Understanding Prime Cost: A Game-Changer for Brewery Profitability

Running a brewery is more than crafting great beer—it's becoming about managing costs effectively. If you’re a part of the new age that is relying more on food, Prime Cost comes in. Understanding and tracking this crucial metric can reduce expenses, improve margins, and keep your brewery thriving. Whether serving food or focusing on your taproom, mastering Prime Cost can unlock serious profit potential.  

In the restaurant world, Prime Cost—the combination of goods sold (COGS) and labor expenses—is the proven metric for managing costs without sacrificing quality. As more breweries expand into food service, understanding Prime Cost is essential for achieving the elusive yet critical slim margins in the restaurant industry. 

Breweries brew their product unlike traditional restaurants, which means a built-in cost advantage. You may not realize it, but you are vertically integrated, which gives you a leg up against other restaurants to boost margins on beer sales while enhancing the customer experience.

How do we implement it? 

Tracking Prime Cost doesn't have to be complex. You can quickly measure and manage this metric with tools like XtraChef, Fathom, or Syft—or even directly from your Profit and loss (PnL) statement.

You should track Prime Cost for each location individually and company-wide to understand what locations are excelling or falling behind. A second-level analysis can tell you if labor or COGS drives any issues. Dive to a third level, and we can see if the overages derive from food, drinks, FOH, or BOH labor.

Key Considerations

• Sell beer to each taproom at market rate (price to retailer) to compare yourself against the restaurant industry benchmark of 60% or better Prime Cost.

• Factor in all direct labor costs—wages, payroll taxes, benefits, and contractors. Coding and allocating taxes and benefits by department may take additional work, but I promise it is worth it. 

Your brewery already has a built-in advantage: you brew your own product! By leveraging that strength and tracking your Prime Cost, you can confidently make decisions that drive growth and improve your bottom line. 

Need help getting started? I have some ideas for you to start small or do it all!