Challenge: A rapidly growing brewery had limited to no internal accounting function. The financial information they did have was not reliable, profit margins were unknown, and there was no inventory system in place. A custom margin analysis was necessary for the brewery to grow and scale their business.

Calculated COGS for each product line. We started by determining the true cost of goods sold (COGS) for every product, calculating the total cost to brew and package each type of brew (Amber, Blonde, Hefeweizen, etc.) and size (case of 12 oz. bottles, 15.5 gallon kegs, etc.) sold. The COGS incorporated all the raw material costs (grains, hops, yeast, etc.), as well as personnel and packaging costs.

Determined employee utilization rates. Comparing the total cost of each employee to the hours worked that were actually billable to the company’s clients (i.e., revenue generated), allowed us to determine the profitability of each employee. Using this information, the company was able to easily identify employees that were under-utilized, or not profitable.

ROI: Increased Profits by 15%

Based on the product margin analysis we provided, the brewery decided to adjust their pricing and distribution strategies. This included increasing some prices, eliminating one product line, and modifying their marketing to focus on more profitable product lines. These decisions collectively led to the brewery increasing overall margins and profits by 15%.

Best Practices for Profit Margin Analysis

Know your profit margins by individual product line–not just overall company revenues–in order to:

  • Adjust pricing and distribution strategies based on product margins
  • Focus your marketing/ promotional efforts on more profitable products
  • Calculate the appropriate cost of acquiring a customer (CAC)

The Persuader Version 2.4