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"A Craft Chemist Making Over Big Beer"

Discussion in 'Beer News' started by TheBeerAlmanac, Jan 29, 2013.

  1. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    I cant give you final, bottom-line profit, but from a 2010 BA survey, EBITDA (2009) for the respondents was $47 per barrel. It includes over 100 production breweries (not brewpubs) of all sizes (looks like about 10% were greater than 50k bbl/yr in size).

    This number is pulled down by the under 1k bbl/yr group, who make basically nothing.

    Edit: Looks like Ab-Inbev is ~$50 per bbl EBITDA. So same ballpark.
  2. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    Ok. So with all those economies of scale and super awesome efficiencies, they are essentially no more profitable per gallon of beer produced than your typical production brewery.
  3. Privately held companies do not have to release very much in the way of financial data. Usually they have to make tax reports to the state and I would imagine the TTB, possibly the SEC and/or a state financial regulator depending on the number of investors and business structure. Might have to go on a deep hunt to find that data.
  4. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    That was kind of my point.
    TheBeerAlmanac likes this.
  5. Bass, Leffe, Franziskaner, Spaten, Goose Island (Obviously)

    Not saying they are the top of the top but at least make beers competitive with the median range craft brewers. I can think of a lot of US craft hefeweizens, Belgian blonds, English-style pale ales and German-style beers I would not drink over a Bass, Leffe Blond, Franziskaner Hefeweizen, or Spaten Optimator, respectively.
  6. If the profit per gallon is the same, then the operating margin would be significantly higher for BMC. This number is much more important.
  7. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    This reply does not strengthen your point at all imho.

    Besides *maybe* a GI special release beer once in a great while, I will probably never touch any of those beers again in my lifetime. I might drink an Optimator or a Franziskaner if it were handed to me for free at a party, Bass is terrible, Leffe Blond is unremarkable, and most of GI's year round releases are a case study in mediocrity.

    I could ride a tricyle around Seattle and drink dozens of beers that blow the doors off most everything in ABI's portfolio. The apologists are growing tiresome.
    CaptainPiret likes this.
  8. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    It's not apples/apples. The original assertion that I was refuting is that producing low end, crappy lager is a more profitable venture than producing high end beer. That is simply not true.

    Not to mention, none of these figures factor in brewpubs, where the margins are astronomically higher.
  9. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    Speaking of things that arent apples to apples, bringing brewpubs in is completely banana. A brewpub is basically combo production brewery/tied house. If Inbev could own a string of pubs across the US, their margin would shoot up too. :)
  10. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    Yep.

    Of course, they are selling at a much lower price, so that makes the MARGIN higher. And lower prices creates higher volume.
  11. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    And Founders' margins would shoot up quite a bit if they sold 30 million barrels per year.
  12. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    I bet they would have to lower margins to get to 30MM bbls. At least if they did it this year.
  13. Good clarification... I'll (mostly) agree with that.

    But, within the context of quality American craft beer, that still leaves the AB-Inbev portfolio rather short. Goose Island.

    But even within that context- this isn't AB brewing these beers, it's GI. So we're back to where AB in theory CAN make great beers, but they choose not to, going after the bottom line themselves and buying out other already-existant breweries to fill that niche.

    Also... while it seems a little bogged down in semantics (happens on the internet!), the profitability of macro vs. craft side-conversation is interesting to read for sure. And maybe begs a seperate thread with more numbers and in depth examination?

    IS GI really profitable enough, with good enough margins, for Inbev to leave them alone?
  14. AB is brewing Goose Island's IPA, Honker's Ale, Harvest Ale, 312 and Summertime in it's Baldwinsville, NY and Ft. Collins, CO breweries. Clearly noted on the labels, but that is not much help when it's a draft beer.
  15. Good point, which slipped my mind.


    Though, that said- I would think AB is brewing those beers to GI specifications, at least for the most part. And at least for the time being.

    So even there, the potential brewing talent at AB is still essentially untapped. And willfully so.
  16. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    And considering Hall's replacement came from the Shock Top division, I would see GI is pretty much AB any more. That distinction that used to exist is much less so, if not nonexistent.
  17. jtmartino

    jtmartino Savant (470) California Dec 11, 2010

    No man, you're right. Forget overhead costs. Forget economies of scale. Forget the fact that I've spoken about this exact issue with Gary Fish, owner of Deschutes. Forget I said anything...you're right.

    If you don't mind, care to provide a shred of evidence supporting your claim?
    Bobator likes this.
  18. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    You do it.
  19. And what I'm saying is profit per barrel is not a good figure to use to determine profitability. That is the figure you stated.
  20. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    Ok. Fair enough. Maybe we've gotten away from the nuts and bolts of it.

    jtmartino's original statement was
    "High-end craft beer is really not that profitable"

    Do you agree with that?
  21. Hey, don't count out chemists! I graduated with a degree in chemistry and work in cell biology. I use these skills from my education and work experience in my homebrewing and it's helped immensely! Just because I understand the science behind it, doesn't make me any less creative! Those chemists and businessmen built a "better beer" but only in the idea that they want to make a beer with higher abv, sweeter, and cheap to produce in bulk. They were all science and no art of brewing, and that is where they failed!
    Peter_Wolfe likes this.
  22. jtmartino

    jtmartino Savant (470) California Dec 11, 2010

    That statement was made in regards to the industry as a whole. Market share and economies of scale.
  23. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    I'm gonna need to see a new deck. Crowdsourcing and synergies to demonstrate value added.

    #likeaboss
  24. Given the current market, I bet you could pull a pretty good gross margin on ultra high end beer, particularly if you can sell on site. However, it'd probably be hard to do it at a high volume (high meaning millions of barrels). AB will never sell enough high end craft (which I'm assuming you mean $10+ bombers at least) for it to add significantly to the profitability of the company. Where they may make their money is on the 312 type beers. I would imagine the BCBS, Juliet, etc. will be the Corvettes of AB.

    NOTE: I do not know actual figures from any brewery; I am simply making guesses.
  25. a74gent

    a74gent Savant (395) Massachusetts Mar 16, 2010

    I agree with your spirit, but AB can make a beer as good as anything a craft brewer could do.... IF they wanted to do so chasing the same styles. That isn't their goal...
    Bobator likes this.
  26. I am not anti-chemist (as a reminder Rebecca Reid is a Chemical Engineer who knew very little about beer prior to joining AB) but permit me to ask your opinion. If the goal of AB was to brew a ‘good’ beer which skill set do you think would be better to be head of the pilot brewery:

    · A brewer who is experienced in making beer (preferably ‘good’ beer)
    · A chemical engineer who knew very little about beer until a few years ago

    I do not want to disparage the past efforts of Rebecca Reid:

    “Ms. Reid recently helped reverse Bud Light's slide by creating the recipe for Bud Light Platinum after the company ordered up a sweeter variation of America's top-selling beer that's higher in alcohol but still goes down smoothly and isn't heavy in calories. Such a request wasn't straightforward: More alcohol typically produces a harsher taste and more calories.

    The Indiana native began playing with the formula in late 2010, experimenting with several batches over a year and tinkering with brewing times, temperatures and ingredients. Making beer can take weeks as barley and sometimes other grains are converted into malt, sugar and alcohol through heating, cooling and filtering tanks while being combined with water, hops and yeast.

    For Platinum, she overhauled the mix of grains, settling on a combination that lent a caramel-like note. She also altered the time the malt sat in the mash cooker; the longer it sits, the lighter and smoother the beer becomes. And she went low on the hops, which produce bitterness, to bring out more sweetness, among other things.”

    She was indeed inventive in creating a beer that met the AB marketing parameters of:

    · Higher alcohol
    · A sweeter flavor profile
    · While still not being heavy in calories

    Through her science she was able to meet conflicting requirements and still achieve on what the AB marketing folks ordered; a genuine feat of engineering.

    I suspect that most BA folks would not view the above a tremendous feat of brewing.

    Cheers!
  27. leedorham

    leedorham Champion (835) Washington Apr 27, 2006

    I've been discussing beer with others for most of my adult life and hear this refrain time and time again. AB could brew it if they wanted to.

    Well guess what? They haven't. I'm going to take a cue from AB's home state and say "show me."
  28. FWIW, I thought the Michelob DunkelWeisse was a tasty beer.

    According to a previous poster, this beer is no longer being brewed.

    Cheers!

    P.S. I wonder if Florian Kuplent (present day headbrewer of Urban Chestnut Brewery) formulated this beer since: “During this time at A-B, Florian was also given free rein to experiment with new ingredients and different recipes at the brewery’s experimental microbrewery, which was where he created a series of award-winning craft-style beers under the well-known Michelob brand.
  29. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    I tried it once, it was decent. If it had been random microbrewery instead of AB, I would have said, "good effort, hopefully they will improve". From AB, it was disappointing as they have the talent, in theory, to do better. In their case, I have to assume they put out exactly what they meant to put out, which was a decent version. It was no Weihenstephaner, heck it was no Franziskaner either. And, with Inbev owning the latter, I guess there really is no reason for the Michelob version to be made.

    Looked it up, BA scores agree with me:

    Weihenstephaner 4.26 (#1 in style)
    Franziskaner 3.82 (#15)
    Michelob 3.53 (#49)
  30. The intent of my post was to simply state that I thought that AB made a ‘craft worthy’ beer in Michelob DunkelWeisse. I think you agreed with me?: “If it had been random microbrewery …I would have said, "good effort”.

    Cheers!
  31. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    It reads that way to me. :)

    Of course, it only sold fairly well, so they dumped it (although this site doesnt list it as retired, so who knows, but I havent seen it in a while), while a craft-worthy beer from a craft brewery wouldnt have been.
  32. Well the DunkelWeisse is no longer ‘advertised’ on the Michelob website.

    I have no idea how well it sold for AB. I could see AB discontinuing this beer simply because it did not meet the company’s objectives for this beer; for example they may have established that this beer needed to meet a sales growth objective of a 25% increase every year for the next x years.

    I really don’t know the detailed specifics of how AB makes business decisions but I know that there overarching goal is to make lots of money. If AB had the comfort level they would sell donuts if they felt very, very assured that they would meet the business objections (sale, revenues, profit, etc.) by selling donuts.

    Cheers!
  33. a74gent

    a74gent Savant (395) Massachusetts Mar 16, 2010

    No doubt...they will make whatever sells while carefully managing their brand(s!). For thost who are into this kind of thing, it reminds me of reading about the things they sold during prohibition...
  34. Believe me, I was baffled to hear that AB's head of development was 29 years old without much knowledge of beer (I'm 25 with BA in Chemistry and beer server certified. I've applied to a few breweries using my combination of science and homebrewing knowledge in place of an actual brewing degree to no avail). Though the craft beer community may not be impressed, the rest of the world will be; because the rest of the world wants cheap, drinkable, and "drunk-able" beer. (yea, i made up that last word for "it'll get ya drunk").

    Even some of the beer community would be impressed, because AB has mastered one thing that all breweries strive for: repeatability. The produce millions of batches that are all the same. Any brewer would love to have the ability to make their beer the way they want, the same way, everytime; but there's always some slight difference. Which in my opinion, I appreciate! Those slight difference give the brewers and their beer character! They aren't robots designed to do one thing. Which brought me to my point that AB has become all science of brewing and no art of brewing. Real craft brewing is a wonderful mix of science and creativity to share with everyone!

    I may have gotten off topic. I mostly just snapped back because I identify myself as a chemist, but also as a beer geek and craft beer lover. Saying that chemists failed beer, really got me cross; though I'm sure (read: I know) the author wasn't directing it at me. My apologies.

    Cheers!
  35. I liked you word invention of “drunk-able”. I wonder if we will hear that word in the Anheuser-Busch TV commercial during the Super Bowl for Black Crown (which is also 6% ABV).

    I agree 100% with your statement of: “AB has become all science of brewing and no art of brewing”. A damn shame as in the past they had talented brewers like Mitch Steele and Florian Kuplent. I would be willing to bet that AB still has a lot of talented brewers. Unfortunately I don’t think that AB truly permits these brewers to be as creative as the brewers would like.

    Cheers!
  36. "craft" beer

    because only inbev would see it as such a new and strange use of the word that we have to put it in quotes
  37. That made me look it up, and it is correct. But then I thought, about 120 pints per keg, 240 per barrel, so that comes out to about $0.20 pint for a kegged beer (ballpark). Once again, it makes a taproom that gets $4-5 a pint a goldmine for a small craft brewer.
  38. I'm sure that there was another requirenent, that beer cost no more to brew than Bud Light.
  39. rlcoffey

    rlcoffey Savant (490) Kentucky Apr 20, 2004

    Well, I wouldnt say goldmine, but it, in many cases, is what allows them to stay in business.
  40. I am sure that a ‘desirement’ from the AB brass was to keep the cost of brewing Bid Light Platimum low but I suspect that in the overall scheme of things it likely costs a tad more to brew.

    Firstly, to produce a higher alcohol beer (higher gravity beer) typically utilizes more material (more grain). Maybe there is some scientifically/magically way to get more ABV with the same amount of grains but I am unaware of that.

    Also, from the article:

    “She also altered the time the malt sat in the mash cooker; the longer it sits, the lighter and smoother the beer becomes.”

    For a production brewery, additional time typically translates to additional money.

    But for all I know Rebecca is a genius and she figured out a way to produce Bud Light Platinum for the same cost.o_O

    Cheers!

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