A product can be popular with customers, sell consistently and generate a significant amount of revenue without being one of the most profitable products in your range.
For wineries, breweries and distilleries, it is easy to focus on what sells the most. Sales figures show which products customers want, but they do not tell the whole story. The cost of ingredients, production time, packaging, storage and distribution all affect how much money a business actually makes.
A product that sells thousands of units might contribute less profit than a smaller, more specialised product. Equally, a product with a healthy margin per bottle might tie up valuable production capacity or require years of storage before it can be sold.
Understanding which products contribute most to profitability can help producers make better decisions about pricing, production planning and where to invest their resources.
1. The Difference Between Revenue and Profit
Revenue is the money a business earns from selling its products. Profit is what remains after the relevant costs have been deducted.
The distinction sounds straightforward, but it is easy to lose sight of when sales volumes are increasing.
Consider two wines. One sells in large quantities at a relatively low price, while the other sells fewer bottles at a higher price. The more expensive wine might appear to be the better performer, but its production costs could tell a different story. Higher-quality grapes, extended barrel ageing, specialist packaging and additional handling can all increase the cost of producing a premium wine. As a result, the lower-priced wine could generate more profit, even if it sells for less per bottle. The key is not simply how much a wine sells for, but how much profit remains after the costs of producing and selling it are taken into account.
The same principle applies to beer and spirits. A lower-priced beer produced efficiently in large volumes may generate more profit than a premium beer that requires more expensive ingredients, specialist packaging or additional production time. Similarly, a higher-priced spirit may involve years of ageing, storage costs and capital tied up in stock before it can be sold.
In each case, the higher selling price does not necessarily translate into higher profit. To understand which products are performing best, producers need to look beyond revenue and consider the full cost of producing and selling each one.
2. What Does Each Product Really Cost You?
The first step towards understanding product profitability is knowing what goes into the cost of each product.
Some costs are relatively easy to identify. Grapes, malt, hops, botanicals, bottles, labels and closures can generally be linked to a particular product or batch. Other costs require more consideration.
Labour, electricity, equipment use, cleaning, storage and facility expenses all contribute to the cost of running a production business. Depending on how a product is made, these costs can vary considerably between products.
For example, a wine that requires extended barrel ageing ties up both the barrels and the capital invested in the wine for longer than a product released relatively quickly. A distillery producing an aged spirit needs to account for the time the spirit spends in storage, alongside evaporation and the ongoing costs associated with maintaining its stock. A brewery producing several small batches of different beers may spend more time on changeovers and cleaning than it would running longer batches of a single product.
Packaging also deserves attention. A product sold in a premium bottle with specialist labelling and a gift box can have a very different cost structure from one sold in a standard bottle or can, even if the liquid itself costs roughly the same to produce.
Not every expense needs to be allocated to an individual product in exactly the same way. However, producers need a consistent costing method that reflects the resources their products actually use. Otherwise, some products may appear more profitable simply because part of their cost has been overlooked.
3. Your Most Popular Product Might Not Be Your Best Performer
Imagine a brewery sells two beers.
Its core beer sells 10,000 units at a contribution of $2 per unit after variable costs. A specialty beer sells 2,000 units at a contribution of $4 per unit.
The core beer contributes $20,000, while the specialty beer contributes $8,000.
The core beer generates more total contribution because it sells in much higher volumes. However, the specialty beer contributes twice as much per unit.
Neither product is automatically the better choice. The core beer may be essential for maintaining customer relationships and supporting regular sales, while the specialty beer might offer an opportunity to improve margins or appeal to a different market.
The important point is that profitability per unit and total contribution are different measures. Both matter when deciding what to produce.
4. The Costs That Are Easy to Overlook
Even when the main production costs are understood, there are other factors that can affect a product’s financial performance.
Ageing is one example. A whisky or other barrel-aged spirit may eventually command a premium price, but the producer must fund production and storage long before receiving the revenue. During that period, stock ties up capital that could otherwise support other parts of the business.
Production complexity can have a similar effect. A product that requires additional processing, more frequent changeovers or specialist equipment may consume more labour and production time than its ingredient costs suggest.
Waste and yield differences matter too. If a product consistently produces less saleable volume than expected, the cost of the finished product may be higher than the original estimate. Packaging losses, damaged goods and expired ingredients can further reduce the financial return.
Overheads also need consideration. Rent, insurance, administration and other operating expenses support the business as a whole. Allocating these costs consistently can help producers understand the broader economics of their product range, although allocations should be interpreted carefully rather than treated as exact measures of the cost of producing one additional unit.
5. What Should You Do With the Numbers?
Once producers have a clearer picture of product costs and profitability, they can start asking more useful questions.
- Is a product priced appropriately for what it costs to make?
- Could a change in packaging improve its margin without affecting customer demand?
- Would producing a larger batch reduce costs, or would it create excess stock?
- Is a slow-selling product still worth keeping because it attracts customers to the wider range?
These decisions require more than a single profit figure. Sales trends, customer demand, production capacity, stock levels and the role of each product in the overall range all matter.
For instance, a product with a relatively low margin might be an important entry-level offering that encourages customers to try a brand. Another product may have a strong margin but sell so slowly that it occupies valuable warehouse space for months.
Similarly, a highly sought-after or flagship product may not be as profitable as some of your core products, but it can still have significant marketing value. If customers are drawn to your brand because of a particular wine, beer or spirit, your sales team can use that interest to introduce complementary products with stronger margins. Rather than viewing the flagship product as a sale in itself, consider it an opportunity to increase the profitability of the overall sale.
It is also worth reviewing product profitability regularly. Ingredient prices, packaging costs, wages, freight charges and selling prices change over time. A product that performed well last year may have a very different margin today.
The goal is not necessarily to discontinue every product with a lower margin. It is to understand why products perform differently and decide whether their financial contribution justifies the resources they require.
In conclusion…
For wineries, breweries and distilleries, the most profitable product is not always the one with the highest selling price, the largest sales volume or the lowest production cost. It is the one that contributes meaningful profit after the relevant costs are considered, while still supporting the wider business.
Vinsight provides Sales, Inventory and Manufacturing software for the wine, beer and spirits industry, helping producers connect production, inventory and costing information to make more informed decisions about their products and operations.
