Page 79 - Bord Bia

ROADMAP

STAGE 1

e) Route to Market
Continued

Pricing Tree Domestic Market Example FOR ILLUSTRATION ONLY

This is a pricing tree that outlines the margins and costs associated with getting a keg of beer to
customers in the domestic market. It starts with a recommended retail selling price (RRSP) and calculates
the net proit. You need to take into account distributor margins, A&P budget, the publican’s margin
and duty payable.. This produces a gross proit estimate which gives you a starting point to assess your
return on the business. We’ll discuss this later in the funding & inancials (link to topic G). It is important
to note that this exercise is for directional purposes only, you must determine your own pricing tree to
calculate this accurately for your own business. This example assumes using a distributor for your kegs in
the domestic market rather than self-distribution.

Pricing Tree Example: 50L Beer Keg to On-trade Customers
Pricing Variable: Comment: € Value:
Retail Selling Price per pint (RSP) Price to consumer € 4.50
Retail Selling Price per keg RSP x 88 pints per keg € 396.00
Price per Keg to Customer What the customer / pub pays € 165.00
Discounts (order volume related) 5% volume discount € 8.25
Duty per keg (note: 50% relief for Craft Brewers) based on 4.5% abv beer(est.) € 25.00
Net Sales Value per keg Your sales revenue per keg to Distributor € 131.75

Cost of Goods (CoGs) Ingredients, Production € 40.00
Freight estimate only
Distributor Margin Requirements (%) To be negotiated est. 20% € 21.35
(of net sales value above)
Gross Profit Net Sales less CoGs + Distribution % € 70.40
Advertising & Promotions Budget (incl Cost of line
maintenance in bar at c. €10) Estimated at 30% of Net Sales Value € 39.53

Net Profit from Sale of keg € 30.87
SOURCE: www.revenue.ie and www.abi.ie

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