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  #1  
Old 12-19-2006, 09:04 PM
pkbites pkbites is offline
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Beer profit margin

What exactly is the mark up on beer? In my opinion beer is overpriced, seeing that it is 90-96% water. Consider what has to be done to gasoline here, and it is ounce for ounce much cheaper than beer, I find the price of beer to be pretty high. Not that I begrudge any company to make a good buck or charge whatever they see fit.

Yesterday I went into Garys Beer & Liquor in Oak Creek [Milwaukee] Wisconsin.

They were selling Sterling Light Beer. Which isn't great, but (surprising for a light beer) is better than the regular Sterling Beer.
I don't want to get into what beer you think sucks, that's not what this is about.

What this is about is, they were selling Sterling Light for $2.99 a CASE!
Not a 6 pack or a 12 pack. $2.99 for a CASE of 24 twelve ounce cans. And it was $2.99 a case straight up. No rebates or anything like that. When I asked the manager why it was so cheap he just shrugged and said with mark up that was the price.

With mark up?

What exactly is the mark up on beer?
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  #2  
Old 12-19-2006, 09:08 PM
Gary T Gary T is offline
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I don't know about the markup on beer, but I wonder if you think bottled water is overpriced, seeing as it's 100% water.
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  #3  
Old 12-19-2006, 09:09 PM
galen galen is offline
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Beer, and liquor in general, is cheap in the US and the real price has been going down for at least the last three decades.

Alcohol taxes are incredibly low compared to other countries.
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  #4  
Old 12-19-2006, 09:23 PM
pkbites pkbites is offline
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Quote:
Originally Posted by Gary T
I don't know about the markup on beer, but I wonder if you think bottled water is overpriced, seeing as it's 100% water.
Yes, absolutely. Especially single serve bottles that run anywhere from 79 cents to $3.00. The 5 gallon jugs of spring water we get delivered to my office only cost $4.00, and tap water cost far less than that.

Lets clear one thing up: by "overpriced" I mean the price is much, much higher than the overall value of the product received. I do not mean that there should be some kind of price controls or anything like that. A company or store should be able to charge whatever they want.

I just want an idea of of what the real value of this particular product. Most breweries sell to a distributor, who then sell to a store, who then sell to the retail customer. In the case of the OP the brewery, the distributor, and the store can make a profit while selling an entire case of beer for only $2.99? And it's not like this particular brand is a high volume item. A case of Bud runs anywhere beyond $16. Bud though has the shit marketed out of it. Subtract that expense and how much does it cost to produce a case of Bud as compared to this swill?
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  #5  
Old 12-19-2006, 09:51 PM
Cluricaun Cluricaun is offline
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I'd guess that it depends on the beer. I'd say that the production cost on a bottle of Icehouse is probably lower overall than the production cost of a bottle of, let's just pick Sierra Nevada. The volume turned out by a mega brewery brings the per unit cost down in a way that can't be matched by smaller producers, so my guess would be that the mark up on a case of Miller products is in the 80-95% range, whereas craft beers would be closer to the 30-50% range.
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  #6  
Old 12-19-2006, 10:27 PM
Blunt Blunt is offline
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I work part time in a liquor store, and from what I've seen, beer does not have a high markup at all. As far as I know, our wine is marked up the most, liquor is next, and beer is the least. I think we make a buck or two per case of Miller or Bud or whatever that probably retails for 14 dollars. Some wines on the other hand, may be marked up 100% or more. I don't know when I work next, but I'll come back with more specific info if this question isn't answered before then.
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  #7  
Old 12-19-2006, 10:42 PM
Gary T Gary T is offline
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Wow. Blunt's message suggests a markup in the 15% neighborhood, rather less than I would have guessed. That would be less than 50 cents profit on that case of Sterling Light.

The manager's comment, and the low price, suggest that the store uses a standard percentage markup for all beers. A savvier marketing strategy would be to use a markup matrix, a form of sliding scale. This would give a higher markup percentages on low-ticket items (making it at least worthwhile to ring up the sale) and a lower markup percentage on high-ticket items (minimizing "sticker shock"). I'm surprised that this store appears (my perception) not to do so.
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  #8  
Old 12-19-2006, 10:42 PM
Mr. Slant Mr.  Slant is offline
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Hmmmmmmmmm.
I suppose the GQ would be simpler to answer if we defined the question as to where the value add really is in this supply chain.
Are you asking about mark-up from brewer to consumer?
Brewer to distributor?
Distributor to retailer?
Retailer to consumer?
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  #9  
Old 12-19-2006, 10:49 PM
psycat90 psycat90 is offline
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I could give you some sort of related info on packaging and the supply chain, etc. although it would be geared to wine, the same would probably extend to beer as well as many other products, or so I assume.

But the biggest indication to me as to why that particular beer might have been so cheap is this - PBC seeks OK from bankruptcy court on $500K loan

I'd guess the mark up is minimal on that particular brand, but they got a really good deal on a truckload or more of all of the beer brands coming from that brewery.
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  #10  
Old 12-20-2006, 02:14 AM
t-bonham@scc.net t-bonham@scc.net is offline
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You should include in your 'production cost' for beer some extras that sellers have to pay. Like 'dram shop' liability insurance, which can be very expensive.

Nobody sues the gasoline station when their customer gets in an accident. Beer sellers can be sued, often are, and have to pay for the insurance even if they are never sued.
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  #11  
Old 12-20-2006, 03:16 AM
Little Nemo Little Nemo is offline
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I've read that for most beers, the production cost of the containers is usually about as high as the production cost of the beer itself. I also read that for many brands, the cost of the advertising is as high as the cost of making the beer. And while the money spent on advertising might seem unnecessary, it's actually as important as the money spent on the containers. Brewers have to convince customers to buy beer and then to buy their specific brand of beer.
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  #12  
Old 12-20-2006, 03:19 AM
Little Nemo Little Nemo is offline
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Quote:
You should include in your 'production cost' for beer some extras that sellers have to pay. Like 'dram shop' liability insurance, which can be very expensive.

Nobody sues the gasoline station when their customer gets in an accident. Beer sellers can be sued, often are, and have to pay for the insurance even if they are never sued.
I've heard of businesses that serve alcohol being sued, but have there been cases of stores that sell alcohol for outside consumption or brewers themselves ever bing sued for an alcohol-related accident?
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  #13  
Old 12-20-2006, 07:31 AM
Harmonious Discord Harmonious Discord is offline
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More inportant is the federeral tax on alcohol is part of the prooduct's cost and would need to be considered.
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  #14  
Old 12-20-2006, 07:48 AM
Uncommon Sense Uncommon Sense is offline
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Calling all August Wests, calling all August Wests!!
He actually works in a Brewery (in Milwaukee) and may be able to shed some lite on the subject.
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  #15  
Old 12-20-2006, 08:02 AM
enipla enipla is online now
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Is it that much cheaper to make Coke? I can get a case of Coke for $6. I just paid $22 for a case of Miller.
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  #16  
Old 12-20-2006, 08:27 AM
Ethilrist Ethilrist is offline
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Given Blunt's response, I would wager that the $2.99 a case price for markup might be more reasonably explained as "They shipped us a metric buttload of this stuff and I have to get it out of my back room, so I'm selling it way below cost just to dump it."
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  #17  
Old 12-20-2006, 09:47 AM
groman groman is offline
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Quote:
Originally Posted by enipla
Is it that much cheaper to make Coke? I can get a case of Coke for $6. I just paid $22 for a case of Miller.
Well, until they're no longer actually brewing the stuff and mass producing concentrated syrup to be diluted with carbonated water, I don't see how making beer would be cheaper than making coke.

First and foremost, beer needs to be brewed, which is more complicated than the tightly controlled chemical chain of bottling Coke or making the syrup. Coke is essentially a pre-mixed non-alcoholic mass-produced cocktail Imagine a bartender mixing you up a Cola (by carbonating water, adding corn syrup, caramel, caffeine, plus whatever else is in it) vs. having the bartender brew you a glass in front of you, and I think the difference in process should become clear.

Second, beer is supposed to be made from at least starch, yeast, hops and water. I mean if you were taking the Coke approach, I suppose you could skip the hops part and use an artificial flavouring, and still call it 'beer', but I doubt you could get away with not actually mashing, cooking and fermenting your starch source.

The only bulk ingredient of Coke is really corn syrup. I don't know what grain they make most mega-brewery beers out of, but I've always assumed it was not barley based on the taste, but even if it's corn there's simply no way your starting ingredients are going to be cheaper than those of Coke.
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  #18  
Old 12-20-2006, 10:06 AM
enipla enipla is online now
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Quote:
Originally Posted by groman
Well, until they're no longer actually brewing the stuff and mass producing concentrated syrup to be diluted with carbonated water, I don't see how making beer would be cheaper than making coke.
I understand that it would not be cheaper, but two, three or in my case, nearly 4 times as expensive? Seems a bit much.
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  #19  
Old 12-20-2006, 10:12 AM
Harmonious Discord Harmonious Discord is offline
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Either Australia or Canada had a mess with price mark ups going on a year ago.
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  #20  
Old 12-20-2006, 10:23 AM
Musicat Musicat is offline
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Quote:
Originally Posted by groman
First and foremost, beer needs to be brewed...

Second, beer is supposed to be made from at least starch, yeast, hops and water. I mean if you were taking the Coke approach, I suppose you could skip the hops part and use an artificial flavouring, and still call it 'beer', but I doubt you could get away with not actually mashing, cooking and fermenting your starch source.
Then there's time to consider, which costs money, too. How long does it take to brew a batch of beer, compared to mixing the ingredients for Coke?
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  #21  
Old 12-20-2006, 10:42 AM
Throatwarbler Mangrove Throatwarbler Mangrove is offline
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Just a WAG on my part, but I'd wager that beer companies operate much like Nike or Coca-Cola, in the sense that most of the "value" added to the product is in the form of advertising and celebrity endorsements. Whatever the actual cost of production for beer is, it's probably more or less the same across the market, no single maker having any kind of significant technological edge that could reduce costs. Therefore products are differentiated based on "image" and other non-tangibles.
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  #22  
Old 12-20-2006, 10:45 AM
Throatwarbler Mangrove Throatwarbler Mangrove is offline
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I should add that given the above, the markup on beer can be whatever the retailer decides it should be based on the amount of marketing dollars spent, regardless of what the physical cost of production is. The premium one pays for Nike shoes goes towards the marketing machine and Micheal Jordan, not to any physical manufacturing costs, same with beer.
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  #23  
Old 12-20-2006, 11:11 AM
Gary T Gary T is offline
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Retailers don't compute production costs, advertising costs, distribution costs, and such. Those are already accounted for in their wholesale cost. The retailers then mark that up to their retail price, considering their overhead, competition, what the market will bear, etc. Rather than laboriously calculating a mark-up for each individual item, they typically use a standard percentage for everything, or a few standard percentages (as Blunt mentioned) for a few broad classes of things. The comment "with mark up that was the price" implies that the retailer in the OP simply applied his standard beer markup to the product in question.
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  #24  
Old 12-20-2006, 02:41 PM
August West August West is online now
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You rang?

The majority of the cost in producing beer is in the packaging. Bottles, cans, and labels, and the equipment and labor to put the beer in those bottles and cans and label them, is by far the most expensive part of making beer.


I don't know what the standard mark-up on beer is because I am on the production side, not sales, but I am pretty sure that it is different for diffferent sectors of the market.
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  #25  
Old 12-20-2006, 02:56 PM
OneCentStamp OneCentStamp is online now
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Quote:
Originally Posted by Uncommon Sense
Calling all August Wests, calling all August Wests!!
He actually works in a Brewery (in Milwaukee) and may be able to shed some lite on the subject.
(bolding mine)

Eww. If it comes from Milwaukee, and it's "lite," he can keep it.
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  #26  
Old 12-20-2006, 03:06 PM
ArmenE ArmenE is offline
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Quote:
Originally Posted by groman
The only bulk ingredient of Coke is really corn syrup. I don't know what grain they make most mega-brewery beers out of, but I've always assumed it was not barley based on the taste, but even if it's corn there's simply no way your starting ingredients are going to be cheaper than those of Coke.
For Bud/Miller/Coors/etc, the grain bill is probably a bit more than half barley, with the rest of the fermentables coming mainly from rice. Maybe they use some corn sugar too. Budweiser even says right on the bottle that it's made with the "finest rice, barley, and hops",or something along those lines.
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  #27  
Old 12-20-2006, 03:53 PM
t-bonham@scc.net t-bonham@scc.net is offline
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Quote:
Originally Posted by Little Nemo
I've heard of businesses that serve alcohol being sued, but have there been cases of stores that sell alcohol for outside consumption or brewers themselves ever bing sued for an alcohol-related accident?
The only ones I know of personally are when the store sold alcohol illegally (to a minor). But given the sue-happy culture in America, I'm sure there have been other lawsuits.

I remember hearing about some class-action product liability suits against the alcohol industry. I think they were dismissed because alcohol is only dangerous when used to excess, unlike tobacco, which is a danger to every person who smokes and even those just breathing nearby.

But the insurance policies are still an added cost to the stores, even if they are never sued at all.
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  #28  
Old 12-20-2006, 04:50 PM
Musicat Musicat is offline
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Quote:
Originally Posted by August West
You rang?
Sure did. Cheers!
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  #29  
Old 12-20-2006, 05:32 PM
August West August West is online now
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Howdy Musicat!

Sorry to hijack the thread, but my wife and I are heading to Door County for New Year's weekend. Any cool stuff going on that we shouldn't miss?

Feel free to email me a reply if you think of anything, address is in my profile.
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  #30  
Old 12-20-2006, 06:07 PM
pkbites pkbites is offline
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Quote:
Originally Posted by groman
Well, until they're no longer actually brewing the stuff and mass producing concentrated syrup to be diluted with carbonated water, I don't see how making beer would be cheaper than making coke.
Actually many, many moons ago I started a thread on this idea. Search for it yourself, I'm too lazy.

What is to prevent a company from creating an artificially flavored beer flavored syrup, mixing it with carbonated water and a foaming agent and then adding grain alcohol to give it the small 5% content that the average beer has. Brewing time would be eliminated, brewing costs slashed, and considering the swill many beer drinkers guzzle without complaint (like this Sterling shit) I bet they'd get away with it!
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  #31  
Old 12-20-2006, 06:25 PM
Cluricaun Cluricaun is offline
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Quote:
Originally Posted by pkbites
Actually many, many moons ago I started a thread on this idea. Search for it yourself, I'm too lazy.

What is to prevent a company from creating an artificially flavored beer flavored syrup, mixing it with carbonated water and a foaming agent and then adding grain alcohol to give it the small 5% content that the average beer has. Brewing time would be eliminated, brewing costs slashed, and considering the swill many beer drinkers guzzle without complaint (like this Sterling shit) I bet they'd get away with it!
It's my understanding that this isn't really too far off the mark for most American macro brews. There's a lot more in there than hops, barley, water and yeast. Colorings, flavorings, etc.
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  #32  
Old 12-20-2006, 07:34 PM
Cyn Cyn is offline
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Quote:
Originally Posted by Mr. Slant
Hmmmmmmmmm.
I suppose the GQ would be simpler to answer if we defined the question as to where the value add really is in this supply chain.
Are you asking about mark-up from brewer to consumer?
Brewer to distributor?
Distributor to retailer?
Retailer to consumer?
Assuming 15% markup we can extrapolate.

Consumer pays $2.99 retailer paid about $2.55

Retailer paid about $2.55 wholesaler paid about $2.18

Wholesaler paid $2.18 brewer paid about $1.88 in production costs.
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  #33  
Old 12-20-2006, 07:36 PM
drachillix drachillix is online now
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Quote:
Originally Posted by Cyn
Assuming 15% markup we can extrapolate.

Consumer pays $2.99 retailer paid about $2.55

Retailer paid about $2.55 wholesaler paid about $2.18

Wholesaler paid $2.18 brewer paid about $1.88 in production costs.
FTR this was drachillix not cyn


damn cookies..
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  #34  
Old 12-21-2006, 11:01 AM
Kevbo Kevbo is offline
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Quote:
Originally Posted by pkbites
What is to prevent a company from creating an artificially flavored beer flavored syrup, mixing it with carbonated water and a foaming agent and then adding grain alcohol to give it the small 5% content that the average beer has.
The tax laws. For example, if heat distillation is part of the process, then the result is taxed as hard liquor rather than at the "malt beverage" rate. Thus the ice process is used to raise the alcohol content of of "ice" beers.

I know a guy who is marketing some pre-mixed rum cocktails. They aren't any stronger than beer, yet they fall under all the same rules and taxation as 100 proof whiskey would.
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  #35  
Old 12-21-2006, 11:11 AM
Uncommon Sense Uncommon Sense is offline
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Originally Posted by Kevbo
The tax laws.
How would this be any different than making, say, a Jager Bomb?
You're adding alcohol to RedBull.
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  #36  
Old 12-21-2006, 11:19 AM
DSYoungEsq DSYoungEsq is offline
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Ok, let's get back to the OP.

Beer is priced what it is because that's what people will pay to buy it. Certain beers can be priced higher than others, reflecting the "value" customers put on the brand.

If you want to know whether or not beer is "overpriced," from the sense of markup resulting in profit, I'd suggest looking at the profit margins of breweries. That's not so easy to do any more, given that most brewing companies also sell regular alchohol, wine, etc., but you can at least get some idea of the markup from production cost to wholesale.

If you think beer is over-priced, stop buying it. I won't buy soda pop in 2 litre bottles unless it is under $1.39 a bottle, which is perhaps unreasonable, but which allows me to buy the stuff that way almost all the time.
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  #37  
Old 12-21-2006, 11:49 AM
Santo Rugger Santo Rugger is offline
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Quote:
Originally Posted by Uncommon Sense
How would this be any different than making, say, a Jager Bomb?
You're adding alcohol to RedBull.
The Jager is already taxed.
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  #38  
Old 12-21-2006, 01:41 PM
Uncommon Sense Uncommon Sense is offline
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Originally Posted by Pygmy Rugger
The Jager is already taxed.
Of course, and so would the alcohol added to the mixed beer to get it to 5%.
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  #39  
Old 12-21-2006, 02:03 PM
neofishboy neofishboy is offline
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Current mark-up I use....*

Kegs, 12-packs and domestic 6-packs: 25%
Import 6-packs: 30%
Singles: 35%

This puts my profit margin around 23% for the whole department.


*Mid-sized independent grocery store known for having fairly low beer prices.
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  #40  
Old 12-21-2006, 02:46 PM
ralph124c ralph124c is offline
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Beer vs Bottled Water?

I wonder how much more beer costs to produce (than bottled water)? Seems to me the rest of the costs (packaging, overhead, etc.) should be roughly the same.
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  #41  
Old 12-21-2006, 05:37 PM
August West August West is online now
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Quote:
Originally Posted by Cluricaun
It's my understanding that this isn't really too far off the mark for most American macro brews. There's a lot more in there than hops, barley, water and yeast. Colorings, flavorings, etc.

Most macro brews are pretty straightforward. They are brewed with malted barley, adjunct syrups (usually corn- or rice-based), hops ( barely), water, and yeast. The brew them to high gravities and dilute them down to flavorlessness with deaerated water. Any extra ingredients cost them money.
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  #42  
Old 12-21-2006, 07:19 PM
AllanD AllanD is offline
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Quote:
Originally Posted by Kevbo
The tax laws. For example, if heat distillation is part of the process, then the result is taxed as hard liquor rather than at the "malt beverage" rate. Thus the ice process is used to raise the alcohol content of of "ice" beers.

I know a guy who is marketing some pre-mixed rum cocktails. They aren't any stronger than beer, yet they fall under all the same rules and taxation as 100 proof whiskey would.

Yeah, it's the Tax laws, while in the US all alcoholic beverages are taxed on their alcohol content the tax rate differs depending on HOW the alcohol was produced.

Beer, Wine and Distilled alcohol are all taxed at different rates.
So an three identical bottles of alcoholic beverage all with a 5% alcohol
content would be taxed differently.

Products like Bacardi Breezers and Smirnoff Ice (And Bartles & James "wine coolers" (made by E-J Gallo)) are actually produced as unhopped beer (I.E. fermented from barley malt) filtered through activated
carbon, flavored, sweetened and artificially carbonated and are thus
taxed as the "beer" that they technically are.

Yes the products could be produced more easily by the simple expedient of diluting, sweetening and flavoring a distilled parent spirit, but they'd be taxed
at around twice the rate of a "brewed" beverage that cost would of course be passed onto the consumer and that would make the product less competetive in the market place.

AllanD
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  #43  
Old 12-21-2006, 11:11 PM
pkbites pkbites is offline
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Quote:
Originally Posted by AllanD
Yes the products could be produced more easily by the simple expedient of diluting, sweetening and flavoring a distilled parent spirit, but they'd be taxed at around twice the rate of a "brewed" beverage that cost would of course be passed onto the consumer and that would make the product less competetive in the market place.

I don't completely buy this. Fortified wines are some of the cheapest booze there is, and they're jacked up to 18%. I would think a beer flavored soda with a minute' 5% fortification would be cheaper ounce per ounce (including tax) than, say, Wild Irish Rose, which I see on sale for $2.29 for a 750ml bottle.

Not that I'm advocating brewers make beer flavored alcoholic soda. Considering some of the crap they're already making the natural way. Have you ever had Huber beer?
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  #44  
Old 12-22-2006, 05:38 AM
whatsittoya whatsittoya is offline
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If I understand the laws in my state, diluted beer flavored distilled alcohol would only be available at a liquor store. Only beer (3.2 beer at that) and beer derived drinks can be sold at grocery stores. That would be a major hit against mass distribution.
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  #45  
Old 12-22-2006, 06:46 AM
Cluricaun Cluricaun is offline
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Quote:
Originally Posted by August West
Most macro brews are pretty straightforward. They are brewed with malted barley, adjunct syrups (usually corn- or rice-based), hops ( barely), water, and yeast. The brew them to high gravities and dilute them down to flavorlessness with deaerated water. Any extra ingredients cost them money.
I'll stand corrected then. Thanks.
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  #46  
Old 12-22-2006, 07:33 AM
Mr. Slant Mr.  Slant is offline
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Quote:
Originally Posted by August West
Most macro brews are pretty straightforward. They are brewed with malted barley, adjunct syrups (usually corn- or rice-based), hops ( barely), water, and yeast. The brew them to high gravities and dilute them down to flavorlessness with deaerated water. Any extra ingredients cost them money.
Okay, corn-allergic Doper here.
I'm not a big beer drinker, but I didn't realize that mainstream domestic macrobrews used corn.
How common is that? Is it like corn syrup in soda, so ubiquituous that I'm now stuck on diet soda for the rest of my life?
Anyone know if the various brewers would actually tell me if I'm allergic to anything they sell?
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  #47  
Old 12-22-2006, 07:49 AM
R. P. McMurphy R. P. McMurphy is offline
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I'll WAG on the Sterling situation.

I'll assume the beer is probably brewed using a standard process that uses the cheapest grains. The packaging and bottling is very standard. Advertising and marketing are probably minimal.

Beer doesn't age well. The brewery probably over-produced. It was time to get the stuff to retail before they had to dump it. They send their rep out to the distributors and start making deals right and left based on volume sales. They concentrate on Wisconsin because the state beer taxes are so low. After all, the beer lobby was very strong in Wisconsin.

The distributor has a bunch of beer that he wants to move quickly so he put a low price on it and stacks up cases in his retail store. Customer perception is "it ain't so bad and at that price, it's a deal." Amazingly, everybody makes some profit in the process.
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  #48  
Old 12-22-2006, 07:50 AM
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Location: Sydney, Australia
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Here is a breakdown by a smaller Aussie brewer. The cost per case is fairly average.

They quote $12.51 for the beer $8.24 for packaging and a total cost with excise and GST of $33.52 and they sell it direct and keep all the $9.46 profit.

I remember hearing years ago that in Australia beer would be cheaper than lemonade if not for government taxes.
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