Announcement

Collapse
No announcement yet.

Profit on kegs

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Profit on kegs

    Here is how my keg sales are looking in my business plan:
    (I can't self distribute in my state)

    ½ Barrel Kegs of Beer 1 = $70 (to the distributor)

    Raw ingredients cost to make ½ barrel of Beer 1 = $26
    Profit Margin = $44

    ½ barrel Kegs of beer 2 = $80 (to the distributor)

    Raw ingredient cost to make 1/2 barrel of beer 2 = 32.70
    Profit Margin= 47.30

    Now, when I say profit margin, I am obviously only taking into account the cost of raw ingredients, not any other costs. What other things should I take into account when figuring this stuff? And, do these numbers look too low or too high?

  • #2
    Originally posted by zachj9292
    Here is how my keg sales are looking in my business plan:
    (I can't self distribute in my state)

    ½ Barrel Kegs of Beer 1 = $70 (to the distributor)

    Raw ingredients cost to make ½ barrel of Beer 1 = $26
    Profit Margin = $44

    ½ barrel Kegs of beer 2 = $80 (to the distributor)

    Raw ingredient cost to make 1/2 barrel of beer 2 = 32.70
    Profit Margin= 47.30

    Now, when I say profit margin, I am obviously only taking into account the cost of raw ingredients, not any other costs. What other things should I take into account when figuring this stuff? And, do these numbers look too low or too high?

    Your cost of goods sold look high to me but I am thinking in terms of a 12plato beer with moderate hops. Without knowing the type of beer you are talking about it is impossible to know if your costs are high or low.

    Comment


    • #3
      the lower gravity beer is a simple pale ale but has about 14 lbs of centennial hops near the end for nice flavor/aroma and im using wl cali ale yeast. The 1.054 is hard to classify. Its an amber ale but I am using apple extract (about 140 bucks worth) per batch. I am using wlp005 on that one.

      I know the latter beer don't sound good. But after homebrewing this, its gonna be a good gateway beer to start out with. (and its a panty dropper )

      Comment


      • #4
        profit on kegs

        did you take into account the utilities to produce the beer, water usage, chemicals to clean and sanitize, keg rental, who pays the federal and state excise tax?

        Comment


        • #5
          Besides what Stuart wrote (utilities/chemicals/taxes) you will also have labor to unload or grind grain, brew, labor to clean tanks, labor to transfer/filter beer, and labor to keg, along with the labor to wash kegs, CO2, etc.

          You will quickly find your margins diminishing from 40+ % to down around 15 to 20%. I think that I have our distributed keg margins around 15% for kegs priced similar to yours.

          Also note that this doesn't include any of your overhead (insurance, rent, etc) as well as replacement costs for life limited parts such as pumps, tanks, keg washer, etc.

          Comment


          • #6
            I see I see. Lots of things to consider. I still need to look into the taxation in my state. I am still in business plan mode

            Comment


            • #7
              I would ask whether you are charging enough per keg. Here are a couple threads that put the range higher (obviously, this will be influenced by whether you are self-distributing or not):

              http://www.probrewer.com/vbulletin/s...ad.php?t=18367

              http://www.probrewer.com/vbulletin/s...ad.php?t=19122

              Maybe others with more experience can chime in here. I have no direct experience myself; only plans, like you.

              Re: variable costs, here is some information I've found about utility consumption per barrel brewed:

              kWh - 35
              therms (gas) - 3.7
              water - 10 bbl
              sewerage - 9 bbl

              You should also allow for some losses along the way as wort turns into beer. I'm cautiously allowing for 15% loss in my plan, a number which I've been told is high. And maybe also account for some spillage, e.g. when filling kegs, bottles, the like.
              Last edited by BradJP29; 05-22-2012, 01:13 PM.

              Comment


              • #8
                Price too low

                I agree with the statements above. I have things broken into fixed and variable costs but then I have a total costs and break even point that I need to make in a month. Fixed costs are like rent, ins, etc.

                I would also say to check your cost to the distributor. I think there is a 25% markup from the distributor to the account. So, if they sell your 1/2bbl keg to an account for $125, then you might be $95 to the distributor.

                Fortunately, we are in a self -distribution state, so we don't worry about that, but we still factor that 25% into OUR cost of distribution. You still have to maintain taps, truck it, chase down payments, etc.

                Comment


                • #9
                  Zach9292: Your numbers seem way off (i.e. way low) to me.
                  Kevin Shertz
                  Chester River Brewing Company
                  Chestertown, MD

                  Comment


                  • #10
                    Originally posted by ArmstrongBrew
                    I agree with the statements above. I have things broken into fixed and variable costs but then I have a total costs and break even point that I need to make in a month. Fixed costs are like rent, ins, etc.

                    I would also say to check your cost to the distributor. I think there is a 25% markup from the distributor to the account. So, if they sell your 1/2bbl keg to an account for $125, then you might be $95 to the distributor.

                    Fortunately, we are in a self -distribution state, so we don't worry about that, but we still factor that 25% into OUR cost of distribution. You still have to maintain taps, truck it, chase down payments, etc.

                    Granted I'm not a expert in these matters but I am dealing with this same issue right now and this is what others in the industry have suggested to me. (Please feel free to refute if necessary)...

                    Don't forget that even if you plan to self-distribute you (most likely) won't do that forever. You need to price yourself similar to what you would IF you were going through a distributor.

                    Let's say you sell a keg for $125 (which I agree is low) yourself and then go to a distributor in a year because of growth. Now you have to raise your price to keep your margin where you want and still give the distributor his cut. Suddenly the bar is paying $150 for the same keg that used to cost them $125. Not a good business move IMO. The bar doesn't care who delivers it as long as it is there when they need it and the price is right.

                    Find out what price a distributor would sell your beer at and work from there. You need to build in the margin loss now for IF you go to distribution later. In the meantime take the extra money and pay off your bills...

                    Even if you don't plan to use a distributor, you should talk to them as if you are looking to partner with them. You will learn A LOT in a one hour meeting with them.....
                    Last edited by yap; 05-19-2012, 06:56 AM.
                    Scott LaFollette
                    Fifty West Brewing Company
                    Cincinnati, Ohio

                    Comment


                    • #11
                      Aite I am charging 110 and 120 for a 1/2 barrel keg of both of my beers. I will post the rest of the info as soon as I figure out how to implement cleaning supplies expenses and employee wages. I will have two employees, an assistant brewer and a laborer, and I have the base pay figured out, but not the taxes. What taxes are there to consider when it comes to my workers wages?

                      I would like to know cleaning and sanitizing supplies recommendations as well. I haven't found a past post that I feel good about.


                      After this I will copy what I have into the forum and let the pros review

                      Comment


                      • #12
                        Employer's taxes

                        The employer pays 7.65% combined for FICA and Medicare. Then there's state unemployment insurance (rate and amount of wages subject to tax varies by state) and FUTA (on first $7,000 of wages, the rate varies by your sate's experience).

                        Comment


                        • #13
                          ½ Barrel Kegs of Ale #1 =

                          Recurring Costs (per 1/2 bbl):

                          Raw ingredients cost to make ½ barrel of beer= $19.28
                          State and federal tax per ½ barrel of beer = $10.24
                          Expected energy costs per 1/2 barrel = $4.64
                          Employees wages and wages tax = $24.81
                          Rent = $43.20
                          Keg rental expense = ?


                          = profit margin?


                          Does everything look ok besides what i am missing?

                          I am still waiting to hear from my distributor on how much their keg rental expense. When I asked for this info they said they would have to see me personally, but I don't have my business plan even ready yet. They have me running around in circles. Could you guys just give me an average estimate on the keg rental cost?

                          After I get this number i can decide the sale price to the distributor

                          Comment


                          • #14
                            What is a keg rental expense that your distributor is supposed to charge?

                            If you are trying to figure out the cost of cooperage, the way I see it there are 2 methods. Number 1) rent kegs from a large number of companies that will supply them to a company your size. As far as I know, cost is about $4/month, not including transportation to your location. Calculate $50/year, average number of turns per keg per year is 5 (assumed), cost is $10/keg. Number 2) Buy the keg if you have capital with no or minimal loss of value - new costs about the same as used. Cost is loss of value + interest on invested sum.

                            Comment


                            • #15
                              I don't understand what your $43.20 rent expense is.

                              Originally posted by zachj9292
                              ½ Barrel Kegs of Ale #1 =

                              Recurring Costs (per 1/2 bbl):

                              Raw ingredients cost to make ½ barrel of beer= $19.28
                              State and federal tax per ½ barrel of beer = $10.24
                              Expected energy costs per 1/2 barrel = $4.64
                              Employees wages and wages tax = $24.81
                              Rent = $43.20
                              Keg rental expense = ?


                              = profit margin?


                              Does everything look ok besides what i am missing?

                              I am still waiting to hear from my distributor on how much their keg rental expense. When I asked for this info they said they would have to see me personally, but I don't have my business plan even ready yet. They have me running around in circles. Could you guys just give me an average estimate on the keg rental cost?

                              After I get this number i can decide the sale price to the distributor

                              Comment

                              Working...
                              X