Rising cost of Goods

[Laughing Dog]

In Looking at price increase notifications I have the following.

Malt up 30%
Hops up 8-10%
Packaging Cost up 6-8%

so an average of 16-20% increase per BBl on raw ingredient/packaging cost and that is if you contracted hops and buy in bulk on other products, so far I am not seeing a price increase from breweries to distributors. has anyone moved on price yet? I know as an industry we cannot just eat the cost of goods, but what is the public going to think of paying 9-10 dollars per six pack for beer. and 5 dollars a pint at the local pub, will they tolerate it? or are we going to run ourselves into the ground trying to stay competitive with the big boys. What are your thoughts?


Laughing Dog

[tsewong73]

Well, we're still a few weeks away from brewing our first batch, but I've been contemplating raising our prices slightly above what I had planned. When I worked out our cost of goods sold, I boosted it for additional costs like rising raw materials prices, the sudden need for another employee, etc. After re-calculating our COGS to compensate for the higher raw materials prices, we're still a few bucks below my original projected COGS. Still, we might tack on a couple of extra dollars to our wholesale price to be prepared for a worse situation.
Overall, though, I don't think we'll be boosting our wholesale prices too high. I don't think the grain/hops situation is going to last forever and it might be in our company's best interest to simply keep an eye on the situation and sort of ride it out. If our wholesale prices do need to be raised, I don't think the rise in cost for the consumers is going to be a big surprise. EVERYTHING is expensive these days. Prices of groceries, gas, utilities...everything seems to be going up. People are going to notice paying higher prices for their beers, but those increases will be slight compared to the increases in costs for everything else in their lives.

[Greenbrewmonkey]

Hello,

I am raising prices. Some of the states we wholesale to require a little notice (30 days), so for them prices will increase Dec 1st. Others will see it sooner.

I don't really like it, but I simply have to.

Cheers,
Ron
Jolly Pumpkin Artisan Ales

[rockfish]

I don't think the grain/hops situation is going to last forever and it might be in our company's best interest to simply keep an eye on the situation and sort of ride it out.

I like the optimism but am curious what it is based on. Any specifics why you think the situation will change? Cheers!

[Diamond Knot]

Along with Rockfish, I must add the question where that optimism comes from.
With alternate fuels driving the market, and how much farmers can get, I wonder too how low grains will be. Hops are now $40 per pound in some markets, and it's getting insane for brewers to keep a low cost.

However, we will perservere! Hops may come down, but I doubt grains will. Just my $.02.

[jason.koehler]

I think a lot has changed in the 8 months since the original posters made their opinions known...if you asked them now, you'd most very likely get a different one :D

I started a little hop farm project this year, how's the weather around your place for hops Brian?

[Diamond Knot]

The weather? Oh........about $23 - $40 per pound!

We've got a patch up on Camano Island with about 4 acres or so, but not enought to sustain DK. Heck..........it might do a fresh hop festival the way they drink up here!

Good to hear from you! Where are you and the missess these days, Jason?

[tsewong73]

Rockfish asked me what my optimism is based on. It's based on October 20, 2007. I've learned a lot since then and my tune has changed - from "Blue Skies" to "Nobody Knows You When You're Down and Out." If I remember what I was thinking, I probably believed it was all simply a market fluctuation and that the market would correct itself. I think I got that idea from some folks much more experienced than me. Anyway, as more information came out about what the situation really was like, the scene became much more gloomy.

I have to say, though, that so far we all seem to have handled it all pretty well. I haven't heard of anyone closing their brewery as a result. I think that may have been the crux of my optimism - that no matter what, at least most of us were going to make it through the crisis intact without compromising quality and so on.

Am I right?