10 Metrics Key To Your Brewery’s Profitability

Get ready to bookmark this one! The top 10 metrics you should be tracking at your brewery.

Business Ops Optimizing Your Taproom

You know how important data is to your brewery’s profitability. With brewery POS systems reporting on a robust amount of insights daily, it can be hard to nail down exactly which metrics most impact your bottom line

So we’ve made it easy for you! Below are 10 metrics key to boosting profitability at your brewery:

1. Cost Of Good Sold (COGS)

Cost of Goods Sold (COGS) identifies how much it costs to make the products you’re selling. This can include the cost of:

  • Raw materials
  • Ingredients
  • Packaging
  • Overhead 

Overhead includes things like rent, utilities, and other costs you pay just to keep things running at your brewery.

Small Batch Standard (SBS) defines COGS as anything that touches your product and includes excise taxes, freight for Direct to Consumer (DtC), keg leases, and merchant account fees in their Overhead Costs. Some breweries also include Labor Costs!

SBS notes that COGS should always follow Revenue. If Revenue increases, COGS will too. That’s because if you’re making more money, you’re making more beer! The same goes for decreasing Revenue—your COGS should decrease too.

COGS is helpful for breweries to determine:

  • If you’re pricing menu items well
  • If costs to make your products are increasing
  • How much you have left to spend 

How To Calculate COGS

This calculation will give you a dollar value for your COGS:

COGS = (Starting Inventory + Additional Purchases) – Ending Inventory

Get a percentage value of COGS by dividing the above dollar value by your Revenue for the same time period.

A healthy COGS depends on a number of factors. SBS has created benchmarks and estimates healthy COGS to be 29-42% of Revenue. These benchmarks account for the rising cost to make beer and depend on how much Revenue a brewery brings in from taproom sales as opposed to distribution. Breweries that collect a majority of Revenue from distribution will see their COGS closer to that 42%. 

2. Contribution Margin

Contribution Margin is how you calculate how much Profit you make from each individual menu item. It’s extremely useful to know how much each beer style contributes to your Revenue, especially best sellers!

How To Calculate Contribution Margin

To calculate the Contribution Margin of a specific product, use the following formula:

Beer 1’s Contribution Margin = Selling Price of Beer 1 – Cost of Ingredients to make Beer 1

Now you can identify what each menu item sale contributes to paying your Overhead Costs.

3. Gross Profit

Your Gross Profit is the money you make after deducting COGS from Revenue. This is what you have left to pay for rent, labor, other Overhead, and that new boiler you’ve had your eye on!

How To Calculate Gross Profit

The Gross Profit calculation is pretty straightforward. Here’s how you get a dollar value: 

Gross Profit = Revenue – COGS

Want this number as a percentage? That brings us to…

4. Net Profit Margin

Net Profit Margin determines how efficient your brewery is at turning Revenue into Profit.

Being profit positive is always a good thing of course. By identifying your Net Profit Margin, you can easily pinpoint what’s tipping the scale in either direction. Is there an opportunity to cut Operating Costs? Perhaps you can increase Revenue through additional marketing and programming?

Both will yield a higher Profit Margin!

How To Calculate Net Profit Margin

You’ll identify your Net Profit Margin with this formula:

Net Profit Margin = (Gross Profit / Revenue) x 100

5. Overhead Rate

You think we’d talk all about Overhead without addressing a way to quantify it?! Overhead Rate divides Fixed Costs (rent, licenses, property taxes, etc.) by the number of hours you’re open. 

How To Calculate Overhead Rate

Use the following to calculate Overhead Rate:

Overhead Rate = Total Fixed Costs / Total Hours Open

Now you can determine how much you’re spending just to keep your business running! 

6. Break-Even Point

It’s obvious that to be a profitable brewery, you can’t spend more than you earn. But how do you know once you’ve started generating Profit? With a Break-Even Point!

You’ll need to consider both Fixed Costs and Variable Costs here. You know what Fixed Costs include, but your brewery’s Variable Costs include things such as:

  • Raw materials
  • Packaging
  • Carbonation

As opposed to Fixed Costs where you know how much rent will cost every month, your Variable Costs vary based on things such as production or time of the year. 

How To Calculate Break-Even Point

Determine how much Revenue you need to cover expenses with this Break-Even Point formula:

Break-Even Point = Total Fixed Costs / [(Total Revenue – Total Variable Costs) / Total Revenue]

Once you’ve covered your Break-Even Point, it’s dollar-bills-in-the-bathtub time! 

7. Labor Cost Percentage

Labor is a hot topic for the entire food and beverage industry. Because Labor Costs have increased, it’s important to ensure you’re spending a sustainable amount of Revenue on your staff. Labor Costs include salaries, benefits, taxes, insurance, and more.

How To Calculate Labor To Cost Percentage

To calculate the percent of Revenue you spend on labor, use the following formula:

Labor Cost Percentage = (Labor Costs / Total Revenue) x 100

Bonus metric! Here’s how you calculate labor as a percentage of Operating Costs:

Labor Cost Percentage = (Labor Costs / Total Operating Costs) x 100

Healthy Labor Costs hover around 30%. This of course depends on if you’re serving food, your service model, and the size and efficiency of your staff

8. Employee Turnover Rate

Labor talk is trending not just because of rising labor costs, but also due to employee turnover. The pandemic sparked an exodus of people leaving the industry, and breweries are still navigating appropriate retention strategies

Interested in calculating the frequency at which your employees are leaving? 

How To Calculate Employee Turnover Rate

To note: Departed Staff includes resignations, dismissals, and even retirement. 

Employee Turnover Rate = (Departed Staff / Total Staff Remaining) x 100

You can also calculate Employee Turnover by department! Simply divide Departed BoH Staff by Total BoH Staff, for example. 

If your calculation resulted in a cringe, check out the Smart Staffing Guide for tips on how to better hire, train, and retain your beloved staff. Onboarding new staff is expensive, so do your future self a favor and save the time and resources while you can.

9. Customer Acquisition Cost (CAC)

How much does it cost your brewery to get a first-timer in the taproom doors? Identifying Customer Acquisition Cost determines how effective your marketing efforts are. 

How To Calculate Customer Acquisition Cost

You can determine CAC for an entire year’s worth of Marketing Expenses, or by a single campaign:

Customer Acquisition Cost = Marketing Expenses / Total New Guests Acquired

Marketing expenses include:

  • Advertising fees
  • Printing costs
  • Paid search & social
  • Human resources
  • Discounts

Your brewery POS system can quickly determine how many discounts have been redeemed!

It’s encouraged to use CAC to determine the return on investment (ROI) of every marketing campaign so you can pinpoint the most successful strategy. Wouldn’t you like to know if Yelp or Facebook ads are more effective?

10. Customer Retention Rate

Repeat business is extremely valuable when it comes to both brewery profitability and your overall brand name. We’ve seen what Taylor Swift can do with a loyal army of fans!

Luckily there’s an easy formula to determine just how many guests you’re retaining.

How To Calculate Customer Retention Rate

You’ll need to first identify both your total and first-time customers for a given period of time. 

Customer Retention Rate = [(Total Customers – New Customers) / Total Customers] x 100

Want to boost that number? Check out 5 Customer Retention Strategies You Need To Try!

Data fun doesn’t stop with these 10 key brewery metrics. Here are some more brewery reporting resources:

Partner with a POS just as data-driven as your brewery. Get a demo of craft’s most trusted POS system: Arryved!

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