Thursday, January 14, 2010

The Cost of Making Beer

One of the most common questions I get when someone asks about my brewing hobby is how much it costs.  My usual answer would be to give them the cost of the grain/hops bill of my most recent batch.  Most of the time I figured on $60 for a 12 gallon batch.  Broadly applied, $5/gallon, about 10 bottles per gallon equals $0.50 per bottle.  Of course it is more complicated than that, as there are other costs than the ingredients such as fuel, cleaners, caps, adjuncts, water, electricity, etc, and the bottles per batch vary too (sometimes you get more, sometimes less), as do fuel costs, and even the raw materials (grain and hops) have changed batch to batch.  You get the picture.

Since I went about the task of justifying a grain mill purchase based on a potential cost savings, I figured I ought to make a rough estimate of all of my costs.  Of course, I only had the receipts for a few batches, and had to guess and estimate usages on other things.  If I couldn't ascertain what I actually paid, I used today's prices to estimate.  My good records only go back to June (when I started using qbrew software), and I found I rarely made note of the number of bottles we actually got.  There were also costs I couldn't estimate such as electricity (used for washing/sterilizing bottles in the dishwasher (with no detergent)) and water (much water and hot water is used to clean) which I ignored altogether.  And of course, there are no labor costs, and since I recycle my bottles, no costs there, either.  Nor is there any equipment depreciation  or packaging costs.  

What I came up with was about $0.57 per bottle on average.  I also figured that I could reduce the costs to under 50 cents a bottle with the grain mill and buying in bulk.  Still, to compare to the retail cost of a craft beer six pack of $7.99 to $9.99 (or $1.33 to $1.66 per bottle), or the $2-3 for bar prices and I am personally ahead, but if I had to use new bottles for each batch (like the pros), my costs would be about $1.15 per bottle.

I have to figure that professional craft brewers can make beer for about 25-40 cents per bottle of comparative material costs (Iess for mega breweries).  This is a wild-assed guess on my part; it could be 6 cents per bottle for all I know.  That means that labor, packaging, marketing, profit, equipment depreciation, shipping, and distributor and retail mark up is about $1/bottle.  So, for professional brewers volume discounts on materials, high efficiencies, and large volume batching are the keys to profitability.  I have no idea what a craft brewery's profit per bottle actually is, and have no way of guessing.  With the cost of a Super Bowl ad, you must figure that advertising/marketing is one of the largest costs for the big breweries, but you rarely see TV or radio ads for any brewery smaller than Sam Adams.  You could also surmise that a small brewery's selling merchandise might be the difference between profit and loss.  This is why I have no good free brewery swag.

The business of brewing intrigues me.  It takes so much more than good beer to become successful.  I haven't quite even gotten up to good beer, but I am a harsh critic of my own abilities.  People like it....most of the time.  I do wish I could sell it, though.  It would be difficult, but it might beat working for a living.


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