arrel-aged gin. Flavored moonshine. Small-batch rye.
Cinnamon whiskey. Hand-crafted tequila. Single-
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