Size and Glassware
From a consumer perspective, beer drinkers can save almost 80% on macrobrews like Budweiser if they buy a keg.
From half kegs to pony keg sizes, the profit potential is always there.
Bars and restaurants can add another layer into the mix: using different sized glassware.
As you’re targeting pour cost, consider the types of kegs you acquire and the size of drafts you sell. Both of those are levers you can use to control pour cost and achieve your target margin.
How to Price Bottled 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.
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.
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. Here's some more about how to price a menu.
- 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. It's a principle of psychological pricing. 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 or LTO (see LTO meaning). 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.
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. Whether you use an a la carte menu, table d hote menu, or prix fixe menu, adjust pricing to cover your beer markup and maintain a good profit margin.
You also need to stay on top of your restaurant balance sheet or your costs could get out of hand and no markup will be enough.