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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, price your beer accordingly.
and margins will vary widely based on market condi-
tions and other factors. The challenge is to figure out how much to charge
your wholesaler, who then will charge the retailer,
How to Price Your Products who then will price the beer at the $12.99 price
point. How does all that math work? We’ll take this
• Pricing Terms: PTC, PTR, PTW in small steps.
• How Pricing Works in the Real World: Margin Here’s a hypothetical example. Let’s say you
needed by the brewery, wholesaler, and retailer. charge the wholesaler $25 for a case of beer. The
wholesaler needs to make, for example, a 30% mar-
• Use the Pricing Model: Plug n’ play Pricing tool gin when they sell it to the retailer. To get a 30%
for your Beer. margin, the wholesaler then charges the retailer $36
for the beer.
Pricing Terms
The math: $36 minus $25 = $11 Margin for the
The typical beer sales cycle looks like this: the wholesaler. $11 divided by $36 = 30.5% Margin per-
brewery sells to the wholesaler, who then sells to centage.
the retailer, who then sells to the end consumer.
Continuing the example, let’s say the retailer also
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 it in six-packs, they markup the beer and charge the
to Wholesaler, or PTW, is the amount the brewery customer $12.99 per six-pack.
charges to the wholesaler. The Price to Retailer,
or PTR, is the price the wholesaler charges to the The math: 4 six-packs times $12.99 = $51.96 total
retailer. Lastly, the Price to Consumer, or PTC, is sales to consumer for the case of beer. $51.96 minus
the amount charged to the consumer. This is the $36 cost of beer = $15.96 margin. $15.96 margin
amount listed on the store shelf for your beer. divided by $51.96 sales price = 30.7% margin per-
centage.
You won’t be surprised to hear that the price the
consumer pays for your beer is significantly higher Each stakeholder needs to make their margins at
than what you sold it to the wholesaler for. The each point in the sales cycle. This is what keeps the
reason, of course, is that each stakeholder in the world going round, and the beer being sold. The
sales cycle needs to make money. The brewery, the numbers can get confusing fast. Thank goodness we
wholesaler and the retailer all have margins that have a Pricing Model that will do the math for you.
they need on the sale of the beer in order to run
their business profitably. Use the Pricing Model:
Plug n’ play Pricing for your Beer
Those terms again...
There are many variables to consider when pric-
• PTW = Price to wholesaler ing your beer. You can break out the calculator,
pen, and pencil, or you can use this Pricing Model
• PTR = Price to retailer spreadsheet. Below is a snapshot:
• PTC = Price to consumer
How Prices Work in the Real World
The first step is to determine what your beer costs
To properly price your beer, it may be useful to to make. These costs include direct labor, direct
work backwards from the Price to Consumer. This material, and overhead. Next, determine the margin
is the price of the beer on the shelf at the retail that your brewery needs to cover operating costs
6 April - May 2021 BEVERAGE MASTER
BM040521 Main Pages copy.indd 6 3/23/21 3:06 PM
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