What your beer costs to make January 2024
Do You Know What Your Beer Actually Costs to Make? (Container Deposit Schemes and All)
How Brewery Software Can Keep Track of Your Cost Of Goods for Accurately Priced Beer
As a brewer, you likely are well aware that tracking your Cost of Goods Sold (COGS) is important. What most brewers don’t realize, however, is that the level of detail in the data and how it’s used can make a huge difference when it comes to profitability at your brewery. This becomes increasingly important when you take into account the requirements set in place with the Container Deposit Scheme and the weight it puts on beverage producers.
Without a true understanding of what everything really costs, it’s difficult to improve efficiency or increase profitability. Not only is tracking your Cost of Goods important for determining your pricing, but it can also help you identify weak points in your production that may be costing you an arm and a leg.
Calculating Your Cost of Goods
Accurate insight into your brewery’s COGS is essential for determining competitive pricing while still achieving a desirable profit margin.
Many brewers spend hours using spreadsheets to keep track of their Cost of Goods Sold, but this can be complicated with formulas containing circular references, and usually hard to keep data updated for real-time visibility. The right brewing software can save time and make calculating your Cost of Goods Sold simple by automating your data entry and calculating your COGS with 100% accuracy.
Beer30 software offers one of the most powerful COGS reporting functionalities in the industry and allows you to track costs accurately. The powerful software is different from others in the industry in that it accounts for raw material and packaging material price fluctuations from batch to batch, including container fees that may vary depending on your state. This is all done while incorporating the price changes that occur due to split batches, merges, and ingredient substitutions and additions. Beer30 also incorporates losses during fermentation, filtration, conditioning, and packaging into your final COGS breakdown for each batch, so you have an accurate understanding of how your efficiency impacts your costs. It’s critical to incorporate beer losses into your final COGS, to have a true understanding of your Balance Sheet and Income Statement.
By delving into the intricacies of the brewing process and assessing the associated expenses for each brew batch, breweries can make informed decisions about recipe adjustments, pricing strategies, container handling fees, and cost reduction measures.
Having a full breakdown of your COGS gives you the insight you need to see what’s working in your brewery and what’s a waste of money.
To ensure accurate calculations of your COGS and to help you navigate container refund programs, Beer30 software focuses on a few key areas:
A profitable brewery balances raw material inventory efficiently, avoiding excess stock that can impact space and cash flow. Traditional methods, often relying on cumbersome databases or spreadsheets, can be replaced by brewery software like Beer30. The software provides reliable tools for accessing and manipulating cost data effortlessly.
Beer30’s side-by-side cost summary feature shows brewers what is coming in and what is going out, detailing:
- Monthly losses
- Losses per brew/packaging run (empty bottles cans being wasted or destroyed, accidents, etc.)
- Downtime inefficiencies
At any time, you can pull up a report to see the total value for each set of raw materials and packaging supplies that are sitting on your shelf and in inventory to properly assess what your assets are for your material costs.
Brew Day, Work In Process (WIP), and Container Deposits
Beer30 excels in handling the transition of costs from raw materials to Work in Process (WIP) and at handling splitting and merging batches. This is important when you’re looking at taking a base beer, and splitting it up to make variations. For example, if you’re brewing into a 2500L tank a base IPA, and then splitting up into two tanks to get a 1200L Pineapple IPA and keep a 1300L Habanero IPA.
As if there wasn’t enough to worry about already on brew day, brewers are now faced with the added stress of the Container Deposit Scheme. This legislature requires breweries to pay a fee for each container and to offer a refund when customers return them.
Although this Scheme is great from an environmental aspect, it can add additional costs to your bottom line and makes it even more difficult to calculate your average cost of goods.
Fortunately, Beer30 navigates this seamlessly and takes these fees and refunds into account to create an accurate cost of goods that is all-encompassing. Whether you’re charging a handling fee or absorbing the extra cost, Beer30 can help you make sure your data is accurate.
With Beer30, you can set up your WIP and brewing data to include:
- Hourly labor
- Other external factors, such as rent
- Container Deposit Scheme Fees
- Yeast costs associated with fresh pitches / repitches/harvested
Finished Goods Inventory
Once your beer is ready for sale, it will go into your finished goods inventory. When you use the right software system to track the components that go into making each packaged goods item, the individual COGS can be immediately calculated. This means you can easily compare the costs of items like a 24-pack of bottles vs. 24-pack of cans vs. 1 keg.
With the finished goods calculation, you should look at it on a batch-by-batch comparison for reporting purposes. You should see immediately if a batch is higher or lower than the Target COGS, which is the ‘gold standard’ for that beer. This allows you to easily see if you’re hitting your financial benchmarks or if adjustments need to be made.
Sales Vs. COGS
With the beer brewed and finished goods inventoried, it’s time to calculate your sales revenue and compare it to your cost of goods sold to determine your gross profit.
With Beer30, you can easily see sales reports and identify trends happening with your brews, see where the demand is, and compare your revenue directly against your COGS. You can even go a step further with the demand planning module and see what future demand will look like.
Compliance and Reporting
In addition to making sure your finances are in order and your COGS are accurate, Beer30 software will also help make sure that you’re meeting regulatory requirements. Not only will the software ease the burden of tax compliance, but it will also help make sure you’re up-to-date with the Container Refund Scheme’s regulations and reporting.
Beer30 can maintain accurate records of the eligible containers and run up-to-date reports to keep you in compliance.
Without up-to-date tracking and accurate records of what everything is costing at your brewery, you may not actually know your true cost of goods. Without your true cost of goods, you have no way of knowing where your inefficiencies are. Having the right brewery software by your side like Beer30 can help make sure you’re running your brewery as efficiently as possible. Beer30 can help you save time and rest assured knowing that your bookkeeping is accurate. This peace of mind lets you get back to doing what you love: brewing great beer.