Distiller magazine

Distiller_winter_2015/16

Distiller magazine a publication of the American Distilling Institute, the Voice of Artisan Distilling; devoted to the craft spirits industry: vendors and distillers alike.

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72 distiller B arrel-aged gin. Flavored moonshine. Small-batch rye. Cinnamon whiskey. Hand-crafted tequila. Single- barrel bourbon. At the local liquor store, the average consumer is treated to spirits of all varieties, ages, levels of quality and artisanship, and packaging shapes and sizes, but generally has little or no appreciation for what it costs the distiller to make those spirits and get those bottles onto that retail shelf. Distillers must know not only how to make a great spirit, but also have a keen understanding of cost of goods sold (COGS) and key cost drivers to appropriately price a spirit. Building a self-sustaining and successful brand requires not only sufficient margins for producers, but also support and promotion to drive consumer engagement and sell-through and maintain its place on the retail shelf. A spirit's composition and overall cost of goods will vary depending on both the type of product and end market. erefore, before digging into the components of cost, distillers should first consider a few critical questions: What are your aspirations? Producing a few thousand cases a year? Making the next great American Whiskey? What are you passionate about making? Where and how are you planning on selling your products? e answers to these questions can help establish a general framework for overall cost structure and, importantly, what the cost structure of your products needs to be to build a sustainable and profitable business. e Components of Cost of Goods To really get a handle on overall product costs, the distiller must understand both the main elements of cost and key cost drivers as well as the individual component costs. Costs generally break down into five items: grain / liquid, packaging, labor and utilities, freight in and out, Federal Excise Tax (FET). by Frank Maher Cost Analysis:

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