The Cost of Beer Ingredients

[Insidious Rex]

So I read somewhere that the cost of malt is less than 1% of the price of an actual beer. If thats the case then what accounts for the rest of the price? Certainly not water. Are hops really that expensive? Yeast? Is beer basically an overhead product? The cost of brewing and packaging and bottling and distributing etc? What goes into it that costs the most money? And is beer immune from the direct volatility of its immediate ingredients (barley, hops, yeast, water) unlike say wine or some hard liquors? Anyway I figured you brewer types could field these questions better then most of us novices so swing away…

[steveh]

Back in the early to mid 90s, when a friend was trying to open his own brew-pub and we attended the Micro and Pub Brewers convention in Portland, they told us that a pint of brew-pub beer cost about .35-.50¢ to brew. Balance that to the $4 usually charged at a pub and you can call it big time overhead.

AFA barley being 1% of the cost, and it being the second most quantitative ingredient in beer, I'd have to guess the facts you read are a little skewed. Maybe they add labor to the mix?

Also see this: http://www.realbeer.com/blog/?p=503

S.

[darylM]

I think you hit it on the head, the overhead. I make beer for ~$5/us gallon. The ingredients are not that expensive. Bottles can be a bit expensive but if you buy enough, I don't think too bad.

I have also noticed that anything with alcohol in it gets a premium in terms of price.

That being said, I think the overhead is needed. To make a consistant beer takes knowledge and experience. A product that is packaged in glass needs to be shipped in a certain way. And don't forget the cleaniness a brewery needs to be to keep infections away.

[CJ01]

Originally posted by darylM
I think you hit it on the head, the overhead. I make beer for ~$5/us gallon. The ingredients are not that expensive. Bottles can be a bit expensive but if you buy enough, I don't think too bad.



I guess the $8 I pay for a growler (US 1/2 gallon) from my local brew pub isn't too bad. Love Kings IPA and their lager is decent too.


Don't forget taxes if you're buying pre-brewed.

[noby]

Originally posted by steveh


AFA barley being 1% of the cost, and it being the second most quantitative ingredient in beer, I'd have to guess the facts you read are a little skewed.

S.

I'm not so sure. As I'm sure I've said before, an article in a Farming newspaper a couple of years ago had a breakdown of the price of a pint, as they were concerned with the price the maltsters were being paid. AFAIR it was less than 1%; the figure quoted was 0.02cents from an average €3.60 pint.
If we take your example of €0.35 to brew then your still talking about 0.5%, and that's for the malted barley.

Now I know my figures are very crude, and this all stems from the fact that if you're a maltster in Ireland, then you have more or less one main customer, who can basically name his price.

[De Hooter]

Taxes are another part of the expense. Remember brewers have a special occupational tax they have to pay, not to mention the taxes charged on every barrel, and that's just at the federal level. AFAIK each state then assesses their own taxes, I have no idea about municipalities etc...

[MeridianFC]

It costs money to own, maintain, and operate the equipment, pay the employees, there's facility costs, transportation, insurance, the above mentioned taxes, spillage, etc. Plus most businesses I know like to make a profit. I'd hazard a guess that the note to start up even a modest brewery would be in the $500K-$1m range.

The raw ingredient costs for almost everything you own is much, much less than it's final selling cost. Well ideally if the maker want to continue making.

Beer is not immune from flucuations in the cost of it's raw ingredients as I believe we will soon discover (check out the realbeer front page). The barley issue in Canada and the Yakima hop warehouse fire will probably start filtering down to us.

[steveh]

So I read somewhere that the cost of malt is less than 1% of the price of an actual beer.

Let's break it down to just the cost of ingredient -- no labor, no overhead, no equipment, taxes, diminishing returns...

Water,
Barley Malt,
Hops,
Yeast.

No matter the language, it's difficult to think that malt is only 1% of the cost of that pint or bottle of beer. Does the amount of water and the cost of yeast & hops just work together to offset the cost of the malt? Hard to believe based on the inverse in proportions of the cost of water to amount of yeast and hops.

A rather telling bit of news:
Thanks to a barley shortage, a tax hike, and biofuels, Germany's brewers say the price of beer—at least for wholesalers—will rise The price of barley has doubled on the German market in the past year, from €200 ($271) to €400 per ton, and both brewers and farmers agree that the reason for the spike is a barley shortage caused by a meager harvest in 2006. A three-percent rise in German value-added or sales tax is also partly to blame -- brewers decided not to pass the tax on to wholesalers when it came into effect on January 1.

[steveh]

From the Great Lakes Brewing online Beer School:

Water is the most important ingredient, comprising roughly 90% of beer's composition.

So, malt, hops, and yeast share 10% of a (typical) beer's composition. Roughing out what I've used in home brewing, I'd say that the malt makes up the majority of that percentage so let's call it 8%, 1.5% to the hops, and .5% to the yeast.

8% of the ingredients (or 80% of the bulk ingredients?) is only 1% of the cost? What a bargain -- and let's drop that .5% yeast stuff, it's bringing our profits down!! :D

S.

[Insidious Rex]

But of course those percentages arent factoring in any of the overhead and miscelenious mentioned above. The <1% figure could be inclusive of ALL aspects of beer production. Although if as you say certain regions see price spikes because of barley shortages then I dont see how this could be. But then Ive never witnessed an actual jump in price because of a shortage. Can anyone actually recall a beer related price jump due to ingredient shortage in their region?

[hooky]

Originally posted by steveh
-- and let's drop that .5% yeast stuff, it's bringing our profits down!! :D

S.

The BMC crew have already cut the hops out. makes sense the yeast is next.

[steveh]

Originally posted by Insidious Rex
But of course those percentages arent factoring in any of the overhead and miscelenious mentioned above.

As said,

Let's break it down to just the cost of ingredient -- no labor, no overhead, no equipment, taxes, diminishing returns...

S.