Cost of a Pint

Have you ever wondered what makes up the actual cost of your pint of craft beer? Me too.  I searched the interwebs for an answer to that question and to my surprise there was very little information about what actually makes up the cost of a pint. I guess that isn’t really surprising since most of the products we buy have hidden costs. Think about it. Do you know what the actual costs are for an oil filter, a loaf of sourdough bread, or an iPad? We know what we are willing to pay for these items, but do we really know the factors that make up the costs?

As for a craft beer, much of the costs come down to where your beer is brewed. Taxes, ingredient costs, labor, and whether the brewer owns their place of business can radically change the costs associated with producing a pint of beer. The size of the brewer’s setup can also have a large impact on the costs associated with production. A 100 barrel brew house may actually have higher ingredient and labor costs versus a 10,000 barrel brew house, but that aside, let’s speak in generalities. The following assumptions will be made on the basis of an average pint of beer costing $5 dollars.

Let’s say for the average brewery it costs about $50 per barrel (31 gallons) in ingredients to produce your average pale ale, but could go as high as $70 per barrel depending on the brewer’s setup and ingredient costs. If that barrel brings in revenue of $700 a barrel, between 6 to 8 percent of a pint of beer pays for the ingredients. To the average homebrewer that would mean your average 5 gallon batch of pale ale would cost less than $11 (wouldn’t that be nice).  Ingredient costs will also vary with the brewery’s location, shipping costs, and efficiency of their setup. Even a $0.06/lb difference in ingredient costs or a 3 percent difference in malt yield can have a large impact on the bottom line. ⁽¹⁾ If you were running a 10,000 barrel brewery and had a 3% decrease in efficiency that would increase your grain bill by about 15,500 pounds per year. For a million barrel facility that inefficiency would be an additional 1.55 million pounds of malt.⁽²⁾

Taxes are another part of the cost of a pint that will vary depending on the state you live in. Federal excise taxes vary depending on the brewery’s production rates with tax rates starting at $7 on the first 60,000 barrels for a brewer who produces less than 2 million barrels and $18 per barrel after the first 60,000 barrels. ⁽³⁾ That roughly works out to between 2 and 5 cents per 12oz can/bottle of beer. State beer taxes vary from state to state. Alabama has one of the highest beer tax rates with a 60 cent excise tax and 10% sales tax (45 cents) for onsite sales for each pint. That means the average Alabamian is paying 21% of their pint toward taxes versus 5.34% in Wisconsin.

Labor and equipment costs vary widely based on brewery size and equipment setup. Equipment setup can cost between $100,000 on the low side to millions of dollars on the high. Financing setups and paying employees can take a large chunk out of the remaining revenues that don’t go to ingredients and taxes. However, once equipment and/or the building are paid for, then a larger portion of the remaining revenue becomes profit. Of course the end result of more profits may lead the brewer to buy new equipment to make more beer. Whatever the costs that make up a pint, I am happy there are more and more craft brewers out there offering up some very tasty beers.

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1. Metzger, S. What Does Your Beer Really Cost. The New Brewer. Jan 2012. https://www.brewersassociation.org/attachments/0000/8424/JF_TNB12_Beer_Costing-1.pdf
2. Papazian, C., 1994. Home Brewer’s Companion. Avon Books.
3. Beer Tax Rates by State. Jan 2014. http://www.taxadmin.org/fta/rate/beer.pdf