Beer Costs and Menu Pricing

While it may seem counterintuitive at first, the highest-priced beers generally net the bars less profit compared with the lowest-priced ones. The higher priced menu selections can be sold with a much smaller mark-up and much lower profit margin. You may have heard that restaurants price beer according to the three times’ principle: simply multiply [the product cost] by 3 to reach the menu price. Looking at the 33% allocated to overhead, we see that the costs to the restaurant owner include the obvious components: labor, rent, and utilities. But there are not so-obvious costs: sales tax, exchange rates for foreign beers, the wages paid to a daytime barback to put beer deliveries away, the storage costs (which include refrigeration), costs for staff training on the nuances in the beer menu, and the carrying costs to sit on an unsold volume of beer, which may have been purchased on credit, and is therefore not only tying up funds but also costing the owner interest.

At the brewery level, there are operating costs to consider, such as staffing, storage, ingredients, equipment costs, utilities, and packaging. Time is also a major factor because tying up brewery equipment making one beer over another has its opportunity costs. The brewing process for one style of beer may take a fraction of the time needed to produce another style, and this will impact the cost of each product.

Popular beer specialty bars report that pricing also involves an understanding of the local market and what it will bear. While you may start with a simple formula for pricing your beer, the owner must adjust the price to what makes sense in the particular market. website can be used by bar and restaurant owners as a point of reference for pricing beer products competitively. The site features a searchable database of beer offerings; visitors can use it to find which bars are serving beers they want to try in their market.

One way beer owners keep prices in line with customer expectations is to vary the pour size. Offering a smaller serving allows high priced selections to remain affordable. There’s another reason besides high product cost that might compel a beer bar to scale down the serving size of a beer: alcohol content. While a lager may contain around 5 percent ABV, a double IPA could be twice that strength.