Navigating Rising Costs in 2025: Three FP&A Strategies for Brewery Profitability
In the craft brewing industry, we have seen a perfect storm of financial headwinds in recent years. With brewery closings outpacing openings for the first time in decades, production volumes down, and costs soaring due to inflation, labor shortages, and potential tariffs on nearly all US imports, many brewery owners are feeling the squeeze on their margins. Some may not even know it is happening until it is too late. That is where the importance of Financial Planning and Analysis for your Brewery or Brewpub comes into play. Proactive tracking and financial planning can turn these challenges into opportunities for growth and resilience.
At Plato Brewing and Consulting, we help our clients achieve cost improvements through regular monitoring of Key Performance Indicators from reviewing financial statements and sales reports, all the way down to the brewery production level to gain visibility into your business and provide recommendations for improvements on an ongoing basis. In this article, I'll share some practical FP&A strategies to manage rising costs, drawing from real-world examples with strategies and tools you can implement in your brewery today.
1. Conduct Thorough BOM and Standard Cost Rollups for all products. Rising input costs like aluminum, hops, and grains can erode your margins by increasing the base Cost of Goods Sold for your product portfolio. Start with a full BOM audit: Review recipes for rising ingredient costs, production inefficiencies, model labor utilization, and roll up standard costs quarterly.
Plato Brewing Tip: Use a simple Excel template (or ERP software like Beer30, Ekos, or Ollie) to track ingredient costs, batch yields, and variances over time. This will allow you to gain insight into your real cost per barrel and determine if your margins are in jeopardy. This will infer if prices need to be adjusted accordingly.
2. Leverage Variance Analysis for Real-Time Insights. Variance analysis is a cornerstone of effective FP&A in the brewing industry, serving as an essential tool to compare budgeted figures against actual results across key areas like sales, production costs, and operational expenses. Budget vs. actual discrepancies are your early warning system. By dissecting these discrepancies, whether favorable (e.g., higher than expected sales) or unfavorable (e.g., unexpected cost increases), brewery owners can uncover root causes and safeguard profitability.
Plato Brewing Tip: Start with Data Collection: Gather actuals from your ERP/POS system (e.g., tracking sales by channel, COGS per barrel, and labor hours) and compare them to your forecasts and seasonal fluctuations. Focus on key variances: sales volumes (actual units sold vs. budgeted), price (realized pricing vs. planned), and mix (product assortment shifts). Build KPI dashboards to distill and visualize these variances and track supporting metrics
3. Create and Maintain a Monthly Budget for Each Department. For small breweries, it is extremely important to create a budgeting system for tracking. For mid to large size breweries, it is equally important to maintain these budgets and ensure accountability. Costs don't exist in silos, align with managers from operations, sales, tasting room/restaurant and marketing.
Plato Brewing Tip: Hold monthly reviews with each manager/department head to refine budgets. Utilizing the above techniques can assist in accurate budgeting and forecasting but holding regular meetings to ensure these variances are being monitored and proactively addressed is equally important. If you are only budgeting and reviewing quarterly, this could lead to your margins getting squeezed due to rising costs and a lagging pricing strategy.
In a year where craft brewers are bracing for more challenges, robust FP&A isn't optional, it's essential for survival and scaling. If your brewery is grappling with these issues, Plato Brewing and Consulting offers tailored financial reviews and operational planning on a fractional basis to drive measurable results.
Contact Us for a free consultation to see how we can help your brewery improve profitability!