I recently had a conversation with Julie Rhodes from Not Your Hobby Marketing about pricing, costing, margins, freight and the impact of inflation on the beer business.
Below are Julie’s questions and my best attempt at providing answers.
Q: Can you explain FOB, Laid In Cost, Front Line Pricing?
- These are terms used to describe the different cost components
- FOB, free on board, refers to the cost of the product itself, the beer
- Laid-in cost, includes the total price of the beer (FOB), plus freight and beer taxes
- Front line pricing, is kind of like the MSRP on a car, this is the price before any discounts
- Often wholesalers will sell product on deal, where allowed. Quantity discounts, or a set amount off per case, for example. The discount may be shared between the wholesaler and supplier/brewery
Q: What should go into your COGS?
- Brewery COGs are all the costs associated with the production and packaging of your beer
- Wholesaler COGS are all the costs associated with getting the beer into the warehouse
- This includes FOB, freight, taxes (state alcohol taxes)
- Sometimes there is a duty in there, for imported products
- Some wholesalers will include a bottle deposit
- Some wholesalers will include a cents per case marketing fee that is tied specifically to sales volume, say X cents per case
Q: Who pays and when does freight cost come into play?
- Wholesaler usually pays freight
- Wholesaler usually coordinates shipping and logistics, though not always
- Depending on how the shipment happens, straight loads, a full tractor trailer, aggregated loads, shared, where a trailer will pick up product / pallets from multiple breweries
- Some breweries include freight in the FOB cost
Q: How has inflation impacted pricing this year and beyond?
- How hasn’t it impacted price!
- Good article here that provides data points on pricing
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