BeerBorg

I think on a nationally distributed level some of the bigger players will start to dominate. And as Eddie mentioned, some areas can get a tad crowded and just like a foodie town, you will see some come and go as people look to try the "new thing."

But on a local level, I do not think over saturation is an issue for the most part. Here in Michigan, many of us focus on Michigan craft beer (since we have so much good stuffs). My wife and I will drink strictly Michigan unless we have already tried everything at the watering hole and want to sample something different. Michigan hops are huge right now and show no signs of slowing down. Now several local malting companies are trying to get their critical mass going. Many if not most beer stores now have a dedicated area for Michigan beer and wine. However, a lot of the others that are nationally or regionally distributed tend to get lost so if you dont know what you are looking for you probably wont find it - or even bother looking.

Crazy Climber wrote:Regarding the craft brew vs. home brew discussion: this has been something I've wrestled with since starting the hobby 3.5 year ago. There's so many things that can happen when home brewing that can make a beer less than optimal. I've often thought, "wouldn't it be a lot easier to just buy a great IPA rather than repeatedly try to make one, and miss the mark?" And as local brewers proliferate -- assuming they make a good product -- that question becomes more pertinent, because it's now that much easier to buy good stuff.

As long as my home brew skills are improving, I'm absolutely committed to the hobby and thoroughly enjoy the process from start to finish. If I hit a plateau and start to feel that I'm "forcing" myself to drink home-brewed beer that's not as enjoyable as what I can readily buy, then I'd probably re-evaluate things. But after 3 1/2 years in, I don't see that day coming soon. I'm making good beer (IMO), I'm still improving, and still enjoying the process. Plus, there's the added satisfaction of SHARING one's handiwork with others, which can't be matched by handing your buddy a bottle/can of really good beer that was made by someone else.

But I think doubts like that are common, no matter how good you are at something. IIRC, Brian Wilson of the Beach Boys was working on "Smile" when he heard "Sgt. Pepper" and basically decided, "Sh*t...never mind! They just did it better than I could ever do!" Not that I'm comparing myself to Brian Wilson in any way...

That's pretty spot on to why I stopped brewing for a while. Honestly now I think it was due to my plastic bucket being infected or something weird, every brew I would make would has this weird aftertaste...just not good. I've been into craft beer for 3 years now and at one point I was forcing myself to drink my homebrews and the beer I could buy was vastly superior. Then everything changed for me one day...I was at the local brewery Funky Buddha...their Berliner guy had left some months ago and they had run out of his berliners that were already made. They finally put a new one up, a pale ghost of the former glory....It was then I realized I may never get to taste a super sour berliner again, so a decision was made in my mind, I had to make my own....So I researched sour mashing, found stories of success on forums with methods that seemed completely doable with my small setup. I gave it a shot, first time I did all grain ever, but with a 6lb grain bill it was suddenly within my reach. For me a good berliner stands right next to a barrel aged stout, so it reignited my passion for brewing. Somehow my first batch came out amazing, best beer I had ever created hands down....the next was even better... They disappeared so quickly I made a commitment in my mind to brew every weekend. I'm back in brewing full force now, and my third berliner is the best one yet....The fourth and fifth batches have some issues but may improve long term, but now that I've made some amazing beers I am dedicated to recreating them and nailing down the sour mash process for consistently amazing beer. I have the sixth batch ingredients on deck, getting mashed next monday, and I don't see a stopping point happening.

So long story short, I understand that feeling 100%, but once you make an amazing beer you will strive to recreate it because you know the ability is in you. I had thought I was done brewing, now I want to become the local sour mash master.

What volume of sales is needed to sustain a local nano or micro brewer? I have no idea what the sales would have to be to have a viable business.

I imagine if a brewer is content to stay small,local and have few or no employees the business could last.
I think some of the new nano breweries in NYC are family run operations.

Banjo-guy wrote:What volume of sales is needed to sustain a local nano or micro brewer? I have no idea what the sales would have to be to have a viable business.

I imagine if a brewer is content to stay small,local and have few or no employees the business could last.
I think some of the new nano breweries in NYC are family run operations.

No idea, but if they made solid beer I would support the crap out of them. There's a brewer looking to open a wild ale brewery, pretty niche market I'd imagine, but if he stayed small I think there are enough of us beer nerds around to help him out.

Banjo-guy wrote:What volume of sales is needed to sustain a local nano or micro brewer? I have no idea what the sales would have to be to have a viable business.

I imagine if a brewer is content to stay small,local and have few or no employees the business could last.

The volume of sales depends directly on the size of the brewery, building costs, cost of grains and all other utilities a brewery (or any business) would have to pay.

In your price point research, you have to determine what it costs to produce [insert volume here] then determine how much you want to sell it for, minus costs, federal excise and state taxes. In that net profit, you will find exactly how many pints (if you have a tap room) you need to sell to break even or make a profit. These examples of course are merely the tip of the iceberg when it comes to projecting sales, profit, etc. But it is a good start to show how it is determined.

There is no cookie cutter pricing calculator to show how much beer a brewery must produce and sell to make a profit. It's all about doing your market and price point research against the costs of running your brewery and brewing the beer itself. Then you have to consider if you are doing this as your 100% income for you and/or your family, that involves an entirely different set of bills that have to be covered as well.

Lets say you brewery is working on a 1 BBL system and you can produce 2 BBLs (62 gallons) per brew day. That equals out to be 12 five gallon kegs produced for your tap room (in this example). No distribution in this example as that is a whole other beast you have to tackle. 62 gallons is 7,936 ounces of beer which can be broken into 496 (16 oz) pints. Minus 10% for spillage, etc. that would leave you with 446 pints (estimated) to be sold in your tap room.

Now let's say you sold each pint for $5.00. After your sales tax (7.5%, 'example') and federal excise tax (0.53 per gallon produced in this example), you're left with a profit of $4.59 per pint sold. If you sold all 446 pints and profited $4.59 per pint,that's $2,047.14 from your brew day of 62 gallons.

Now you have to subtract all the COGS (cost of goods sold) out of that profit.

Let's say it costs you $160 in grain bill costs to brew 62 gallons. Minus that out of your profit. $1,887.14 now.

Now we'll get into the costs of your brewery (example only as there are much more costs involved)

Monthly Bills
Building Lease: $1,000
Water: $200
Electric: $500
Insurance: $175
Total: $1,875
Plus 10% for overages: $2,062 each month for cost of running the brewery

Monthly Bills (personal) This is an example of my monthly bills just for this post
$2,000 total monthly bills

Add this to the brewery bills and you have $4,062 due each month you will have to make just to break even at the brewery and keep your house for that month.

So if you can profit $4.59 per pint sold, you would need to sell roughly 885 pints per month to break even. It does seem like a lot of pints to sell, though if you break it down per day, say in a 31 day month (open every day) you would need to sell around 28 or 29 pints per day to break even. Meaning you are just covering the brewery bills and your personal bills with no profit at all.

Obviously this is just an example leaving out a ton of small things, fees, and other expenses that will come up during a month of running a brewery and personal issue that arise. We didn't even get into labor costs (if you have employees) or what your time is worth depending on if you will draw pay yourself or not. You can't just always be open by yourself every day as then who and when would brew the beer? Plus, you also have to consider the paperwork that is involved you must produce, track and store for Uncle Sam each month and quarter.

Not to mention keeping track of brewing inventory, fermentation timing, ordering grains, storing grains, cleaning, paperwork, cleaning, paperwork, cleaning, paperwork, etc. etc. And the eventual dumping of bad beer due to [insert issues here] that will be lost in all of this that you still have to pay taxes on even if you dump it. Many brewers will tell you if you love to brew, then do not open a brewery as this is a business first .... Then a brewery second.

No matter the size of the brewery, these are just some of the things you will need to consider when running your brewery. Costs, profits, paperwork and just daily issues that arise are only a small percentage of what it takes to run this business. And don't forget, just as I said above ... This is a BUSINESS first then a brewery second. Running businesses are very, very hard work and nearly impossible to do on your own. Especially when you throw it's a functioning brewery in the mix.

Planning one out is a maze and string theory of sorts of spreadsheets with calculations, predictions, gains, losses, cogs, etc. etc. all mapped out to find that magic number of where your business will begin to show a profit. Some of these numbers are off by a percentage I assure you as I did not want to get drawn out more than I already have on this topic. Just showing the tip of the iceberg on what it takes to plan it all out in the end.

Awesome info Skunk. You have an acute business mind. Most people just think simple......widget costs .50 so sell it for $1.... Nope. You should even factor in the cost of copy paper, toilet paper and a zillion other things that can all eat into profit.

Beer-lord wrote:Awesome info Skunk. You have an acute business mind. Most people just think simple......widget costs .50 so sell it for $1.... Nope. You should even factor in the cost of copy paper, toilet paper and a zillion other things that can all eat into profit.

Thank you and exactly. I didn't even get into the cost of the pint glasses costs and general materials as you stated above in any of that post. It all adds up and you never know until you do it and figure it all up at the end of each day, week, month, quarter and year where you are at in terms of profit or loss. The good old P&L Report as it's called. Humbling to look at for sure in any business no matter the size or space. That lays it all out for you in real figures and gives you the bottom line.

And don't get me started on emergency expenses for equipment breakdowns and natural disasters. No one ever thinks about that but it's only a matter of time.
I've been in business a long time and I've seen and lived it all. Of course, Katrina is hopefully a once in a business lifetime thing but every storm is a possible disaster and equipment is made to break down.

Thanks for that detailed answer Skunk. It's very enlightening. Running your own business is no easy task.

Beer-lord wrote:And don't get me started on emergency expenses for equipment breakdowns and natural disasters. No one ever thinks about that but it's only a matter of time.
I've been in business a long time and I've seen and lived it all. Of course, Katrina is hopefully a once in a business lifetime thing but every storm is a possible disaster and equipment is made to break down.

I can more than understand that and those natural disasters. I lost my house in Hurricane Ivan then back in April here in Pensacola we had a good solid 20 something inches of rain in less than 24 hours. The office at my "real job" was flooded with four feet of water and we have been working remotely ever since.

Of course there is always insurance for that, 'IF' you pay for the flood coverage, etc. Always a loop hole it seems insurance agencies can get out of paying for damage.

Here's a shot of our offices the morning after the flood in April.

A shot of our office from across the street. Yes, that is a car under that water in the middle of the frame.






Here you can see where the water line was over night

Banjo-guy wrote:Thanks for that detailed answer Skunk. It's very enlightening. Running your own business is no easy task.

No problem ... Yes, it is a very in depth under taking even before you open or think about opening.

Regarding craft vs. homebrew and the quality issue:

I make pretty good beer. I certainly enjoy the beer I make. I enjoy craft/micros also. I don't think I could make beer of that quality in my kitchen/basement. But that's not the point, for me.

The point, for me, is the fact that I can make beer at all. And that I have complete control over it. I may make something that I've never tasted before, and likely won't be able to find in a commercial beer. I think some of the recipes I've made this past year, as experiments, are examples of this. I cite the PacTiki Pale Ale and the 100 Years War IPA. They're not mind-blowingly outstanding beers, but they're very good beers, and where am I likely to find commercial beers that use Pacific Jade hops exclusively? Or blend Centennial and Warrior hops? (and the 100 Years War is an extract recipe, too!)

Yes, I get very good beer to drink from my hobby. But the real fun for me is in creating the recipes and branching into ingredients/combinations/techniques that are new to me. The field is practically limitless, and the creative process is what drives me.

In some ways, that's why I feel the craft market has much room for expansion. A creative brewmaster can introduce new twists on styles, test the market in a small way, develop a recipe for larger distribution, and bring in new patrons. I find it comical that Budweiser keeps introducing things like Lime-a-Ritas. They're just copycat marketing, tying tired, trivial crap in with their name recognition, rather than developing and introducing something new and unique, as the smaller guys seem to do. It's like a middle-aged guy wearing clothes designed for 20-somethings; it just looks ridiculous.

I'll also point out that, prior to Prohibition, there were a great many local, small breweries all over the place. Yes, distribution is vastly different today than it was 100 years ago, but the point is, small local breweries can, indeed do okay, in the right circumstances. Can some place like Utica, NY, support more than a couple of small breweries? I dunno. But I'm certain that NYC and LA and Seattle and Atlanta can support dozens.

FedoraDave wrote: In some ways, that's why I feel the craft market has much room for expansion. A creative brewmaster can introduce new twists on styles, test the market in a small way, develop a recipe for larger distribution, and bring in new patrons. I find it comical that Budweiser keeps introducing things like Lime-a-Ritas. They're just copycat marketing, tying tired, trivial crap in with their name recognition, rather than developing and introducing something new and unique, as the smaller guys seem to do. It's like a middle-aged guy wearing clothes designed for 20-somethings; it just looks ridiculous.

Could not agree more with that statement, Dave. That is the beauty of the craft beer space to the letter. Brewers have the freedom to experiment with new recipes, styles and push the limits that larger breweries may not have the option to do. Be it size, corporate owned, etc.

The craft brewers always seem to have something new either in their rotation or in the planning stages all the time. That's how they gain their following and that's why their customers keep coming back. To see what's next. That's why this space will continue to grow and prosper.

Another very important consideration for craft brewers to aspire to, IMHO, is this:
Make good beer.

Sounds obvious and simple, but here's what I really mean:
Not every beer in the lineup needs to be "the best ___(fill in style)___ ever made." But every single beer in the lineup MUST BE a good example of the style.
If that's the case, then discerning craft beer patrons who sample that brewery's offerings will eventually know, without a doubt, that they can (A) try any new beer from that brewery with confidence, and (B) recommend that brewery to everyone they know who likes craft beer.

If I've sampled the product line from Brewery A and know that they're all solid beers, I have no qualms about telling a fellow craft enthusiast, "you should try Brewery A some time - they make good stuff" -- even if I have no idea what type of craft beer that person likes.

Of course, it helps if one or more beers in the lineup are exceptional. But the important thing is to make sure that none of them are mediocre.

Crazy Climber wrote:Another very important consideration for craft brewers to aspire to, IMHO, is this:
Make good beer.

Sounds obvious and simple, but here's what I really mean:
Not every beer in the lineup needs to be "the best ___(fill in style)___ ever made." But every single beer in the lineup MUST BE a good example of the style.
If that's the case, then discerning craft beer patrons who sample that brewery's offerings will eventually know, without a doubt, that they can (A) try any new beer from that brewery with confidence, and (B) recommend that brewery to everyone they know who likes craft beer.

If I've sampled the product line from Brewery A and know that they're all solid beers, I have no qualms about telling a fellow craft enthusiast, "you should try Brewery A some time - they make good stuff" -- even if I have no idea what type of craft beer that person likes.

Of course, it helps if one or more beers in the lineup are exceptional. But the important thing is to make sure that none of them are mediocre.

That's a good assessment actually. Not every beer in a craft brewers line up will be as you stated, "The best beer ever" no matter the style. Yes, Brewery A's IPA will be better than Brewery B from time-to-time, though it is important as you said to stay to the style on your main line up of beers.

In my opinion, every brewery needs an IPA, Porter, Brown, Wheat and Stout. After that is where the creativity comes into play and you can gain good followers with your 'unique' beers. You have to be able to brew the styles people who are not accustomed to craft beers will enjoy to have a main stay of customers. Not every person that steps foot into your brewery is as well versed in the craft scene as others will be. They may not want to try your peach and jalapeno double IPA brew just yet. Brewing solid beers is VERY key in a breweries early and long term success.