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September 19, 2014

HOT BLAST: Explaining the price of beer

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Posted: Tuesday, July 15, 2014 7:30 am

Interesting take on why you pay what you pay for a beer at a bar or restaurant. One bar owner -  Michael Naessens is the owner of Eulogy Belgian Tavern and Bierstube - says:

that the 'three times' principle is a widely followed basic pricing model in the bar and restaurant industry. "Typically, in a restaurant, you want to keep your food costs and so forth at 33 percent," Naessens says. "So, a lot people simply multiply [the product cost] by 3." This approach works fine for, say, a bottle of Budweiser, which may cost a bar or restaurant in the range of 75 cents to stock. When you see bars pricing Buds for $3 apiece, this is likely the model they're using.

What's special about 33 percent? The rationale is that an establishment's operating costs such as labor, rent, and utilities—the costs other than the expense outlaid to buy, say, beer, or ingredients for a dish—will eat up some chunk of the money earned from the sale of that Budweiser. But if the product cost is kept to a third of the price, generally speaking, owners can safely trust that they'll be able to pay their bills and still take home a profit.

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