Thanks Matthew!

I’ve been talking to a local brewer here in Mass for a couple months now. He has been an invaluable resource for cost information, and has gone out of his way to help me better hone my numbers. It has resulted in some realizations about the economics of brewing and just want it takes to be successful. I am undeterred, and continue to work my way through the business plan. I did, however, want to take a moment to thank Matthew for this excellent opportunity, and wish him luck in the ramp up of his new facility.

Marketing your beer

I found a nice chart for determining what brewers who use my facility could earn from their beer. This helped me figure out what is a reasonable fee to charge them for producing it. There is a ton of great information out there from AHA, MBAA, and BA about the costs associated with brewing. All are great organizations and I recommend joining as a 1st step to planning any move into the beer industry.

 

Production size: 15 bbl

 

 

Malt:

@ $0.49/lb

$368.00

Water:

@ $0.005/gal

$8.00

Hops:

@ $12.00/lb

$90.00

Yeast:

 

$6.00

Filters:

@ $1.00/sheet

$30.00

Energy:

 

$30.00

CO2:

 

$5.00

Sewerage:

@ $0.02/gal

$47.00

Cleaning:

 

$23.00

Taxes:

Federal @ $7.00/bbl

$105.00

 

State @ $6.50/bbl

$98.00

Worker hours:

15 hrs

$450.00

Total costs of goods sold:

 

$1,260.00

Total costs per bbl:

 

$84.00

Bottles per barrel

180

 

 

 

 

Wholesale bottles

180 selling @ $3.50

$630.00

Gross profit per barrel:

 

$546.00

 

 

 

 

 

Contract beer

As I speak to brewers I realize just how strange the bias against contract (gypsy) brewing is. I can see why people might have some bile to spit at folks printing t-shirts and coasters before they have a single ounce of product, but contract?? You have invested the time to perfect your recipes, gathered a non-trivial amount of money, and brought a beer to market. Congratulations is all I have to say! So there are several levels of contract brewing, but they all fall under my previous criteria. So what if the only brewery you could lock some capacity at (difficult BTW) won’t let you actually work their gear. The product should speak for itself. Is a delicious contract brewed beer subordinate to 20 crappy on-site brewed beers, I think not. Some of the quirks of the industry.

By offering brewers who would normally contract, a permanent home at Craft Beer Studio, I seem to be helping address a bias I did not know existed before beginning this research. Note to self: work up the licensing so that member brewers show only their brewery names on the legal notice, or cover the additional cost to allow it.

 

Insurance and Leasing lock down

I have previously been relying on numbers for insurance and real estate lease rates I pull from some Brewer’s Assoc docs I found. However, it was recently suggested that my numbers might be a bit off. So I have a few requests in for quotes on actual policies and warehouses in my desired location (Rt 2 x 495). I’m hoping I am not too far off. Even if it is a few hundred dollars, it still should not push my forecasts too far off where they are currently.

Background

I decided that my posts here were a bit more like tweets than anything else, so here’s my attempt at some useful information and insight.

First of all, who am I. Well, foremost I am a brewer. I have been producing around 5-6 barrels a year of all grain beer for around 12 years. I started out as most brewers do, with a stock pot on a kitchen stove. Extract and Adjunct brewing lead to an interest in the industry and more traditional processes. I read everything I could get my hands on starting with this gem: http://www.amazon.com/The-Practical-Brewer-Third-Edition/dp/0971825548

I then began upgrading my setup to more closely match what commercial breweries were doing, although on a much smaller scale; recirculating mash, filtering, back-pressure bottling, etc. I have continued to tweak my system over the years. Today I still run with some of my original equipment, but I now produce 15 gallons at a time and, except for racking, the product never touches anything but stainless steel. Pumps now move wort and water around my system, plate chillers minimize my water use, and filters ensure my beer is clear. 

I have always had the plan that when I got a bit older, and my financial situation was stable, I would retire from my chosen career in software development and move into a job somewhere in an established brewery. Even if I was 60 and was only working the tap room. As a highly skilled technology worker, more and more effort needs to go into keeping yourself relevant as you age. More languages learned, more development methodologies implemented, and more hours in front of a keyboard required. All of this to simply ensure your skills outweigh the fact that companies see aging workers as less valuable than younger ones. Eventually you are out of luck. SO…..this brings us to today. I am not anywhere near an age where I need to worry about some “young whippersnapper” taking my job away, but I definitely am at an age where you re-evaluate the plans for the second half of your life. For me, it is brewing full time. The big question is how?

So after years of dreaming and brewing, and a little more dreaming, I decided to begin planning for the move. The first step was a solid business plan. As a tech worker, I implemented the tools I use everyday to help, namely speadsheets and small programs called marcos to do the heavy listing. I then began talking to people. 

My first stop was gear. What are the costs for a brewery full of enough equipment to make a real go of it? I feel like I read every posting on the internet about brew house sizing and cellar design. I read the about pages on several dozen brewery websites to see what they were using. Then the fun part, went on several weekends of brewery tours to see 1st hand how things were sized and arranged. Next stop was the vendors. I sent out a few emails to North American manufacturers of brewery equipment and received some very detailed quotes for turn key brewery delivery. Essentially an entire brewery on a truck, from kettles to hoses. Add some money for installation and facility modifications and you have a good idea of what it will cost. After the gear, the lease for the property it sits on, and utilities are a fairly minor cost, but not un-important. 

Next is what will it cost you to operate this facility. So you take that leasing, utility, and taxes…add them to an advertising budget, staffing salaries, and legal/regulatory fees, and you get a pretty good idea of the annual cost to have a brewery, but you aren’t even making beer yet!!

Rough malt and hop bills are easy to find, and most malting houses list the prices for the raw materials they sell. Add water, and yeast. Multiply all of that by your cellar capacity for the year, and you have an idea of the cost of commercial beer making. Now you are brewing, but where do you put it all?

Bottles? Kegs? There are pros and cons to both. Bottles are expensive and so is the packaging. Kegs are cheaper, but you limit yourself to where you can distribute. You are seeing most of the newer beers coming out in 22oz bottles for a reason. They are a sweet spot. They are cheap enough, and have only limited packaging. They also hold an amount of product that consumers feel has a good value, so you can charge a bit more. You also are not restricted to bars and restaurants with taps for distribution.

But how do you get it to market, and how much do charge?

Next time. 

Chris

 

 

Mass Brewers

I continue to have fantastic conversations for local commercial brewery owners. A really fantastic group of people with a ton of incredibly useful advice. Thanks to everyone I have spoken to so far.