Over the years, I have observed many pricing strategies for beer. Some look to their competitors and try to come in just below or match their price, while others use prestige pricing thus commanding a premium for their suds. Often overlooked is the impact that a slight change in price has over time. Of course, the full impact of your pricing strategy needs to be assessed from a consumer’s perspective and how it will affect the financial health of your company.

One example I can share of how pricing affected a company’s performance occurred at a chain of brewpubs. Their pricing strategy consisted of line pricing their beers with the intent that beers which were less expensive to make would essentially balance out the more expensive. This approach has also been used by large companies such as Southwest Airlines and uses the principle of price elasticity, which relies on large quantities being sold; some at a low price and others at a higher price. After much discussion with upper management I was able to implement a small price change for specialty and seasonal beers, which was needed to offset the additional ingredient expenses, especially when a different strain of yeast was used. After implementing increased pricing for specialty and seasonal beers in one location the benefits were noticed quickly. Revenue increased allowing the management team to attain bonuses consistently and the location became the most profitable out of five locations. This also led to other locations implementing the same pricing strategy.

Eventually this pricing strategy was implemented in all five locations resulting in increased revenue for the company. Revenue also continued to increase as managers adopted the same pricing methodology for other products. Some may have concerns about the price sensitivity of their customers, however, most craft beer connoisseurs (including myself) tend to be more concerned with quality than price. Further, maintaining quality and continuing to offer innovative products requires breweries to allocate funds for QA/QC programs and pilot brews to develop new, interesting beers for their customers.

To quantify the power of adjusting the price of a pint consider how much an increase of $0.25 per pint can make. For example, if you charge $5.00 per pint and sell 75 pints a day it equals $375. Changing this to $5.25 per pint at 75 pints per day increases this to $394. On a daily basis, this may not appear to be substantial, however, over time the difference becomes more significant. The following was constructed assuming a six day business week and the traditional pint size of 16 ounces:

Beer Size Price Daily Quantity Daily Totals Weekly Monthly Quarterly Yearly
Pint $5.00 75 $375 $2,250 $9,000 $27,000 $117,000
Pint $5.25 75 $394 $2,363 $9,450 $28,350 $122,850
Pint $5.50 75 $413 $2,475 $9,900 $29,700 $128,700

Another similar pricing strategy in the craft beer market is to use smaller glasses for certain beers (similarly priced to a pint), which essentially has the same effect. In fact, some craft beer bars use three or four different glasses ranging in size from 6 ounces to the standard 16 ounce pint. If you have the space for additional glassware this strategy is well worth considering as it is also beneficial for monitoring how much your patrons consume.

To be effective and timely, reviewing your pricing strategy should be done on a regular basis due to increases in raw ingredient prices, changes in taxes, and other financial considerations for your business. Being more responsive with your pricing strategy will allow you to quickly address changes in market conditions and ensure you maintain your margins.