Editor’s Note: On Tap is a new monthly series by Keith Coffman, owner of Lost River Pizza Co. in Bowling Green, Kentucky. Throughout the series, Keith will discuss the ins and outs of successfully selling craft beer in your pizzeria.
Many of you sell the big, light beers at your restaurant, and some of you may offer a small selection of craft beer. However, most of you don’t sell craft beer. Maybe you don’t know much about craft beer or don’t have a draft beer system. Adding 20 to 30 percent to your bottom line is definitely worth installing a draft system and educating yourself about craft beer though! It’s no secret: the big, light beers are the market leaders. They made up 71.8 percent of the overall U.S. beer market in 2015. The companies that make them spend a lot of money on advertising and these beers are available everywhere. From an economic perspective, you should sell both the big, light beers along with craft beers.
You’re probably asking yourself, “Why should I sell craft beer?” There are a number of good reasons, but for the sake of this article, I’ll give you three reasons why you should be selling craft beer. First, you’ll significantly increase your revenue and profits. Secondly, the craft beer market is growing and doesn’t appear be slowing down anytime soon. Finally, you’ll be able to differentiate your restaurant from your big-chain competition and entrench yourself in the “support local” movement.
From a revenue standpoint, you’ll make more selling craft beer. The cost of a half-barrel keg (15½ gallons) of domestic beer is going to be $100 to $130, depending on your location. A half-barrel keg should yield between 115 and 120 pints. The fair market value price on a pint of domestic beer is between $2 and $4. If you sell 115 pints at $3 each, you’ll gross $345. Subtract your beer cost of $115 and you’ll make $230 and a 200-percent profit margin.
Now let’s run the numbers for craft beer. The cost of a half-barrel of a good India pale ale is $180. Let’s say you sell 115 pints at a fair market value price of $5.25 each. You’ll gross approximately $604 and make $424 after subtracting your keg cost. For the IPA example, you make a 236-percent profit margin — and $194 more profit than what you made off of the keg of big, light beer.
Granted, depending upon your customers, you may sell twice as much of the big, light beers as you do craft beer. But keep in mind this paradigm is shifting in America. More people are drinking craft beer, especially millennials (who account for 57 percent of weekly craft beer drinkers, according to the 2015 U.S. Yankelovich MONITOR Survey).
The case for selling craft beer gets stronger when you look at data from the Brewer’s Association, which shows that craft beer volume growth was up 12.8 percent in 2015 alone in the U.S. The segment’s market share jumped from 5.7 percent in 2011 to 12.2 percent in 2015.
Tap into the marketing opportunities of craft beer. Differentiate your pizzeria from the chains by selling craft beer. A few chains have embraced craft beer, but most still haven’t “figured it out.” Their weakness is an opportunity to offer your customers something the chains don’t! Advertise that you offer craft beer. The “support local” movement is a huge marketing opportunity for you as well. As of December 2015, there were 4,269 breweries in the U.S. There are probably breweries brewing craft beer near your restaurant, and Brewer’s Association Data shows that two-thirds of craft beer drinkers prefer beer brewed locally.
There’s so much to talk about in the coming months. Who’s ready to take the journey with me?
Keith Coffman is the owner and operator of Lost River Pizza Company.