It’s International Pizza Expo Month! Hopefully, I’ll get to meet many of you in Vegas and, hopefully, we can enjoy a pint or two at The New Operator Reception, Beer & Bull or at The World Pizza Games Finals & Block Party. This will be my sixth Pizza Expo. I have learned something new every year at Expo that has helped me make my restaurant better.
This month I am going to give you a broad overview on pricing and promoting the craft beer that you are now carrying for your customers. First, let’s tackle pricing. In some tourist trap markets, such as The Strip in Vegas or downtown Nashville, you may see restaurants and bars charging astronomical prices for craft beer. That may work in an area where demand surges based on the increasing influx of visitors, but in the markets where most of us are doing business, that simply won’t fly.
Most restaurants and bars across the United States sell their craft beer at 25- to 40-percent cost of goods sold (COGS). This isn’t just an arbitrary number that operators have pulled out of the sky. Selling at a 25- to 40-percent COGS takes into account your overhead costs, which we’ll gauge at 35 to 40 percent. There’s 5- to 10-percent waste in addition to your profits.
Now, let’s look at the math using 30 percent as our COGS. For this example, divide the $175 cost of a half barrel of an average IPA by 30 percent. The answer to our equation is $583.33. Now divide $583.33 by 1,984, which is the number of ounces in a 15½ gallon half barrel keg. Your fluid ounce price is $.294 (29 cents). In our example, a 16-ounce pint of our example IPA will cost your customers $4.71. I personally like to round up to the next quarter to keep the menu prices looking more organized, so I would sell this beer for $4.75.
As mentioned in a previous article, half-barrel kegs are always going to be the lowest priced per fluid ounce. Sixth barrels, quarter barrels and bottles are usually significantly more expensive per ounce. For example, a case of 24 bottles of Three Floyds Alpha King costs $42.99. When we use the same pricing formula that we did earlier, that results in a $5.97 per bottle price for the customer. A half-barrel keg of Alpha King costs $180.99. When you crank that price into our pricing formula, you get a $.305 per fluid ounce price. When compared to a 12-ounce bottle, a 12-ounce draft pour using our formula will cost your customer $3.66. You can still make the margin that you need and sell a 12-ounce draft of Alpha King for $2.31 less than the bottle. With that being said, it’s good to keep bottles on hand for those beers not available in kegs.
There are lots of pricing promotions that you can take advantage of when selling craft beer that will incentivize customers to come in during your off-peak hours. Popular promotions that you can utilize to drive business include happy-hour specials, late-night specials, pint nights, flight nights, ballgame specials and growler specials. Pricing promotion discounts are completely up to you as the owner. I offer $1 drafts during happy hour, half off pints of featured beers on pint night, $2 off flights on flight night and specials on the big, light beers during NFL games and during the local college games. I encourage you to create and try several different pricing promotions for yourself and see what works.
Keith Coffman is the owner and operator of Lost River Pizza Company.