The economics of microbrewing redux

Neil Cameron’s Economics of Microbrewing article generated a huge response from Australia’s small brewers and has prompted a follow up breakdown from another small brewer that also sets out to explain the high relative cost of craft beer in retail outlets.

“I couldn’t resist the temptation to set up my own chart – I think a little more accurate. It’s not meant to be a snap shot of our business, but it is, I think, more reflective of the average situation for microbrewers,” the brewer, who asked to remain anonymous, said.

Figure 1. Percentage and dollar breakdown on the $65 retail sale.

“The first graph is a breakdown of the retail price (based on a $65 shelf price), along the lines shown in the article. What a lot of people probably don’t realise is that one of the key reasons for the higher shelf price of craft beers is that retailers demand a higher margin on them – basically using the argument that they don’t move as much volume and also just because they know they can. Can you imagine the chains making $11.50 – after GST – on a carton of XXXX?”

Figure 2. Percentage breakdown on the brewer’s portion

Figure 2 illustrates the percentage breakdown on the brewer’s portion – I think this is even more telling. Check out the percentage of gross (ex GST) that excise accounts for! And of course, the purple ‘overheads and brewer margin bit’ covers a lot of things.

• freight
• marketing
• sales
• wholesaler fees
• wages (authentic brewing and small-scale packaging takes a lot of time and people!)
• utilities
• insurance
• rent / mortgage
• debt servicing
• equipment maintenance
• etc etc etc
• Brewer margin (bottom of the list!)

“Scary hey?”

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Tags: brewing, business, economics, excise

This entry was posted on August 7, 2010 at 10:09 am and is filed under Featured, Features, Knew Brews. You can follow any responses to this entry through the RSS 2.0 feed.