Page 8 - Beverage MasterAprMay 2021

Legal & Marketing
Disclaimer: Since we are talking pricing, all exam- account. If your competitor’s brand is selling for a
ples listed are hypothetical only and used for illus- hypothetical $12.99 a six-pack, you may want to
trative and informational purposes. Prices, costs,
and margins will vary widely based on market condi-
tions and other factors.
How to Price Your Products
• Pricing Terms: PTC, PTR, PTW
• How Pricing Works in the Real World: Margin
needed by the brewery, wholesaler, and retailer. charge the wholesaler $25 for a case of beer. The
• Use the Pricing Model: Plug n’ play Pricing tool
for your Beer.
Pricing Terms
The typical beer sales cycle looks like this: the
brewery sells to the wholesaler, who then sells to
the retailer, who then sells to the end consumer.
At each stage in the sales cycle, there are differ- needs to make 30% on the beer. Since they will sell
ent prices and markups that are charged. The Price
to Wholesaler, or PTW, is the amount the brewery
charges to the wholesaler. The Price to Retailer,
or PTR, is the price the wholesaler charges to the
retailer. Lastly, the Price to Consumer, or PTC, is
the amount charged to the consumer. This is the
amount listed on the store shelf for your beer.
You won’t be surprised to hear that the price the
consumer pays for your beer is significantly higher
than what you sold it to the wholesaler for. The
reason, of course, is that each stakeholder in the
sales cycle needs to make money. The brewery, the
wholesaler and the retailer all have margins that
they need on the sale of the beer in order to run
their business profitably.
Those terms again...
• PTW = Price to wholesaler
• PTR = Price to retailer
• PTC = Price to consumer
How Prices Work in the Real World
To properly price your beer, it may be useful to
work backwards from the Price to Consumer. This
is the price of the beer on the shelf at the retail
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price your beer accordingly.
The challenge is to figure out how much to charge
your wholesaler, who then will charge the retailer,
who then will price the beer at the $12.99 price
point. How does all that math work? We’ll take this
in small steps.
Here’s a hypothetical example. Let’s say you
wholesaler needs to make, for example, a 30% mar-
gin when they sell it to the retailer. To get a 30%
margin, the wholesaler then charges the retailer $36
for the beer.
The math: $36 minus $25 = $11 Margin for the
wholesaler. $11 divided by $36 = 30.5% Margin per-
centage.
Continuing the example, let’s say the retailer also
it in six-packs, they markup the beer and charge the
customer $12.99 per six-pack.
The math: 4 six-packs times $12.99 = $51.96 total
sales to consumer for the case of beer. $51.96 minus
$36 cost of beer = $15.96 margin. $15.96 margin
divided by $51.96 sales price = 30.7% margin per-
centage.
Each stakeholder needs to make their margins at
each point in the sales cycle. This is what keeps the
world going round, and the beer being sold. The
numbers can get confusing fast. Thank goodness we
have a Pricing Model that will do the math for you.
Use the Pricing Model:
Plug n’ play Pricing for your Beer
There are many variables to consider when pric-
ing your beer. You can break out the calculator,
pen, and pencil, or you can use this Pricing Model
spreadsheet. Below is a snapshot:
The first step is to determine what your beer costs
to make. These costs include direct labor, direct
material, and overhead. Next, determine the margin
that your brewery needs to cover operating costs
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