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Home Brew Forums > Home Brewing Beer > General Beer Discussion > Something to think about for wannabe micro/nano brewers
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Old 09-12-2013, 07:32 PM   #1
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Default Something to think about for wannabe micro/nano brewers

I read an article about Sierra Nevada hitting the 1,000,000 barrel mark. The revenue from that is approx $200-million.

That got me thinking: $200m seems like a lot of money at first but that is just sales revenue from the beer. I have no clue what operating costs are or what the net is, but you can bet it is a fraction of $200m. There are hundreds of employees, taxes and all associated expenses that apply to a normal business and then those that apply to a brewery. Then there is that little brewery being built in North Carolina. No doubt Ken Grossman has made his fortune in beer but it has taken >30yrs.

For me, I would have to sell a lot of beer to live comfortably, not 1,000,000 BBL, but definitely thousands and I'm not looking to become a pro brewer. I recently toured Terrapin Brewing Company in Athens, GA with the GA Craft Brewers Guild. They were saying it takes approx 3000 BBL to start making a profit or maybe it was to break even or maybe...it was their estimate to make a comfortable living. I'm not sure what size brewery they were basing that on or what the related expenses are that go with that calculation. But doing some very simple math using the $200/bbl figure from the article, that comes to $600k in sales for 3,000 BBL. With expenses, I'm sure there ain't much left in the end. I personally enjoy my vacay time and my boat. On the other hand, I sure am glad there are people who take the risk and make us some delicious adult beverages.

Here is the article:
http://news.investors.com/management...ft-brewing.htm

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Old 09-12-2013, 07:41 PM   #2
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Margins are tight on most businesses.

Looking at the books for most any business is a real eye opener.

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Old 09-12-2013, 08:03 PM   #3
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Yes. I've thought about it and once you do the calc, you realize that... well... it's real work. And I would be afraid of loosing the joy of homebrewing.

In a related comment, I've also toured the Terrapin Brewery and it's a nice place. I like the way they have it set up with that outdoor area for music and socializing. :-)

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Old 09-12-2013, 08:28 PM   #4
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What if you're starting a nano in a state that allows sales directly to the consumer via a tap room? Instead of having to go through a wholesaler, you'd be able to make a whole hell of a lot more profit by selling a pint for say $4, depending on the style of course.

I'm not saying that it's going to be enough for one to quit their day job, but it could at least help to start paying for the overhead of starting the nano and allow the brewery to eventually expand.

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Old 09-12-2013, 09:31 PM   #5
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It is daunting, but remember that even things like salary are reflected in all of the costs of doing business. So if you're making ANY profit, you're good. You just want more profit so you can expand. For instance, our company makes maybe $40 million in revenue and employs over 150 people (including international offices) comfortably. Or reasonably comfortably. My salary is decent, and there are for sure people that make quite a bit more than me.

All of that and we still come out with maybe $6.5 million in profit. We're not a brewery though.

What I'm trying to say is, $200 million in revenue is a lot. I'm willing to bet that everyone is getting paid a pretty good wage. Even if their profit is somewhere around $3-10 million, that's a lot that can be used to grow the company. Heck, $1.3 million is about what I figure you'd need to start a 20bbl brewery anyway.

So let's look at the $200/bbl estimate as well. Sure that's $600k for 3000bbl. I think their estimate is pretty spot on for breaking even or profiting. I would also add that some barrels will make you more money if you can them and distribute...but we'll keep the estimate of $200/bbl you gave.

If you're making $600,000 in revenue, even in your second or third year, that's really good. Annual loan payments (on my brewery estimate) would be about $83k. Operating costs? Couldn't be more than $100k. I wouldn't know, that even seems really high (Water alone might be $4000 of that? Not sure about energy). Ingredients, another $100k as a really quick guess. $180k in salary for 3 people to start with. You've just made about $137k in profit. Not a lot, but it's still profit and you're self sustaining. Now you can bank it, invest it in your company, whatever. Obviously I'm neglecting things like taxes on the profit, expenses for things like external accounting, etc.

Brew 2-3 batches a week. The rest of the time you're racking, inspecting, canning, etc etc. I would say that's pretty respectable for $60k/yr. Just have a wife with a job that has insurance .

I don't know, just my thoughts on that. I'm not saying I want to start a brewery. ...but someday I want to start a brewery.

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Old 09-12-2013, 09:42 PM   #6
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Quote:
Originally Posted by sidepart View Post
It is daunting, but remember that even things like salary are reflected in all of the costs of doing business. So if you're making ANY profit, you're good. You just want more profit so you can expand. For instance, our company makes maybe $40 million in revenue and employs over 150 people (including international offices) comfortably. Or reasonably comfortably. My salary is decent, and there are for sure people that make quite a bit more than me.

All of that and we still come out with maybe $6.5 million in profit. We're not a brewery though.

What I'm trying to say is, $200 million in revenue is a lot. I'm willing to bet that everyone is getting paid a pretty good wage. Even if their profit is somewhere around $3-10 million, that's a lot that can be used to grow the company. Heck, $1.3 million is about what I figure you'd need to start a 20bbl brewery anyway.

So let's look at the $200/bbl estimate as well. Sure that's $600k for 3000bbl. I think their estimate is pretty spot on for breaking even or profiting. I would also add that some barrels will make you more money if you can them and distribute...but we'll keep the estimate of $200/bbl you gave.

If you're making $600,000 in revenue, even in your second or third year, that's really good. Annual loan payments (on my brewery estimate) would be about $83k. Operating costs? Couldn't be more than $100k. I wouldn't know, that even seems really high (Water alone might be $4000 of that? Not sure about energy). Ingredients, another $100k as a really quick guess. $180k in salary for 3 people to start with. You've just made about $137k in profit. Not a lot, but it's still profit and you're self sustaining. Now you can bank it, invest it in your company, whatever. Obviously I'm neglecting things like taxes on the profit, expenses for things like external accounting, etc.

Brew 2-3 batches a week. The rest of the time you're racking, inspecting, canning, etc etc. I would say that's pretty respectable for $60k/yr. Just have a wife with a job that has insurance .

I don't know, just my thoughts on that. I'm not saying I want to start a brewery. ...but someday I want to start a brewery.
Your 20 barrel estimate is right on. The folks at Terrapin said $1.2 million.
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Old 09-12-2013, 09:52 PM   #7
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Your 20 barrel estimate is right on. The folks at Terrapin said $1.2 million.
Nice. I have no idea where one would manage to get all of that money though. If you just had the location, that'd just about halve the cost right there.

Do you actually own a brewery?
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Old 09-12-2013, 10:05 PM   #8
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Lots of costs that no one bothers to calculate. Equipment is expensive. 15 bbl will run a quarter of a million with a minimum of FV and Bright Tank + CIP / Glycol / walk in refrigeration. Water, electricity, Nat Gas, sewer, grain + other ingredients, glass ware, bottling / canning, sanitizers, kegs, insurance, SSN, local, state, federal taxes, gas.... it's crazy. If you are not self distributing and selling pints in the tasting room.... You are struggling... You need cost plus 1 year operating costs to even consider the move.

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Old 09-12-2013, 10:06 PM   #9
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$200 per bbl seems high but considering wages, gas, water and supplies it makes sense.

I think a lot of that has to do with scale and type of packaging as well. A brewpub will have a lower recoup margin than a package brewery bottling their wares. So in reality you can make a comfortable and even profitable living far below the 3k bbl number.

Granted not everyone across the country will know your name, but your local market sure will.

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Old 09-12-2013, 10:34 PM   #10
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If you can't hit over $200 a bbl as a nano you better not open a business! Nanos that think they can survive in the market in a three tier state without selling $3 or $4 pints are dreaming! If you can't sell you beer without a distributor you better be planning on opening a 15bbl or larger brewery and you better brew 4 days a week!

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