Brewery Accounting 101: Understanding Your True Cost of Goods Sold

Cost of goods sold, or COGS, is the number that decides whether your brewery is actually making money on the beer you sell, and most brewery owners are only seeing part of it. If your COGS only includes what you paid for malt and hops, you’re missing labor, packaging, and a handful of other costs that belong in that number too. Get this wrong, and you can be selling beer at what looks like a healthy margin while actually losing money on every keg. It’s a mistake we see across the craft beverage industry, from taprooms to tasting rooms.

What Actually Belongs in Your Brewery Cost of Goods Sold

COGS should capture everything it takes to turn raw ingredients into a can or keg ready to sell. For most breweries, that means four buckets:

• Raw materials. Malt, hops, yeast, water treatment, and any adjuncts that go into the beer itself.
• Packaging. Cans, bottles, kegs, labels, and closures. These get missed more often than any other cost, especially when a brewery buys packaging in bulk and doesn’t tie the cost back to a specific batch.
• Direct labor. Wages for the brewers, cellar staff, and packaging crew who are physically making and packaging the beer, not sales or taproom staff.
• Production overhead. A share of your utilities, equipment depreciation, and facility costs tied to the brewhouse and cellar, not the whole building.

Leave any of these out, and your COGS understates the real cost of every batch. That makes your margins look better on paper than they actually are.

Why Undercosted Beer Quietly Kills Margins

Undercosting doesn’t show up all at once. It shows up slowly, one release at a time, as a brewery prices new beers based on a COGS number that’s missing a piece. A hazy IPA with an expensive hop bill gets priced the same as your flagship pale ale. Nobody updated the cost tracking to reflect how much more that hop bill actually cost. A seasonal release built around barrel aging carries months of extra holding cost that never makes it into the price.

None of these mistakes are dramatic on their own. Added together across a full year of releases, they can quietly erase a meaningful share of a brewery’s actual profit margin, even while total revenue keeps climbing.

Work in Process: The Part Most Breweries Skip

Beer takes time to become beer. Between the brew day and the day it’s ready to package, that batch is sitting in a fermenter as work in process inventory, with real costs tied up in it. Many breweries only start tracking cost once a batch is packaged. That means weeks of fermentation and conditioning time show up nowhere in the books until the beer is nearly ready to sell.

Tracking work in process matters most for beers with longer timelines. A lager that lagers for six weeks or a barrel-aged stout that sits for a year both carry real holding costs the whole time. Skipping this step doesn’t just create a blind spot. It also makes it harder to know your true cost per batch when you’re setting a price.

Building a Cost Tracking System That Actually Works

Getting an accurate cost of goods sold number doesn’t require an enterprise-level system, but it does require consistency. A few things matter most:

• Cost every batch individually, not just at the style or brand level, so you can see which specific beers are actually profitable.
• Track packaging costs by SKU. A 16-ounce can four-pack and a 12-ounce can six-pack have different packaging economics, and lumping them together hides that.
• Update your recipes and cost sheets whenever a hop or malt price changes, rather than relying on a number set once a year.
• Review COGS by brand at least quarterly, so pricing decisions are based on current costs, not last year’s.

These are the same financial KPIs worth reviewing on a regular cadence, not just once a year.

Know Your Real Cost Before You Set Your Price

Cost of goods sold isn’t just an accounting line. It’s the foundation for every pricing decision a brewery makes, and getting it wrong means guessing at margins instead of knowing them. At Anne Napolitano Consulting, our brewery accounting team helps breweries build cost tracking that actually reflects what it takes to make their beer, batch by batch. If you’re not fully confident in your COGS number, schedule a free consultation and let’s get your numbers as sharp as your recipes.

Frequently Asked Questions

What costs should be included in a brewery’s cost of goods sold?

A complete COGS number includes raw materials like malt, hops, and yeast, along with packaging, direct labor for brewing and packaging staff, and a share of production overhead such as utilities and equipment costs tied to the brewhouse. Leaving out any of these understates what a batch actually costs.

How do I calculate the true cost of a single batch of beer?

Add up the raw materials, packaging, and labor tied specifically to that batch, plus its share of production overhead, then divide by the total volume produced. Costing at the batch level, rather than averaging across a whole brand or style, is what makes pricing decisions accurate.

What is work in process inventory for a brewery?

It’s the value of beer that’s already in production, sitting in a fermenter or conditioning tank, but not yet packaged and ready to sell. Costs like labor and ingredients are already tied up in that beer, so it should be tracked as inventory even before it’s finished.

Does packaging count as part of brewery COGS?

Yes. Cans, bottles, kegs, labels, and closures are all direct costs of getting beer ready to sell, and they belong in COGS. Packaging is also one of the costs most likely to get missed, especially when it’s purchased in bulk and not tied back to a specific batch.

How often should a brewery update its COGS numbers?

At minimum, COGS should be reviewed by brand every quarter, and updated any time a hop, malt, or packaging price changes. Waiting a full year to update cost sheets means pricing decisions are often based on numbers that are already out of date.