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Batch Insurance

Discussion in 'Beer Talk' started by kylelenk, Feb 1, 2013.

  1. kylelenk

    kylelenk Savant (395) Michigan Apr 17, 2012

    Does anyone connected with larger breweries know if they hedge batches? For example, KBS or BCBS. I did the math to take, for example, 390 barrels slated for this years release of KBS and converted it to ounces and then to 4 packs and came up with roughly $800,000 (based on $25 four pack I paid last year). Now obviously some will be kegs and this is calculated with end-user price but it's still safe to assume Founders has revenues of over $400,000 on this batch.

    If the batch were to become infected or any other incident, it would be a huge loss of profit (I'm sure KBS is one of their higher margin beers) and loss of brand reputation. Didn't know if anyone had thoughts on the issue or if breweries protected against it.
     
  2. One thing to note is that all 390 barrels are not nessesarily single batch. Hopefully if something went wrong it would only cause a loss of part of a batch.
     
    Eriktheipaman likes this.
  3. Agreed with the other Eric. Not to mention I HIGHLY HIGHLY doubt that KBS is one of their higher margin beers, assuming you mean grossing...
     
  4. I think that an insurance company would be hesitant to offer said insurance. Microscopic germs can ruin a batch. Insurance is for accidents, but wouldn't it be super easy to ruin a batch if you didn't think it turned out the way you wanted it to? Remember when Sam had to dump that batch of 120 Min?
     
  5. As a business you can get almost anything insured for the right price. Seems like a policy few would issue and those that would issue it would likely require tight controls to prevent likely infection. Barrels would probably be out because the risk is much higher than stainless steel or even plastic fermentors. It wouldn't make sense for a brewery to want an insurance risk manager telling them how they can or cannot brew beer. Likely easier to build the cost of dumped batches into the price of each bottle and self-insure against lost.
     
    Mothergoose03 likes this.
  6. Nectar

    Nectar Savant (310) New Jersey Jan 17, 2013

    I find it hard to believe that an insurance company would take up an account with an item that is so volatile and 100% in control of the insuree.

    Fyi: I don't know shit about insurance.
     
  7. Your car is 10 0% in your control and it is an extremely dangerous instrument. You are able to insure that arent you?

    The answer was given above. You can insure anything. The cost and insurance requirements would probably make it prohibitive.
     
  8. This is a scenario where it is so unusual for this type of coverage that its availability would only be with a specialty company that would custom-write a policy (probably in London where they do these kinds of things), and if the value of a batch of the beer (per the OP) is $400,000 then the premium cost would likely be at least $400,001. So it really isn't practical. :)
     
  9. Nectar

    Nectar Savant (310) New Jersey Jan 17, 2013

    Not meaning to split hairs here, esp with a fellow Jerseyite. However, there are plenty of instances where damage could be caused to your vehicle thats out of your control but covered under your insurance.

    Fyi again: dont know shit about insurance.
     
  10. Actually, there are many carriers that provide coverage for products in production - in this case, for beer that is still in tanks/barrels/etc. I have written policies that insure against spoilage, leakage, explosion, and other exposures. Additionally, many carrier provide coverage for equipment breakdown to protect the equipment used in production. Finally, you can also pick up business income coverage that will apply in certain circumstances in which there is a covered loss that prevents a business from operating under normal circumstances.

    Self-insurance is definitely an option. Typically, for larger customers, it makes the most sense to partially self-insure.

    The best part about all of this is that while there are specialty programs, you don't need to go to the London markets for this coverage. We can often write these coverages through admitted state carriers at reasonable prices.

    I am licensed to provide insurance services in Pennsylvania only; it's important to get information specific to you location. Remember, every insured is very different and an insurance/risk management portfolio should be tailored to specific needs.
     
    Mothergoose03 likes this.
  11. Amenders above covered it pretty much to a t. We hold insurance like that. In most cases it is not for a specific batch..it's for loss of use of equipment..say fire hurricane..power outage etc. but one would guess that a specific batch could be covered if desired. But also remember that the batch itself is not that expensive to make..it's the time, labor, barrels if aging, packaging, distro etc.

    The other issue about insurance is if you use it the cost goes way up. So most breweries have insurance but don't often use it..and as someone else mentioned move to self insurance as things get bigger.
     
    Mothergoose03 likes this.

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