The Full Cost of Producing Craft Beer

Producing craft beer involves more than the cost of malt, hops and a can. To understand a product’s true profitability, you need to calculate its full cost, including raw materials, packaging, labour, overhead, distribution and selling expenses.

Understanding these costs helps you set appropriate prices, protect your margins and make better financial decisions. Here are the main factors to consider when calculating the full cost of craft beer.

What is the full cost of a craft beer?

The full cost of a craft beer includes all the expenses required to produce, package and sell it. In other words, it tells you how much each can, bottle or keg actually costs once all relevant expenses are accounted for.

It is an essential measure for setting an appropriate selling price, assessing product margins and making informed financial decisions.

Production cost, full cost and selling price: what is the difference?

Production cost, full cost and selling price are related, but they measure different things.

For example, a beer may appear relatively inexpensive to produce if you consider only ingredients and packaging. Once production losses, overhead and delivery expenses are included, however, its full cost may be significantly higher.

A detailed analysis is therefore essential to determine whether the selling price actually covers expenses and generates a sufficient margin.

Which costs should you include in the calculation?

To calculate the full cost accurately, you need to look beyond ingredients. Whether beer is sold in cans, bottles or kegs, or directly at the brewery, it involves several expense categories: raw materials, packaging, labour, overhead, distribution and selling expenses.

Together, these elements provide a realistic picture of each product’s profitability.

1. Raw materials: malt, hops, yeast and water

Raw materials form the foundation of beer production costs. They primarily include malt and other grains, hops, yeast and water. While these costs may seem straightforward to calculate, they vary considerably depending on the recipe, beer style, batch yield and ingredient quality.

A standard blonde ale will not have the same cost as a heavily hopped New England IPA, a fruited sour, an imperial stout or a barrel-aged beer. Some styles require more hops, specialty yeast, fruit, lactose, spices or extended ageing.

These choices directly affect production costs, as well as how long tanks remain occupied and how much production capacity is available.

2. Packaging: cans, bottles, kegs and related materials

Packaging is often one of the most underestimated components of craft beer costs. Yet it can account for a significant share of the unit cost, particularly for microbreweries producing smaller volumes. The choice between cans, bottles and kegs therefore has a direct impact on profitability.

• Cans: Include the can itself, the lid, an adhesive label or direct printing, cartons, shipping trays and any additional secondary packaging. A blank can with an applied label does not have the same cost as a custom-printed can.

• Bottles: Account for the glass, cap, label, handling, shipping weight and risk of breakage.

• Kegs: Packaging costs may be lower because a larger volume is sold in fewer containers. However, kegs also involve return management, cleaning, logistics, capital tied up in containers and reliance on bars or restaurants. Each format should therefore be analysed separately to establish a reliable full cost.

Graphic design, custom labels and promotional packaging must also be included. They contribute to the product’s perceived value, but they represent real expenses that the selling price needs to cover.

3. Labour and operating expenses

Even in a small microbrewery, the time devoted to production must be accounted for. Brewing involves preparation, fermentation monitoring, quality control, cleaning, sanitizing, canning or bottling, handling and inventory management.

You also need to account for time spent on less visible but essential tasks, such as:

• Planning brewing schedules.

• Placing supplier orders.

• Monitoring inventory.

• Managing administrative work.

• Training staff.

• Coordinating sales.

If these activities are excluded from the calculation, the full cost will be understated.

4. Overhead: premises, utilities, equipment and insurance

Microbreweries incur expenses beyond those directly attributable to a particular batch. Some remain relatively stable regardless of production volume, while others vary with usage. These include:

• Administrative salaries.

• Rent or relevant property ownership costs.

• Electricity.

• Refrigeration.

• Insurance.

• Licences.

• Equipment maintenance.

• Other administrative expenses.

• Equipment depreciation.

Equipment often represents a major investment for a microbrewery: brewing vessels, fermenters, cooling systems, packaging lines, cold rooms, pumps, keg washers and cleaning equipment.

Although this equipment is not purchased again for every batch, its cost must be allocated over time to reflect its use in the full cost of the beer.

5. Sales channels and distribution

Full costing must also include the expenses involved in getting beer to the end customer. These vary considerably depending on the sales model.

Direct sales at the brewery generally allow the business to retain a higher margin per unit because fewer intermediaries are involved. However, they may require additional spending on on-site staff, taproom facilities, payment processing, events and promotional activities.

Distribution through grocery stores, bars and restaurants can increase sales volume and visibility, but often reduces the margin per unit. Relevant factors include transportation, delivery, commissions, sales representation, promotions and potential returns or unsold inventory. Retailer and distributor margins also affect the price the brewery can obtain for its products.

Direct sales through a physical or online store also reduce reliance on intermediaries and can help preserve the margin per unit. However, they involve additional expenses such as sales staff, retail premises, e-commerce platform maintenance and storage.

Example: calculating the full cost of a can of beer

A practical example can help illustrate how full costing works for a microbrewery. The figures below are for illustrative purposes only. Actual costs vary depending on production volume, beer style, package size, automation, distribution model and each brewery’s cost structure.

In this example, a can could have an estimated full cost of $1.65 to $4.60. This range illustrates the potential difference between a beer produced at higher volumes using a simple recipe and an efficient sales channel, and a specialty beer that is more expensive to produce, packaged in small batches and sold through several intermediaries.

When should you consult an expert about your product costs?

Full costing can quickly become complex, especially when production volumes grow, packaging formats multiply or margins are lower than expected.

For a microbrewery, working with an expert helps clarify where money is being spent, which products are truly profitable and which changes could improve financial performance.

At Mallette, our costing experts help microbreweries and Quebec SMEs analyse their costs, margins and financial forecasts.

Want to understand what your products really cost? We can help you develop a clear, reliable costing approach tailored to your business.