craft brewery financial training

Beer Costing 101

One of the challenges with beer costing is that it is confusing.

It’s not clear what costs should be included, how the costs are calculated, and how to keep track of everything.

In this post, we’ll break through the beer costing confusion using the age old questions: who, what, where, when, why and how of beer costing.

Beer costs are made up of direct materials, direct labor, and overhead. These three categories, taken together, form the bill of materials. The bill of materials shows you total costs for each brand and package of beer.

Once you have the costs nailed down, you can make sure products are priced properly so that you get enough margin to ensure profitability for your brewery.

To get started on your beer costing journey, begin with these Beer Costing 101 questions:

  • Who?
    • Assign a responsible person or team of people to keep beer costs updated (usually this is a combination of the inventory manager, brewer, and finance person)
  • What?
    • Update costs for raw materials (hops, grains), packaging materials (cans, bottles, cardboard), and watch out for freight charges including surcharges
  • Where?
    • Beer costs are used for calculating inventory value and brewery cost of goods, be sure to update both
  • When?
    • Update costs on a regular basis (quarterly or semi-annually) or use a brewery management software like Ekos to track costs in real time
  • Why?
    • To understand margins by product line and package
  • How?
    • Start with your recipe, list out all ingredients, quantities and costs per unit

Watch the 5-minute video on beer costing 101:

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