Data provided here comes from our team of experts who have been working on business plan for a craft brewery. Furthermore, an industry specialist has reviewed and approved the final article.
Are craft breweries profitable, and what is the typical monthly income for craft beer producers?Let's check together.
Revenue metrics of a craft brewery
How does a craft brewery makes money?
A craft brewery makes money by selling beer to distributors, retailers, and consumers.
What are the common products sold in craft breweryes?
craft breweryes typically sell a variety of artisanal and distinctive beer products.
These often include flagship beers, which are the brewery's core offerings and represent their unique styles and flavors. Alongside these, seasonal beers are periodically released to align with different times of the year, featuring ingredients that reflect the changing seasons.
Limited edition or specialty beers provide an element of exclusivity, often experimenting with unconventional ingredients, brewing techniques, or aging processes to create unique taste experiences.
Many craft breweries also offer tasting flights, allowing customers to sample a selection of different beers in smaller quantities.
Additionally, some breweries sell merchandise such as branded glassware, apparel, and accessories, which help build brand loyalty and offer customers a way to connect with the brewery beyond just the beer itself. In recent years, the trend of canning and bottling craft beers has grown, enabling customers to purchase their favorite brews to enjoy at home
What about the prices?
In a craft brewery, the prices of their products can vary depending on several factors such as the type of beer, the size of the serving, the location of the brewery, and market trends.
On average, a pint of craft beer when consumed on-site at the brewery's taproom can range anywhere from $5 to $10, with specialty or limited edition brews sometimes commanding higher prices.
If customers opt for takeaway options like growlers or crowlers, they might spend between $10 and $20 for a fill, again depending on the beer's style and uniqueness.
Additionally, bottled or canned craft beers sold in packs at the brewery or local stores could be priced around $8 to $15 for a standard six-pack, with higher-end or larger-format bottles reaching $15 to $30 or more.
| Product | Price Range ($) |
|---|---|
| Pint of Craft Beer (On-site) | $5 - $10 |
| Growler/Crowler Fill | $10 - $20 |
| Craft Beer Six-Pack | $8 - $15 |
| Specialty/Large-format Bottle | $15 - $30+ |
Who are the customers of a craft brewery?
Craft breweries cater to a variety of customers, from craft beer aficionados to casual beer drinkers.
Which segments?
We've prepared a lot of business plans for this type of project. Here are the common customer segments.
| Customer Segment | Description | Preferences | How to Find Them |
|---|---|---|---|
| Enthusiast Explorers | Adventurous beer enthusiasts who seek unique and experimental flavors. | Unconventional beer styles, limited editions, seasonal releases. | Beer festivals, social media beer groups, specialty food and beverage events. |
| Local Regulars | Loyal patrons who frequent the brewery as part of their social routine. | Classic and consistent beer offerings, friendly atmosphere. | Community events, local advertisements, loyalty programs. |
| Casual Sippers | Individuals looking for a relaxed and casual drinking experience. | Easy-drinking and approachable beers, comfortable seating. | Local cafes, online directories, word of mouth. |
| Beer Tourists | Travelers seeking to explore the local craft beer scene. | Brewery tours, variety packs, merchandise. | Tourist information centers, travel websites, online reviews. |
| Health-Conscious Consumers | Individuals who prioritize organic, gluten-free, or low-calorie options. | Organic beers, gluten-free options, light and sessionable beers. | Health and wellness expos, specialty grocery stores, online forums. |
How much they spend?
In our comprehensive analysis of the craft brewery market, we find that customers generally spend between $25 to $50 per visit. This expenditure includes purchases such as draught beer, bottled or canned beer to go, merchandise, and any food offerings available.
Consumer habits research indicates that a loyal craft brewery enthusiast tends to visit their favorite spot around 2 to 3 times a month. The frequency of visits can increase if the brewery offers special events, releases, or promotions.
Considering these factors, the estimated lifetime value of an average craft brewery customer, calculated over a typical one-year loyalty period, would range from $600 (2x25x12) to $1800 (3x50x12).
With this data, we can infer that the average revenue a craft brewery might expect from a regular customer over the course of a year would be approximately $1200. This figure is based on a balance between lower and higher spending customers and the frequency of their visits.
(Disclaimer: the figures presented are based on industry averages and general consumer trends. Actual revenue per customer can vary significantly based on location, competition, market trends, and other factors specific to each craft brewery.)
Which type(s) of customer(s) to target?
It's something to have in mind when you're writing the business plan for your craft brewery.
The most profitable customers for a craft brewery are typically enthusiasts and loyal patrons who value quality, uniqueness, and authenticity in their beer choices.
These customers tend to be passionate about craft beer and are willing to pay a premium for artisanal brews, leading to higher profit margins.
To target and attract them, craft breweries can leverage social media, attend beer festivals, and host tasting events to showcase their products and engage with the community. Building a strong online presence and offering brewery tours can also help.
To retain these customers, consistent quality and variety in beer offerings are key, along with personalized loyalty programs, special releases, and engagement through newsletters or social media to keep them informed and connected to the brewery's story and values, fostering a sense of belonging and loyalty.
What is the average revenue of a craft brewery?
The average monthly revenue for a craft brewery can vary significantly, typically ranging between $5,000 and $50,000. This wide range is due to various factors including production capacity, distribution, and on-site sales. Let’s dive into specific scenarios to understand the different revenue potentials.
You can also estimate your own revenue, using different assumptions, with our financial plan for a craft brewery.
Case 1: A local nano-brewery in a small town
Average monthly revenue: $5,000
This type of brewery is relatively small, known for its hands-on approach, and often caters to a local or neighborhood market. With the limited production capacity of, say, 100 to 200 barrels per year, these breweries rely heavily on local support.
Given their size, nano-breweries might not offer a wide variety of beers and usually do not distribute their products widely, focusing instead on sales directly from the brewery's taproom or at local events.
Assuming an average price of $5 per pint and an estimated sale of around 1,000 pints per month, a nano-brewery could generate $5,000 in revenue monthly. This figure could be complemented by merchandise sales or special event hosting.
Case 2: A microbrewery with regional reach
Average monthly revenue: $25,000
Scaling up from the nano-brewery, a microbrewery produces more beer, typically up to a few thousand barrels annually, and has a more extensive market reach. These breweries often have a more diverse menu of brews and distribute their products in local supermarkets, bars, or restaurants.
Unlike nano-breweries, microbreweries may benefit from brand recognition and loyalty in their region, contributing to higher sales. They often have an established taproom with regular foot traffic and may also distribute kegs to local establishments.
With a wider distribution, assuming they sell 5,000 pints (or equivalent) at $5 each, coupled with a robust keg distribution program to local outlets, a microbrewery could generate around $25,000 per month. This revenue might be enhanced by hosting brewery tours, tastings, and events.
Case 3: An established craft brewery with a broad distribution network
Average monthly revenue: $50,000
These breweries operate on a much larger scale, with a substantial production capacity that can reach tens of thousands of barrels annually. Their brand is usually well-recognized, and their products are distributed across multiple states or even nationally.
Their extensive distribution network allows them to reach a wide audience, significantly increasing their sales volume. Additionally, they may have a flagship taproom or brewpub, merchandise sales, and a dynamic range of seasonal or specialty brews.
Considering their broad market reach and assuming sales of 10,000 pints at $5 each, alongside a successful distribution and retail strategy, such a brewery might see average revenues reaching $50,000 monthly. Strategic partnerships, sponsorships, or collaborations can further enhance these figures.
It's important to note that the numbers provided are simplified and actual revenue can be influenced by many factors including location, market trends, operational costs, and investment in marketing.
The profitability metrics of a craft brewery
What are the expenses of a craft brewery?
Operating a craft brewery entails expenses such as brewing equipment, ingredients, facility rent or lease payments, staff wages, and marketing.
| Category | Examples of Expenses | Average Monthly Cost (Range in $) | Tips to Reduce Expenses |
|---|---|---|---|
| Ingredients | Malted barley, hops, yeast, adjuncts | $3,000 - $10,000 | Source ingredients in bulk, negotiate with suppliers, reduce waste |
| Production Labor | Brewers, cellar workers, packaging | $2,500 - $6,000 | Optimize staffing, cross-train employees, automate where possible |
| Rent and Utilities | Brewing facility lease, water, electricity, gas | $2,000 - $5,000 | Choose an energy-efficient location, monitor and reduce water and energy usage |
| Equipment | Fermentation tanks, kettles, bottling line | $1,000 - $3,000 | Invest in durable equipment, maintain and repair as needed |
| Packaging Materials | Bottles, cans, labels, packaging design | $500 - $2,000 | Buy packaging materials in bulk, design cost-effective labels |
| Marketing and Promotion | Website, social media, events | $300 - $1,000 | Focus on digital marketing, utilize social media, collaborate with local businesses |
| Insurance | Liability insurance, property insurance | $200 - $800 | Shop around for insurance quotes, maintain a safe facility |
| Licenses and Permits | Brewer's license, health permits | $200 - $500 | Ensure compliance to avoid fines and legal issues |
| Tasting Room Expenses | Bar staff, furnishings, glassware | $1,000 - $3,000 | Optimize tasting room layout, consider second-hand furnishings |
| Contingency | Emergency fund for unexpected expenses | $500 - $1,000 | Regularly contribute to the contingency fund |
When is a a craft brewery profitable?
The breakevenpoint
A craft brewery becomes profitable when its total revenue exceeds its total fixed and variable costs.
In simpler terms, it starts making a profit when the money it earns from selling craft beer and possibly other merchandise or tours exceeds the expenses it incurs for ingredients, rent, equipment, salaries, marketing, and other operating costs.
This means that the craft brewery has reached a point where it covers all its expenses and starts generating income; this crucial juncture is known as the breakeven point.
Consider an example of a craft brewery where the monthly fixed costs typically amount to approximately $25,000. But, we also need to consider the cost of producing the beer itself, which involves various variable costs such as ingredients and packaging.
Assuming each batch of beer costs around $2,000 to produce and yields about 250 gallons, and each gallon can be sold for $40, the revenue from one batch would be $10,000. If the brewery produces 10 batches a month, that's $100,000. Subtracting the cost of production ($20,000) and fixed costs ($25,000), we have a potential profit margin. However, the breakeven point, in this case, revolves around producing and selling enough beer to cover the initial $45,000 in costs.
To break even, the brewery would need to sell between 5 to 6 batches of beer per month or approximately 1250 to 1500 gallons. This calculation doesn’t consider other potential sources of income (like merchandise or tours), which could reduce the breakeven point.
It's essential to understand that this indicator can vary widely depending on factors such as location, brewing capacity, pricing, operational costs, and market demand. A larger craft brewery with higher overheads would naturally have a higher breakeven point than a smaller microbrewery or nanobrewery.
Curious about the profitability of your craft brewery? Try out our user-friendly financial plan tailored for craft breweries. Input your specific assumptions, and it will calculate the amount you need to earn to brew a profitable business successfully.
Biggest threats to profitability
The biggest threats to profitability for a craft brewery can be rooted in several key factors.
Firstly, rising input costs like malt, hops, and energy can squeeze profit margins, especially if they cannot be passed on to consumers through higher beer prices.
Competition in the craft beer industry is fierce, making it crucial to stand out and maintain brand loyalty, but this can be challenging as consumer preferences evolve.
Additionally, distribution and marketing costs can eat into profits, especially for smaller breweries trying to expand their reach.
Regulatory hurdles and compliance costs can also burden breweries, impacting profitability.
These threats are often included in the SWOT analysis for a craft brewery.
What are the margins of a craft brewery?
Gross margins and net margins are financial metrics used to assess the profitability of a craft brewery.
Gross margin is the difference between the revenue earned from selling beers and other beverages, and the direct costs related to producing those drinks.
Essentially, it's the profit remaining after subtracting the costs directly related to brewing, such as ingredients (hops, malt, yeast, etc.), labor for brewing staff, and utilities specifically for production.
Net margin, however, accounts for all the expenses the brewery faces, including indirect costs like administrative expenses, marketing, rent, and taxes.
Net margin offers a comprehensive view of the brewery's profitability, considering both direct and indirect costs.
Gross margins
Craft breweries typically have an average gross margin ranging from 30% to 50%.
This implies that if your brewery is earning $20,000 per month, your gross profit would be approximately 40% x $20,000 = $8,000.
Let's illustrate with an example.
Imagine a brewery that sells 1,000 cases of beer per month, with each case priced at $40. The total revenue for this scenario would be $40,000.
However, the brewery experiences costs for ingredients, production labor, and utilities specifically tied to brewing.
Assuming these costs total $25,000, the brewery's gross profit would be $40,000 - $25,000 = $15,000.
Here, the gross margin for the brewery would be $15,000 / $40,000 = 37.5%.
Net margins
Craft breweries generally have an average net margin ranging from 5% to 15%.
In straightforward terms, if your brewery earns $20,000 per month, your net profit might be around $2,000, which is 10% of the total revenue.
We'll use the same example to make things clear.
Consider our brewery sells 1,000 cases at $40 each, totalling $40,000 in revenue. Direct costs were established at $25,000.
Beyond these, the brewery also shoulders various indirect costs such as marketing, rent for the taproom or salesroom, insurance, compliance costs, taxes, and administrative salaries. Suppose these additional costs amount to $12,000.
After deducting both direct and indirect expenses, the brewery's net profit stands at $40,000 - $25,000 - $12,000 = $3,000.
In this scenario, the net margin for the brewery would be $3,000 divided by $40,000, equating to 7.5%.
As a business owner, it's crucial to recognize that the net margin (vs. gross margin) furnishes you with a clearer perspective on the actual earnings of your craft brewery, as it encompasses all operational costs and expenses.
At the end, how much can you make as a craft brewery owner?
Now you understand that the net margin is the indicator to look at to know whether your craft brewery is profitable. Essentially, it reveals how much profit you've made after covering all the expenses of running your brewery.
Your earnings will largely depend on how effectively you manage your brewery business.
Struggling Craft Brewery Owner
Makes $2,000 per month
If you start a small brewery and make choices such as opting for low-cost ingredients, limiting your beer variety, minimal marketing efforts, and not diversifying your revenue streams (like merchandise or hosting events), your total revenue might stall at around $10,000.
Furthermore, if expenses aren't kept in check — due to poor supply chain management or inefficient production practices — your net margin could be stuck around 20%.
That translates into earning only about $2,000 per month (20% of $10,000). It's a tough market, and this scenario depicts that struggle.
Average Craft Brewery Owner
Makes $7,500 per month
Imagine you operate a mid-sized brewery with a decent variety of quality beers. You engage in regular marketing, have a good location that attracts customers, and you supplement your beer sales with merchandise and hosted events.
Your efforts pay off to an extent, bringing your total revenue to about $40,000. With prudent management and operational efficiency, you could be looking at a net margin of around 25%.
That means, as an average brewery owner, you could be making around $7,500 per month (25% of $30,000).
Successful Craft Brewery Owner
Makes $50,000 per month
As an owner who prides themselves on excellence, you’re dedicated to the craft, creating unique, high-quality beers, and offering a fantastic venue experience. You engage your community, invest in effective marketing strategies, and maybe distribute your beers to local bars or stores.
Your passion and hard work elevate your total revenue to a booming $200,000. Through strategic partnerships, optimized operations, and careful cost management, you achieve a net margin of 40%.
With this approach, your monthly earnings skyrocket to approximately $50,000 (40% of $125,000). It’s the dream of many craft brewery owners, and it all starts with a detailed, well-thought-out brewery business plan.
We hope this inspires you to pour your heart into your craft brewery and reach for the highest pint of success!