One of the most profitable items that a retailer can sell today is draft beer. The cost-per-ounce for craft beer in kegs is roughly 40-45% less than bottled beer. Installing and maintaining a draft dispensing system and using efficient serving practices should yield a higher profit margin.
Selling Price Considerations
It’s important that the pricing makes sense to the customer. If you sell both bottled and draft versions of the same beer, balance the pricing so two beers of similar quality, type and style sell for a similar price-per-ounce. Depending on which you sell more of (bottle or draft), determine those prices and then price the other accordingly.
Draft beer comes with a higher overhead cost for equipment depreciation cost, system maintenance (weekly line cleaning, keg change-outs, adjustments, etc), supplies (CO2, nitrogen, line-cleaning fluid), spillage, and potential spoilage. Because spoilage is a higher concern for draft beer, you can also use the higher profit margin to offer special rates when business is slow, such as during the early evening.
If you’re selling craft beer, price staggering and price variety should match the perceived quality of the beer. The more it costs, the higher the perceived quality. For those selling craft beer, studies have shown consumers aren’t afraid to spend a little extra to get high quality. This can even encourage customers to “trade up” for a more expensive beer that seems to be of even better quality. Using a printed beer list is also important for selling craft beer because you will likely have a greater variety of prices than selling only big name brands.
Profit Margin per Keg
- Determine the keg size
- Determine how many ounces you will serve per unit, depending on how much foam will be served
- Determine ounces of liquid beer poured
- Subtract that amount from the glass size
- Divide that number by 4 to account for the foam factor
- Add the ounces of liquid beer and beer foam
- Determine how many pints you can sell per keg
- Divide the total ounces of beer in keg by serving amount
- Determine price of each serving
- Determine net profit
- Multiply number of servings by cost of each serving
- Subtract wholesale cost of the keg
- Standard 15.5-gallon keg = 1984 ounces of beer
- Served in a standard 16oz pint with ¾ inch of head = 14.5oz
- Yields ~136 pints
- Charge $3
- Approximate Net Profit = $310-$340.
Reduce Loss and Increase Profit Margin
Avoiding waste requires diligence. The easiest way to avoid reduce waste is to train your staff for proper serving practices. Remember that foam provides for style and profit! Proper maintenance of your system requires expert knowledge and regular cleaning. Monitor your keg age, storage temperatures, pressurization, and CO2 levels. If you detect something wrong with your keg (excessive foam, poor flavor quality, keg is past storage date), don’t be afraid to throw out the compromised product and start fresh with a new one. Maintaining a higher standard for the quality of your draft beer helps your reputation and pays off by allowing you to charge premium prices. If you want to calculate a profit/loss analysis of your business’s draft beer sales, contact Clean Beer to make an appointment.