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Discussion in 'Northwest' started by Dajtai007, Sep 17, 2013.
I wouldn't expect to see it less than 60 bucks. I also wonder if it will cash only.
Assuming Pannepooch is worth $15, I'd estimate the cost around 15*2 + FftW 12 + CAftW 17 + Michael 14 + DC 5 = $78. Maybe a discount for bulk, maybe not so I'd guess $65-80.
I am sure this has been touched upon in the past, but I'm just curious with regard to the pricing proposed above. I understand that barrel-aging is an expensive and time consuming practice that can explain a portion of the higher prices, but when we start getting into the greater than $1/oz. realm, I begin to wonder - why are these bottles so expensive? I don't mean to turn this into a standard BA 'you don't have to buy it' type discussion - I'm legitimately curious from a homebrewer perspective what makes all of these bottles so pricey.
As an aside, is Michael as disappointing as some of the more recent reviews seem to suggest?
:-) I share your curiosity on the subject... so much so, that I posted a question about it on the Beer Talk forum some time back. You can read through the thread if you're interested... there were a lot of responses and information brought up, including some posts from various brewers/breweries.
As for Michael, I thought the most recent edition was pretty good. The first one (released back in 2009), not so much. At least for me, it's still not worth the price.
Thanks for the link - I read through the thread and essentially the cost boils down to something that looks like this:
Cost of barrel + Shipment of barrel + Cost of ingredients + Inventory Space + Opportunity Cost in not using space to produce other non-BA beer + Additional time and labor on part of brewer + Cost related to potential or actual loss of beer through infection + Interest factor due to initial outlay of funds at beginning of process, only to recoup cost at a later date + additional overhead costs (utilities, rent, retail space, etc.) + limited nature of product driving higher demand = Price of BA beer.
So some basic math: one barrel can typically yield about 375-400 22 oz. salable bottles by a conservative estimate. That is about 8,800 ounces of product available to the consumer (this takes into account bottles not sold, those kept for tasting events, by the brewer, employees, etc.). At 12 oz. for each bottle, you're looking at about 700-725 bottles, again, as a conservative estimate.
700 bottles at, say, $15 a bottle is $10,500 in revenue. I'm not going to begin to speculate on the values of the costs given above, but I find it interesting that a small-scale operation (relatively speaking) such as Central Waters can sell fantastic BA beers in 4-packs for $12-$14, and run a successful business at the level of $2,000 - $3,000 per barrel aged variant (given 700-800 12 oz. bottles at $3-$4 per bottle), and there is such variability in the prices for these variants in the industry.
Just some corrections on numbers:
~60 gallons/barrel (averaged between bourbon and wine)
~15% loss after a year of aging (it's what we see averaged out)
~5 gallons of trub (you don't pull the settled solids), transferring and bottling/kegging loss
=~483/12oz, ~263/22oz, ~228/750ml
Barrels (and shipping) are expensive and variable in cost. A decent bourbon barrel will cost north of $100, and then freight is factored in. Two barrels per pallet, and depending upon your location, it could run you that much again per barrel to get it to you. A real examination of barrel costs to smaller breweries can be found online at Rocky Mountain Barrel. Wine barrel pricing in the market can be observed online at Wine Business in their classified section.
If you're large enough, buying buy the truckload will save some good money. Most people aren't purchasing 100+ barrels at a time though.
Labor adds up. It's not the largest added cost, but it's a very real addition when you factor in multiple transfers, analysis, etc.
Packaging costs are often absurd. If you're putting it in cheap 12oz bottles, great. If it's going into waxed 22oz, corked and caged, or generally most higher pressure rated 750's, it's often more for the packaging than for the ingredients.
It's worth remembering that barrel aging beer is a risky proposition. Some added cost needs to be factored in for barrels that don't mature as desired, develop infection, leak, break, etc. It happens. We've lost ~15% of our lambic inspired production already to barrel failure, and none has even been bottled yet.
The final cost to consumer is a function of each individual breweries goals and business specifics. If you are operating at capacity and the space those barrels are stored in could be housing a fermenter or brite tank (or multiple) used for regular beer, then you've lost a minimum of of 24 regular batches of beer for one or two batches in barrel (assuming a years worth of aging). That's a lot of lost revenue and seriously hurts cash-flow.
Some breweries age for only a couple/few months in barrel, so are able to turn that space multiple times. Some reuse barrels multiple times. Some are just logistically and/or spacially able to process these products better, or benefit from economies of scale or established programs. All of this is to say that there's no 'formula' that applies to each brewery.
I don't know what the specifics are in HOTD's case, but can you imagine the mayhem if he WERE selling for half the price of what they are? Take the lively discussion here after the last release and magnify it by ten. Not to make excuses for anyone, or justify pricing. Just my thoughts there.
And of course there are more than a few breweries where the retail price is more opportunistic than necessity based. It's a business/industry after all.
The opportunity cost piece seems hard to factor and I think people are misusing it. The assumption seems to be that you could just have another fermenter or brite tank in the space. But that's not the case; the capital needed to buy these items is, I would guess, high. If you had to take out a loan to get those tanks, interest payments come out of the opportunity cost. Getting more floor space, on the other hand, is cheap in most locations. The cost is the tanks, the barrels, etc. Ramping up barrels has to be cheaper than the tanks. So constraints on capital probably help you make that decision.
And if you have the capital readily available, it's probably not either / or ... it's probably both. In short, I doubt there are many brewers really considering the opportunity cost trade off of floor space since it's relatively plentiful. I'm guessing you could do barrels in a remote location even. Labor would be more of a bottleneck, right?
I think one can process all the math they (read: me) want to try and justify the price, but this is the most relevant argument when all is said and done. Very well said.
It's your last point where the rub is for a lot of us I think.
I'm completely OK with a brewery owner making a good living from his craft, and if he's good at what he does (as HOTD obviously is), why shouldn't he be rewarded.
The reason I started my original post regarding the cost of barrels, had to do with some repeated commnets I'd heard from a local brewer out East that he was just attaching a very normal and reasonable mark-up for his beers. This particular brewer doesn't actually own his own brewery (he's a "gypsy" brewer), and yet one of his barrel aged beers was retailing for $20 for an 11.2 ounce bottle (hey, it was aged in Pappy Van Winkle barrels, and we ALL know how expensive those spent barrels are). So like Lansman I gather, this made me very, very curious.
I guess we all like to think of our favorite brewer as working hard to barely eek out a decent living, keeping costs down so he can make his beer as accessible as possible to the masses. I guess it just grates a bit when we think of an extra $5 or $10 added to a bottle of beer, just so he can make an extra boat payment this month. Hypothetically speaking of course... :-)
5 gallons of trub (you don't pull the settled solids)
Really? Pretty sure there are a few exceptions here.....
You are correct that the cost of tanks are high. It's worth remembering that they immediately start increasing revenue though, whereas barrels still have significant cost associated and may be a year before they contribute to revenue.
I think it'd be a hard decision, even assuming an abundance of space, to dedicate it to barrel storage as opposed to making the investment in fermentation capacity for most breweries. In either case, the cost for the beer should be calculated by the volume moved through the space. And I think the assumption that most breweries have an abundance of space is not true. Most of the craft breweries in our state are operating at capacity. Most can't just tear down a wall to expand floor space. Expanding space is actually quite expensive most times.
To make room for additional barrel space, we are in the process of moving our entire operation to a new location, the costs involved in which, between necessary spacial and equipment modifications and lost production are in significant excess of the cost of purchasing multiple new tanks. So while cost per square foot is quite low on a monthly basis, actual cost is very high. The same is likely true for most breweries. Running full barrels of beer between locations is risky at best, impossible at worst.
It also adds to labor, between the actual transfer of product between spaces, but also in the hours invested in permitting, licensing, etc. for the new location. It really is a full time job for at least a few months.
As far as labor being a bottleneck, I would assume that just like more fermentation capacity (tanks), the near immediate return on dollars spent justifies the cost for most businesses. I may be misunderstanding the labor bottleneck question though?
You SHOULDN'T pull the trub. Or bottle it. I'd thought that was standard practice/quality control too, but your allusion to recent experience reminds me that not everyone sees it that way...
It should also be noted that purchasing tanks is an equity investment unlike barrels or space (unless you're one of the fortunate few that purchased their production space). Makes it an even more attractive option, and certainly shouldn't be ignored. So when making the determination to utilize space (assuming a finite quantity) for barrel aging versus expanding tank fleet, some consideration needs to be made for the fact that barrel aging capacity growth is effectively a zero equity to cost option versus developing business assets.
Again, it's different for every business though, and it's an interesting debate.
De Garde - I was just speculating that getting more space may be easier than getting more skilled labor. I'm assuming that to barrel age well is less regimented and predictable than non-BA brewing (in most instances), meaning you'd need to constantly have skilled supervision on hand.
All the arguments in favor of expanding tank fleet rather than adding a barrel aging program make it curious that so many small breweries do the opposite. They're either A) making a poor business decision, B) doing it for the love / curiousity of barrel aging; or C) simply don't have the available capital for tanks and are choosing barrels as the lower barrier to entry way to maximize the return on their floor space.
I think it's complicated. I'd say that yes, it would likely make more sense to add tanks, BUT some of the difference can be offset by higher priced product among other things.
It's worth remembering that most of us got into this because of passion primarily, not dreams of wealth.
Which really means that all of the above are correct.
Of note though; financing is available for tanks, but not for barrels as they aren't deemed a depreciable asset. For some, it is likely harder to institute a barrel program than spend the larger sum on tanks.
There are benefits beyond easily tracked financial ones though: a good specialty beer can increase brand awareness, garnish excitement for your business, excite staff, etc. And if sales of your core product are flat and you have the space, it's a no brainer. And if you're growing and have the space (many new breweries), then both make sense.
Edit: I think we make a good example here. Financially, it would make much more sense to have started a brewery focused on good IPA and DIPA. Its not what we wanted to do though, so we run our business the best we can knowing that it's not as profitable as it could be, but tempered by the fact that it's what we want it to be. I would think many breweries barrel programs operate under a similar scenario/mindset.
So how about that anniversary party? Only 5 more sleeps!
I'm getting excited. All I know is that I enjoy pretty much all his beers and I plan on drinking a lot them on Saturday. His beers are no different from the price point of sours out there. Geez cut him some slack. He brews just over 500 bls a year.
I'm stoked. Can't wait for the party. Bob, Jim 08 and 09, Matt 10 and 13, AftW, Maple BFftW, etc. Leave with some DC, hopefully some Otto, plus great people, food, music, and the vintage 6 pack. See you all Saturday!!!
does anyone expect a large line before the event?
Just a line with 300 people.
Again, just my two cents on this, but unless you're hoping to score a table for your group or party, I'm not sure I see the point of standing in line for this event. Just to use fred fest as an example again, due to better than expected traffic from Eugene to Portland, I got to the tasting room roughly a half hour before it opened. By the time I arrived, I'd say there were close to 100 people in line in front of me, and it took just under an hour for me to get inside. However, a half hour after I got in, folks arriving for the event were able to walk right in, with no wait at all. Want to know what I was able to get that they weren't able to get? Nothing. Not a thing. I think there was some concern that one of the barrel aged sours for the event might go pretty quickly, but given that everyone was only getting a couple ounce sample pour, it turned out not to be a problem.
I can't see any reason why this event will be any different, and as I'm flying solo for this event, I can't see any reason to stand in line.
Thanks for the informative post.
Which doesn't seem to have a huge impact on HoTD pricing. God, imagine if they were caging and corking. What would 15/12oz bottle turn into??
All of your points about what goes into the cost of producing the kind of beer that Alan makes are relevant, but I think the biggest part of the pricing is probably just above.
HoTD isn't exactly making beer for the common man. They make a luxury product that is consumed largely by middle upper class guys that can afford to take a weekday off to stand in line or fly into PDX from all over the country for an event. Ounce for ounce they HoTD is probably one the most expensive breweries in the country and the demand is there, so they charge what they can (and could probably charge more).
People wonder why it is so expensive and I think the answer more than anything else is because it can be.
Agreed on all accounts.
I would add not only that it CAN sell for what it does, but also that it SHOULD. You won't hear me advocating for higher prices in general, but with the general craziness surrounding HOTD releases, it's fairly obvious that even at the current price point, it's likely undervalued. I'll repeat what I said above: can anyone imagine the madness if it were selling for significantly less?
It's also worth noting that Alan and staff don't appear to live a Rock'n Roll lifestyle. Typical of most breweries, whatever the price point, it seems to go into making more beer and improving equipment and facilities. Hopefully there's something left to have some good food on occasion and set some money aside for a rainy day.
Very true John about standing in line for little to no benefit. I've found the same to be true at beer festivals. The February Belgian Fest in Seattle is one of my favorite events I look forward to each year. You can stand in a long line waiting for it to start or show up a few minutes after the start and walk right in. I expect this to be no different especially given your experiences.
As for the comment about HotD not for the common man, very true. Last time I was there a couple came in, sat next to us at the bar, and asked for a Bud. They were astonished they couldn't have one there, got up and left. Had a chuckle at their expense with that one.
edit: one more thing. I'm fine with their pricing and I love their bottling preference. I much rather pay $15 for a 12 oz than $30 for a 22.
I wish them well.
Was Fred Fest one or two sessions? I'm only considering showing up early since I'm going to the second session and don't want to miss out on anything that gets low after the first session.
Just one session.
Also, I can't imagine that Alan would allow that to happen (running out of something during session one, so that those in session 2 would miss out). My guess is that he'll have a certain amount of each beer allocated for both sessions, so that folks in both sessions will have an equal opportunity to try the beers on draft.
.... but then there's no incentive for going to the 1st... lol
Yeah I think or hope there will be enough for both sessions, really looking forward to this. I'll be with my wife and probably in my opus x hat.
Is anyone is looking to sell a ticket I'd love to buy it! I had some things moved around and can go this weekend!
And the press joins the party:
does anyone know if tickets are transferable? i may not be able to make it and i would like to pass my ticket along to a friend, but the event page says the ticket purchaser must be present. any info?
Maybe contact the tasting room to see what they say? Given your particular circumstances, I'd be surprised if they couldn't (or wouldn't) make some sort of arrangent with you.
That being said, my guess is you could probably just have your friend identify himself as you, and there likely would be no problem. I forgot my invoice for Fred Fest, but the folks at the Will Call table didn't even ask for it. I gave them my name, they checked the list, my name was crossed off and they handed me a glass.
I would still recommend contacting HOTD and seeing what they suggest, rather than going the latter route I suggested (as a possibility).
just called and Wendy said they are NOT transferable. She cited the cancellation dates and that the ticket purchaser must be present, both which were posted on the ticket page.
fuck it, see ya there.
A friend of mine went to the HOTD site, recently, to see if he could get a ticket for the evening and he said there's some box that says "Last chance code" or some such thing. What's that about??
Probably for the people who received a personal invite from Alan.
Anyone hear anything further about the cost of the "6 packs" to go on Saturday? Previous speculative comments about the likely price seem reasonable, but it would be nice to have an exact price, and nice to know whether purchases will be cash only, or if one can use a credit card.
Yeah I'd like to know that as well
$80 for the 6-pack. $18 a bottle for Pannepooch Reserva on-site.
Nice! This will help towards being my most expensive beer trip ever