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For all you industry folks, how much does a brewery make in profit on one barrel?

Discussion in 'Beer Talk' started by sandiego67, Feb 12, 2013.

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  1. sandiego67

    sandiego67 Feb 25, 2008 California

    I see these dinky breweries making less than 5,000 barrels per year. How much money could you possibly make on 5,000 barrels?
     
  2. marquis

    marquis Nov 20, 2005 United Kingdom (England)

    5000 barrels is between one and two million pints so there's scope to earn a decent living.
     
  3. tectactoe

    tectactoe Mar 20, 2012 Michigan

    That is an emormous range.
     
  4. gcamparone

    gcamparone Dec 6, 2011 Rhode Island
    Subscriber Beer Trader

    percentage wise? this is an extremely general question
     
    YogiBeer likes this.
  5. Tashbrew

    Tashbrew Dec 29, 2007 California

    Draft or packaging, or both and what percentages of each, taproom, restaurant, demographic of community, there are all sort of possibilities and course there is product line...
     
    YogiBeer likes this.
  6. checktherhyme

    checktherhyme Apr 8, 2008 Washington

    Breweries typically make the least amount of money selling bottles. The cost of packaging and distribution decrease profits. Selling draft beer straight out of the tap room is extremely profitable. Zero cost of transportation, no middle man, and they can serve it directly from the bright tanks.
     
    utopiajane and StrappingYoungLad like this.
  7. EnronCFO

    EnronCFO Mar 29, 2007 Massachusetts
    Beer Trader

    Sub 5000 barrels is dinky now?
     
  8. leedorham

    leedorham Apr 27, 2006 Washington

    There are hundreds or more breweries in the US providing a comfortable living for 2-4 people on 1000-2000 bbl per year.

    Selling beer directly out of a taproom you can easily gross $900/bbl. How much of that is profit depends on a whole lot of factors.
     
    StrappingYoungLad likes this.
  9. hopfenunmaltz

    hopfenunmaltz Jun 8, 2005 Michigan

    5000 bbl is dinky? There are > 100 breweries in MI and there might be <10 that make 5000 bbl or more per year.
     
  10. emannths

    emannths Sep 21, 2007 Massachusetts

    If you're interested, read probrewer.com. If you're looking at keg/bottle sales (wholesale), not brewpub sales, here's an estimate that ~3,000bbl is the breakeven point.
     
    jmw likes this.
  11. sandiego67

    sandiego67 Feb 25, 2008 California

    Thanks. This makes sense to me. I thought it would be closer to 5000 barrels.

    I understand that there are a lot of variables. I visit a lot of local breweries every week. Most are start-ups and are producing a few thousand barrels per year max. I see a lot of staff, a lot of warehouse space, utilities, equipment, supplies, etc. to pay for

    If they are selling a typical Pale Ale in a 15.5 gallon 1/2 barrel for $150, I was wondering how much of that is profit?
     
  12. sandiego67

    sandiego67 Feb 25, 2008 California

    It is actually 1.24 million 16 oz pints.

    If you were selling all of the beer at your brewpub 7 days a week, you would need to sell 3,397 pints per day. If you are open 12 hours a day, you would need to sell 4.7 pints per minute.
     
  13. YogiBeer

    YogiBeer May 10, 2012 Illinois

    ISO Investor. It's that easy, right? :)
     
    Highbrow likes this.
  14. oregone

    oregone Jul 2, 2008 Oregon

    Short answer: enough.
    Long answer: depends on packaging, style, distribution costs, turnaround, operating costs, cost of goods sold, labor, etcetcetc. There's not much money in most bbls of beer, but multiply say, $50x5000...
    There's a number of breweries cranking out beer in that range or less that have been around for awhile. Many grow out of it when possible. You rarely see breweries putting out 6packs in that production area as the money Is not necessarily there.
    Some possible costs: $72 grain ($.8/lbx90lbs for mix of good specialty and quality base including transport)
    $20 hops ($10/lb at 2lb/bbl. This is highly variable)
    $5 yeast (assume a brewer this size is paying around $200/batch, divide by 10bbl and by four for repitching)
    $10 misc (cleaning materials, nutrient, clarifiers, etc)
    That puts you at $107/bbl. This isn't the craziest example, but it can be done cheaper (less expensive grain and hops, less ingredients overall) but it can also go up (add barrels, more grain or hops, not reusing yeast, etc). This also fails to account for any of the other costs which can vary wildly, nor bottling/kegging costs which also are significant and highly variable.
    I think it's a safe bet that your 'other' costs for each barrel won't be less than $20 unless you're very fortunate and hard working, so let's say $40/bbl at the low end. That brings the total to ~$150/bbl.
    Keg or bottle? Keg costs can range from $5-$25+ depending on style, age, turnaround, procedure, loss/theft, etc.
    Bottling costs vary wildly, but surely not less than $.75 for some mediocre bottle and label, plus packaging. And there's labor associated with both.
    So, for kegs tack on $10 each (2/bbl). Add $10 more (labor, sanitation, etc). $170/bbl. $85/keg.
    Bottles: assume a 10% loss, so ~160btl/bbl (22oz). 160btl x .75/btl = $120. Add the $10 (above). $280/bbl. $1.75/btl.

    This is for a pretty straightforward, say Amber or Pale -esque brew. Add in some gravity, higher hop rates or expensive hops, better bottles or labeling, corks and cages, wax, barrels, etc, and it starts going way up.

    Kegs:
    Distribution: tack on 20-35%+. Your keg is now ~$110.
    End profit: Tough to move a keg in this style for over $125, so let's multiply the $15x2 for $30/bbl.

    Bottles:
    Distribution say you sell this to a distributor for $3/btl. Distributor markup makes it $3.90/btl
    Retail: Average mark-up is 40% (highly variable). Now at $5.46/btl.
    End profit ($3-1.75) $1.25/btl. Times 160btl/bbl equals $202/bbl.

    Again, conservative on a lot of the costs. Assuming these numbers and two thirds draft, the total at 5000bbl would bring it to around $130k per year. So, back to the short answer: enough.
    Unless there's a few owners or you suck at management.
     
    Beergelden, beernads, drtth and 3 others like this.
  15. Jkoeneman

    Jkoeneman Jul 30, 2010 Indiana

    Lots of high level assumption here, but just strictly someone walks in to the tap room and says, "I want a 1/2BBl keg" using your price.

    Assume 10,000 Sq. Ft and 3,000BBL

    Costs:
    Materials (Including Utilities) per keg = $35
    Rent (10,000sq ft * $3 sq.ft. / 6,000 Kegs) = $5
    Staffing ($420,000 / 6,000 Kegs) = $70
    Taxes: (Fed: $7/BBl, State = $3.00/BBL) $5
    TOTAL COST: $115
    Price: $150
    Profit: $35 (23%)

    Or what Oregone said: Enough, sometimes, depending on a ton of externalities that are tough to control if you're not careful.
     
    oregone likes this.
  16. oregone

    oregone Jul 2, 2008 Oregon

    Sorry for the long response.
    I like seeing the question 'how do these guys make money" as opposed to the 'why are they charging so much," but figured I'd try to pencil it out instead of posting more conjecture.
    There's a ton of variables here, and agree with the above poster that youd be hard pressed to sell that quantity in pints at a pub. Not to mention while you remove distribution costs and store markup, you add a whole lot of overhead and lose a lot of exposure.
     
    Beergelden and Zach136 like this.
  17. reverseapachemaster

    reverseapachemaster Sep 21, 2012 Texas

    This is an extremely vague question (kind of like asking how much money can you make selling hamburgers? well it depends on the ingredients and price point...) but it does point out how difficult it really is to be an extremely small craft brewery and earn a living, let alone generate any profit. When I see people trying to open a 1/2 BBL brewery I just shake my head because unless you have next to no costs and can sell away all of your beer at a decent price in the taproom you're going to have a hard time just paying off the brewery equipment, which means you're brewing nonstop on top of working a full time job elsewhere (as is usually the case with these incredibly small breweries).
     
    oregone likes this.
  18. oregone

    oregone Jul 2, 2008 Oregon

    Also decent numbers. Most breweries don't sell the bulk or even a large amount of kegs directly to consumers though.
     
  19. sandiego67

    sandiego67 Feb 25, 2008 California

    Is it safe to say that not all of these brewers are getting TV shows and travelling around the country to all of the big beer events while Twittering and Facebooking all day?
     
  20. abkayak

    abkayak Jan 8, 2013 New York
    Beer Trader

    its not proper to ask what someone makes as profit.....you should only be concerned with what your willing to pay
     
    Aberns and HipsterBrewfus like this.
  21. sandiego67

    sandiego67 Feb 25, 2008 California

    I'm pretty sure that lenders and investors are concerned about profit.

    It is clear that there are a lot of brewers who have figured out how to make a living with their hobby but are limited on their growth potential.
     
    jesskidden and corbmoster like this.
  22. reverseapachemaster

    reverseapachemaster Sep 21, 2012 Texas

    In addition to prorated costs of insurance, employment taxes, utilities, possible workers comp insurance, license renewals, keg shells that never return, principal costs on equipment, dumped batches, test batches, beer donated/given free, accounts that never pay, loan interest, advertising, etc.
     
    sjjn and oregone like this.
  23. commis

    commis Jul 21, 2009 Massachusetts

    What? It's not improper. Vague and not carefully worded maybe but it's not improper. He isn't asking his father in law how much he pulls annually... He's asking nothing more improper than something along the lines of " how much profit does each F150 make Ford".
    Calling it not proper is bizarre.
     
    corbmoster likes this.
  24. otispdriftwood

    otispdriftwood Dec 9, 2011 Colorado
    Beer Trader

    If you can hype up your beer enough so that you can charge enough to make $100 profit per barrel, that's $500,000. Not bad.
     
  25. maltmaster420

    maltmaster420 Aug 17, 2005 Oregon
    Beer Trader

    That was an awesome post, but I wanted to firm up your numbers on this point. The average wholesale price for a 1/2bbl is now somewhere between $140-160, depending on the brewery.
     
    oregone likes this.
  26. oregone

    oregone Jul 2, 2008 Oregon

    Haha!
    I knew I should have turned to you. You've got the up to date info (I remember being corrected on the Oscar Blues price hike).
    Without digging out a year old distro portfolio, is that standard even for a regional say, pale or such? Has it really gone up that much? Yikes. Guess it makes sense with the dept load most breweries are carrying.

    Edit: I also failed to include taxes which add around $5/keg or more depending on state. Pointed out above. Still...
     
  27. Aberns

    Aberns Jul 9, 2012 Illinois

    I would say calling a 5000 barrel per year brewery 'dinky' is whats truly improper here. I'm sure (although not certain) there are plenty of brewers out there who would slap you for calling their brewery 'dinky.'
     
  28. abkayak

    abkayak Jan 8, 2013 New York
    Beer Trader

    sure its not proper...he's asking industry folk what they see as profit..you don’t do that. now talking about investors and lenders... you do your own home work for them and don’t pull down loose #'s from a forum.. if he's just a drinker then he should just be concerned with what he is willing to pay...and go try to get that # from Ford see how much info you get there
     
  29. rlcoffey

    rlcoffey Apr 20, 2004 Kentucky

    From the 2010 Benchmark and Best Practices Survey, EBITDA (Earnings Before Interest, Tax, Depreciation and Amoritization) was $47 per barrel for production craft breweries (all sizes).

    $7.85 for breweries under 1k bbls in size.
    $59.74 for 1k-7.5k
    $37.28 for 7.5k-50k
    $59.28 for 50k+

    Interest, if you have loans, and Depreciation for equipment are going to eat into that before you get to net profit, but those are so variable with different particular conditions of the individual brewery that EBITDA is probably the best # to work with.

    That drop off per barrel for the middle group is weird, but Im guessing that the small guys get a lot more revenue from on premise sales and the big guys have economy of scale in their favor.
     
    oregone likes this.
  30. emannths

    emannths Sep 21, 2007 Massachusetts

    Umm...http://corporate.ford.com/our-company/investors/investor-quarterly-results

    Fwiw, if a brewer decides to sell a bomber of IPA for $7 amid $10 6pks, it seems reasonable to ask why it deserves the premium. Many brewers and their advocates respond with "well, they're small, so it's hard for them." It's not reasonable to ask "how hard?"

    Either way, OP came at it from the opposite side--in disbelief that one could make a living as a small brewery.
     
    jesskidden likes this.
  31. oregone

    oregone Jul 2, 2008 Oregon

    Can't it be a middle ground? I certainly wouldn't ask a particular brewmaster or owner what they're pulling in per bbl. But I also personally don't see an issue with wondering if these guys are making money, and if so, does anybody have some realistic numbers.
    I believe that it's common knowledge that nobody is getting rich in the industry (even the Rue's had to buy their jet second hand), but asking those with some experience about possible margins shouldn't offend anyone.
    See, I can agree with both of you!


    PS: I don't actually believe that the Bruery owns a jet. Unless it's invisible. And they bought it from super heroes.
    Your society dollars are still not going to jet fuel. Invisible or not.
     
    commis likes this.
  32. commis

    commis Jul 21, 2009 Massachusetts

    Your logic escapes me. Calling it not proper is bizarre. Asking what a company makes selling their goods is a pretty innocent question regardless of his motives. Industry folks have chimed in and tried to answer his question so as of yet he hasn't offended anyone with any more severity than he might by putting his elbows on the supper table.
    OP, when I used to sell 1/6 barrels of homebrew to locals that wanted them for parties they were throwing I used to make between 15-20 bucks. Now you know my dirty little secret.
     
  33. oregone

    oregone Jul 2, 2008 Oregon

    You might want to keep that.... Secret?
     
  34. commis

    commis Jul 21, 2009 Massachusetts

    I put my elbows on the table too. Miss Manners and the ABC can kiss my pale ass.
     
  35. maltmaster420

    maltmaster420 Aug 17, 2005 Oregon
    Beer Trader

    Yeah, that's pretty much the standard. The things you tend to see in 6pks for $7-8 (Deschutes, Full Sail, Widmer, etc) are at the lower end of the range, and the "premium priced" breweries like Stone, Rogue, DFH, etc, tend to be on the high end. Some of the self-distributed breweries are a bit less expensive than the average, but they generally don't undercut anyone by much. Breweries like Hop Valley or Barley Browns know what the bars are paying for stuff like Mirror Pond or Total Domination, and if they're making comparable beer there's no real reason to undercut them and deprive yourself of profits.

    Disclaimer: Familiar breweries were used in this post simply for the sake of being relate-able examples. Nothing in my post is intended to portray the actions, intentions, or business practices of any specific brewery. (hopefully that saves me from the lawyers)

    edit: before anyone accuses me of releasing sensitive info, I just wanted to point out that one of the largest distributors in the state offers dock sales, and their prices on that page are within a buck or two of the wholesale price that bars pay. As you can see, most of the things they offer are around $150. They also don't mention it on that page, but the things in the $130 range are actually 50ltr kegs (13.2 gallon) rather than full size (15.5 gallon) 1/2bbls.
     
  36. Grinder

    Grinder Dec 28, 2007 Wisconsin

    I'm involved with a 1BB brewpub which is doing nicely brewing 2 BBs a day. Hoping to expand to a 3BB system this year. Wisconsin is only $1 a BB in tax I think but they want to double it LOL
     
  37. rlcoffey

    rlcoffey Apr 20, 2004 Kentucky

    I wouldnt say "nobody". But it is a very small number of people.
     
  38. abkayak

    abkayak Jan 8, 2013 New York
    Beer Trader

    idk maybe I’m wrong...but I thought this was Beeradvocate..not what's P/L of the microbrew biz. as someone posted there is a better place for industry insight... I don’t ever think it's proper to ask what someone makes $$... and insiders giving answers are probably fewer than those that would disclose this info...again, maybe I’m wrong....I’m just glad they are taking the risks and brewing for us...and growing up around my house you got your ass beat for putting elbows on the table.......cheers
     
  39. rlcoffey

    rlcoffey Apr 20, 2004 Kentucky

    An addition to my earlier post: While Im not going to post any more current numbers I may have had some access to, I can say that the business atmosphere for the nanos has changed. I think it is possible for the under 1k guys to make enough to be "profitable" at some level now. Probably not enough to cash flow a bigger brewery, but much better than those numbers I posted earlier would suggest.

    That link to probrewer is pessimistic in 2013. Maybe. At least a little. Probably still sound advice though.
     
  40. IamMe90

    IamMe90 Sep 4, 2012 Wisconsin

    Pretty sure this discussion thread isn't significantly impacting the lives of any microbrewer in the country, so you can probably relax.

    And I'm sorry that you got your ass beat for putting elbows on the table, that's terrible.
     
    Domvan likes this.
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