Craft beer drinkers know that their hobby and preference at the tap comes with a certain expense—it’s ever more apparent that good beer isn’t cheap. A $9.99 six-pack now often seems like a bargain, with prices from trendy breweries often averaging $12 or more. But where does all of that money go, and how does the cost of producing craft beer break down?
Well, thanks to Joe Satran over at Huffington Post, we have some good estimates in terms of numbers and percentages, helpfully illustrated in the form of an infographic. And the results are pretty enlightening, showing us that the vast majority of price we pay for craft beer comes from nothing brewing-related: Instead, he calculates that more than 50 percent of the final price comes from distribution and retailer mark-ups. Please note, all of these numbers vary widely from state to state—this is just a general look at average costs.
Probably the most shocking numbers for the average drinker is the amount of the final cost spent on actual brewing ingredients—only 10 percent of the total cost, or roughly $1.20 of your $12 six-pack, is spent on malt, hops and yeast. Other aspects of production account for about 24 percent, and the brewery’s mark-up clocks in at around 8 percent. That 8 percent markup represents a brewery’s profit margin on the beer they’re selling to a distributor (as is law, in many states), meaning that at max, the average brewery’s profit on a $12 six-pack is going to be somewhere under the $1 mark. Overall, these brewers are taking home quite a small piece of the overall pie.
Distributors and retailers, on the other hand, inflate the overall price of beer with much larger mark-ups, with each of the two steps of the three-tier system (a system established after prohibition that demands producers, distributors and retailers have a hand in the alcohol business) typically meaning another 50 percent mark-up on average before the beer reaches consumers.
Of course, knowing that such a large portion of the final price ultimately comes from the distribution and retail process, it does raise the question of why self-distributed breweries typically sell packaged beer for similar prices in their own brewery shops and taprooms. It certainly wouldn’t hurt to see some more sub-$10 six-packs out there to balance the rising cost of being a craft beer fan.