In the article “A Glass of Handmade” published in the November 1987 issue of The Atlantic magazine, William Least Heat Moon along with a character called The Venerable explored the then early micro brewing scene in the USA. It’s one of the original sources of my interest in good beer, dense with keen observation and quotes from players now in their fourth decade past the interviews. One, Buffalo Bill’s Brewpub owner Bill Owens, was quite clear about his business model:
Owens brews six barrels every Monday, about three hundred barrels a year. “For a hundred and thirty dollars’ worth of ingredients I can make a twenty-five-hundred-dollar profit. A glass of lager – that’s all I brew now – costs seven cents. I sell it for a dollar and a half. Compare my profit on a bottle of commercial beer – forty cents.”
Making money. Along with brewing history, it’s one of the more interesting aspects of good beer but one rarely discussed these days by beer writers. In my conversations with small brewery owners, it’s something I often bring up much to their amusement. I remember the look on Ron‘s face a few years back when I started asking one upstate New York small brewery owner how much this bag of malt cost, how much he made of that keg. I don’t get it. I got answers. Yet no one seems to go there. You can think of as many reasons for that as I can but it’s annoying that such an obvious critical element of the trade is set aside or even hidden behind suggestions that there isn’t any money in making good beer.
For such a successful, now well established industry, well, that sure would be weird. I get it – and there are a couple of folk dabbling with macro-economic observations but getting particular brewers to unpack what they are up to, what the situation they are facing is more immediate. So, inspired by #FlagshipFebruary, I thought it would be good to explore my interest in the green, the black and the red and look to see who is out there doing the same thing. The balance scale and the small scale. Micro brewing micro-economics.
This month, I have a few interviews lined up and might see if anyone else is interested in having a look see wherever they are. #MoneyMakerMarch. Sure, it maybe started as a joke. But then it ended up making me think. And made me remember one of the things I was first interested in when it came to good beer, that seven cent per glass cost. Let’s see if anything comparable to that sort of gross revenue before taxes and other expenses is in anyway still possibly true. These days I take apart the price of multi-million dollar projects for a living. Let’s see if I can apply any of that experience to come up with anything unexpectedly interesting.
I agree it’s an interesting issue, but without looking at a brewery’s books, it’s very difficult to know how profitable it is. There are many complicating factors. It starts with debt, which few breweries will (or can) discuss. But even assuming a certain percentage of debt, you have to try to account for the structure of the business: how much of the beer is sold onsite; is it distributed through a third-party or self-distributed (or of both, in what percentages); how big and efficient is the brewery; is there a restaurant component?—and on and on. In some cases you might be able to guess at gross income if the business is simple structure. During the Trillium news, I speculated about income because I knew (1) how much beer was sold, (2) that almost all of it was sold onsite, and (3) the retail price. It was a big number, but because I don’t have any info on debt or how much the lease in downtown Boston is costing them, that only told part of the story. (Enough, I thought, to indict them for cutting already-low wages.)
Of course breweries are businesses, and many people write about that dimension. But calculating something as specific as per-glass costs isn’t going to be easy unless you can do a forensic study of a brewery’s business. (Those costs will vary widely.) I’ll be interested to see if you come up with something interesting, but I suspect you’re going to discover that the reason no one reports this info is because we don’t have the data to do so.
I agree totally – and really that’s not going to be the sort of thing I might learn. The seven cent glass is an artifact of that time. I’m really more hoping to see if there are a few financial household hints that might be shared, odd lessons learned along the way. For example, I am asking some folk today about their accountant love. Accountants get an odd amount of hate in craft beer but anyone I’ve contacted directly so far loves their in-house and consulting bookkeepers and accountants.
I keep meaning to do a per-ounce survey of draft costs in Portland and I keep not getting around to it. But some breweries charge $5.50 for imperial pints, while others offer non-barrel beer at six bucks for ten ounces. Consumer sees the price, shrugs, but the profit is … not identical.
I’d love to crack that nut. I bet there is a reasonable explanation that is based on rent + debt for the most part. Debt’s a killer. Though I sure can think of a few skimmers. Feel free to act as a #MoneyMarkerMarch foreign correspondent – or, better, vociferous critic. Some good can’t help but come of that.
I don’t remember that.
It was the talk of the town. Really. Somewhere between a wince and envy. I was touched.
https://www.themadfermentationist.com/2019/03/the-economics-of-opening-brewery.html
Not sure if you’ve seen this but there’s some great detail provided.
I did see that, Ryan, and I think I am going to post about that one this evening along with a comparison to the 1987 article which mentions many similar things.