Cost effective to go big?

[sethmg]

Hi everyone- I have a quick question and I know very little about brewing. I own a small bar and was wondering if it would make sense money wise for me to install a small brewing facility. The point basically would be to try and maximize my bottom line rather than trying to become the next hot brewery. I was thinking of replacing our best sellers (IPA and pale) with in house brewed. Making quality beer I would like to leave for a later discussion- I'm mostly just wondering if it would ever really pencil out to spend the $$$ on a 'professional' inspected brew station with only the intent to stay small and perhaps sell 6 kegs a week in house. Rent would not increase because we have the space already. I'm thinking maybe a 3 barrel facility? Could I make it happen for $25k? And if so- am I only saving 50 cents on the pint to brew in house? If that's the case does that mean 50,000 beers sold before I break even not including labor? I like the idea but am not sure it would be worth the effort. Especially when competition is so stiff with so many wonderful breweries in existence already!

Thanks guys!

 

[jtkratzer]

Kal has mentioned on his website (theelectricbrewery.com) that an average beer costs him 10-12 cents per glass of beer to make. I can't imagine profit margins wouldn't be good if you could manage to make beer at that price with bulk ingredients.

 

[daksin]

I'd be very surprised if you could do a 3bbl system for $25k. Even at 10c/pint, it would take forever to make back the initial investment in equipment, time and salaries. Even a small brewery is going to require hiring another couple of people. At best, I'd say that if you were breaking even on the beer after a few years, it might serve to drive a bit more traffic to your bar if you advertise it well. At the small scale, I don't think it's a money-making proposition.

 

[BradleyBrew]

I would learn about beer and how to brew before contemplating a rather substantial business investment.

 

[BBL_Brewer]

Since you already have the place, if you brewed it yourself and sold it by the glass and were able to push 3 barrels a week you would definitely make money. If you have to hire someone to brew it, I doubt it would be very prfitable unless you could up your sales volume substantially. A professional grade 3 bbl system with half barrel kegs as the output will be hard to do with 25K.

 

[ksbrain]

But you could do 6 kegs a week on a Sabco 1/2 bbl system. Which seems reasonable for $25K. You just have to brew more times per week. So the big question is how much you pay for that half barrel of IPA now. And how much cheaper to make it... what's the ROI?

 

[waldoar15]

How many of your regulars are you going to tick off by getting rid of your "best sellers"?
You pretty much have to be able to brew something at minimum that is at least as good if not better, then you have to be able to convince them to buy it. You can probably get by charging more money (if you can produce a better product). But that's a pretty big "if" when you're just starting out brewing.

 

[jtkratzer]

How many of your regulars are you going to tick off by getting rid of you "best sellers"?
You pretty much have to be able to brew something at minimum that is at least as good if not better, then you have to be able to convince them to buy it. You can probably get by charging more money (if you can produce a better product). But that's a pretty big "if" when you're just starting out brewing.

This was my first thought, and a possible solution is to keep both to transition if your beer is good enough to replace the commercial product.

 

[Mongrel]

If you have the space to go a little bigger, you should consider it, and bottle everything you couldn't sell in house. Since you're in Portland, check out Green Bottling. They'll bring their mobile bottling line to you. They do a lot of work out here in Central Oregon too.

I know there's a ton of competition, but how far is your pub from another established brewery? The small neighborhood brewery could attract some new clientele.

 

[ajwillys]

The answer is yes. I'm in the process of considering several different business ventures, one of which is very similar to what you mention. I've run some very complex numbers with just about every variable imaginable. With all the costs (of brewing only) accounted for, you're looking at about 90% profit. Of course, I'm not including insurance, rent, labor... you know, the expensive stuff. If you already have a bar, you'd be surprised how much of those costs can overlap with a brewery, assuming you're in a brewery friendly state which, um, you definitely are.

 

[iaefebs]

Why buy a 3bbl when you might easily get by with a 20 gallon home brew type system. Invest $5,000 get some Corny kegs and go for it.Some homebrewer in Portland will volunteer to come in and get you started. I have no idea what the cost for getting a license is.

 

[Pappers_]

There is a forum for professional brewers at www.probrewer.com where your question might be addressed by more folks with experience in the business.

 

[bwomp313]

There is a forum for professional brewers at www.probrewer.com where your question might be addressed by more folks with experience in the business.

You beat me to it. I was thinking the same thing. It would be much better to seek advise from a forum full of people who have done it and are in the process of doing so. You'll get a lot more speculative answers on here than people who actually have the experience. (granted I know there are some people on here that have done it)

 

[sethmg]

Thanks everyone for the input! You have already quadrupled my brewing knowledge. Someone mentioned that replacing our best sellers may not be a good idea and I didn't think about that. Instead of replacing them a better idea might be in addition to them. Why not have two IPA's? We have the taps for it. And then another great piece of advice- at least for my situation anyway- is not to start a 3bbl if I'm only looking to move 3 bbls a week. I'm going to do more research about smaller operations. I was just in Sitka AK at Baranof Island Brewing which was actually got this idea in my head. They gave me a tour and I was stunned at how small the operation was- two large pots, a single burner that was movable and what looked to be about a 25 gallon plastic fermentation similar to this one. And their beer is f-ing great! They are actually waiting to get approval from the state to move across the street to upgrade to a 7bbl system. We went to several restaurants in town and they were all out which is how we ended up at the brewery itself.

And thanks for the link to the pro brew site!

 

[sethmg]

Another piece of info: the bar pays typically $140 for a keg of micro in Portland. I hear varying opinion from 100 to 115 usable pints in a 15 gallon keg which brings the cost per pint at around $1.20.

 

[ajwillys]

There is a forum for professional brewers at www.probrewer.com where your question might be addressed by more folks with experience in the business.

We also have an active group here at HBT for people that are thinking of turning pro. Click the "Going Pro" link in my sig.

 

[KEG99]

Why not set up a cheap 10 gallon system and once a week offer a "Specialty" beer that you brew? Learn how to brew, find out how your customers take to it, and get your feet wet all at the same time.

 

[ajwillys]

I agree that if you're not really much of a brewer, its probably not a good idea to drop a huge amount on a giant system. If you wanted to hire a brewer (perhaps a hardcore homebrewer), you could do that. While it is cost effective to brew your own that you sell (legally of course), that is only true if your beer actually sells. While its not difficult to make beer, it can be difficult to make consistently good beer in large batches. I would suggest partnering up with someone with aspirations of being a pro brewer.

There's lots of discussion on this in the Going Pro group here and the probrewer site as well. I would really suggest you take a look at both of those.