# Homebrewers Association | AHA Forum

## General Category => Going Pro => Topic started by: Thirsty_Monk on January 12, 2013, 08:43:10 PM

Title: Beer volume vs. Profit margin.
Post by: Thirsty_Monk on January 12, 2013, 08:43:10 PM
Recently I come across article about Russian River Brewing Co out of Santa Rosa CA.

They brew about 14,000 barrels a year.
The brew pub's sales account for more than half of Russian River's total business.

From this source:
http://www.e-malt.com/IndexNews.asp?ID=22996

Just do a simple math how much beer accounts for more then 1/2 of the sales.
Title: Re: Beer volume vs. Profit margin.
Post by: troybinso on January 12, 2013, 09:23:00 PM
I didn't read the articles, but here's my attempt at some quick math:

Half of 14000bbl is 7000bbl.

7000bbl=14,000 kegs

14000/365 = 38 kegs worth of beer a day

That is a LOT of beer being sold at a pub.

My guess is that less than half the beer being made is sold at the pub, but more than half of total sales is made there (food, merchandise, etc.)
Title: Beer volume vs. Profit margin.
Post by: majorvices on January 12, 2013, 09:39:51 PM
Running a pub has its virtues and nightmares.
Title: Re: Beer volume vs. Profit margin.
Post by: hopfenundmalz on January 12, 2013, 09:46:49 PM
I didn't read the articles, but here's my attempt at some quick math:

Half of 14000bbl is 7000bbl.

7000bbl=14,000 kegs

14000/365 = 38 kegs worth of beer a day

That is a LOT of beer being sold at a pub.

My guess is that less than half the beer being made is sold at the pub, but more than half of total sales is made there (food, merchandise, etc.)

They are always packed, but I don't know the amount of beer they sell. They also move some food, hats, and Shirts

Title: Re: Beer volume vs. Profit margin.
Post by: denny on January 12, 2013, 10:35:59 PM
RR just pulled out of WA becasue they needed more beer for the brewpub...

http://seattlebeernews.com/2013/01/russian-river-brewing-company-withdraws-from-washington-market/
Title: Re: Beer volume vs. Profit margin.
Post by: blatz on January 13, 2013, 12:33:10 AM
the two local breweries near me (Tequesta and Cigar City) do very, very well profit margin wise with their "tasting room" next to the brewery.

Tequesta, IIRC, went through a 15 bbl batch of their IIPA in less than a week late last year, and that  was of course only one of the many beers on tap in their tasting room.

Tasting rooms/brewpubs seem to be the lifeline for some of the smaller guys - they can cut out the middle man (men?) and keep all the profit.
Title: Re: Beer volume vs. Profit margin.
Post by: reverseapachemaster on January 13, 2013, 02:52:17 AM
I think Jamil talked about this on BN with his brewery and pointed out that he makes less than a dollar per pint off keg sales while you can easily charge \$3-5 for a pint of a typical ale. It's not hard to see how a tasting room or brewpub location can add up to sales but as said above, it comes with its own problems, especially if it's a pub with food.

In states like Texas, where I live, breweries cannot sell bottles or pints on location (but brewpubs can sell both on premises but not sell away from the brewpub). It's got to be a huge restraint on the business to not be able to capture so much potential sales and profits. The breweries do tastings with the tours and usually charge \$7-10 for so many beers and a glass but I can't see it being even remotely as profitable because you don't want to give away rare/expensive beers at \$3.33 per pint and you don't have as much motivation to do special tappings at the brewery since you can't make any extra money on it. A few will have casks or run beer through a randall with different stuff in it but for the most part you get the standard stuff. Eventually this will probably change but for now it sucks for both drinkers and brewers.
Title: Re: Beer volume vs. Profit margin.
Post by: nateo on January 13, 2013, 03:21:01 PM
Like RAM said, the "half" they're talking about is sales, probably in dollars, not necessarily beer volume. They probably only sell a fraction of their beer at their brewpub, but the margin is so much higher (plus merch, food etc like Jeff said) it's a lot more profitable.
Title: Re: Beer volume vs. Profit margin.
Post by: phunhog on January 14, 2013, 02:28:13 AM
That is why I see small breweries as economically viable...if you have a tasting room.  It actually seems like the easiest way to go. You don't have to worry about food and food service like you do in a brew pub. Most breweries near me just have a local food truck out front, let you bring in outside food, and/or have food delivered to the brewery.  I would rather sell my beer for 5 bucks a pint than sell it for a dollar pint and have to sell 5x as much.  Not to mention of all the other potential hassles of either self distributing or losing even more profit by going through a distributor.
Title: Re: Beer volume vs. Profit margin.
Post by: nateo on January 14, 2013, 03:45:54 AM
That is why I see small breweries as economically viable...if you have a tasting room.

Agreed, though I'd add a few more "if"s: if that tasting room is in a good city for beer, if it has a good location, and if you can afford rent at that good location.
Title: Re: Beer volume vs. Profit margin.
Post by: Thirsty_Monk on January 14, 2013, 03:56:35 AM
That is what I was trying to point out.

You control the experience in your place. You not have to lug the keg in anybody's basement. Yes you have to be there (that is the only glamorous job in the brewery). Sales to retailers are still important and it works hand in hand.

Now the math. It is a 1/2 of sales and not 1/2 of volume.
let say:
if you sell 1 1/2 BBL keg thru distributor for \$100
and 1 pint in the taproom for \$4 (without tax).
Kegs: 100 X 2 = \$200
TapRoom:   4 x 240 = \$960
This means that you have to brew 4.8 times more beer to sell thru wholesaler then by yourself.
On volume this means that you have the same sales for 4800 BBL thru wholesaler or for 1000 BBL thru tap room.
Rule of thumb is that brewery that sells their beer thru wholesaler break even at 1000BBL and starts making money at 3000 BBL.
Example pricing is just for demonstration purpose. Your market might very. I did not take the case market into the account for simplicity sake. Keg market has the lowest margin.

Yes operating tap room has its own drawbacks but also moving to new location because you need to accommodate new equipment is not walking in the park.
Title: Re: Beer volume vs. Profit margin.
Post by: Thirsty_Monk on January 14, 2013, 03:58:56 AM
That is why I see small breweries as economically viable...if you have a tasting room.

Agreed, though I'd add a few more "if"s: if that tasting room is in a good city for beer, if it has a good location, and if you can afford rent at that good location.
nateo for some reason breweries are the destinations. People are seeking you out even thou you are in industrial park. Yes you need to have city large enough to support the tap room.
Title: Re: Beer volume vs. Profit margin.
Post by: nateo on January 14, 2013, 04:06:09 AM
nateo for some reason breweries are the destinations. People are seeking you out even thou you are in industrial park. Yes you need to have city large enough to support the tap room.

Sometimes they are destinations. Drydock in Aurora CO is a great example. Horrible location, but doing very well.

In my hometown (Grand Junction, CO) I've seen a few good breweries with bad locations do poorly, and some awful breweries with good locations do very well.
Title: Re: Beer volume vs. Profit margin.
Post by: anthony on January 14, 2013, 05:05:14 AM
Sometimes they are destinations. Drydock in Aurora CO is a great example. Horrible location, but doing very well.

In my hometown (Grand Junction, CO) I've seen a few good breweries with bad locations do poorly, and some awful breweries with good locations do very well.

In some ways, I think Colorado has reached a point of super saturation where it is hard to draw parallels to other markets that are still developing. There are a few other places like this that come to mind as well.

I remember last Christmas taking my family to visit with my folks back in Loveland, my Dad and I decided we would do a 12 breweries of Christmas tour. We hit 15 breweries and we didn't travel further than 35 miles out of Loveland.

And there were a couple of breweries that without a taproom, I'm not sure they would be in business. There was one in particular in Loveland that was serving the most disgusting beer but folks were in line, filling up growlers, and enjoying the place. Another good example is Grimm Brothers, they are in an industrial park sort of setting, but the taproom always seems to be hopping.

Our tasting room is an integral part of our business plan. We are located far enough from downtown so that bars won't feel competitive pressure from our operation but close enough that people won't have to drive very far to visit us. Far enough that rent is cheaper, but close enough to use municipal transportation, etc.
Title: Re: Beer volume vs. Profit margin.
Post by: nateo on January 14, 2013, 05:09:50 AM
In some ways, I think Colorado has reached a point of super saturation where it is hard to draw parallels to other markets that are still developing. There are a few other places like this that come to mind as well.

You must not have gone to Grand Junction, because it's really nothing like anywhere else in CO (read: the front range).
Title: Re: Beer volume vs. Profit margin.
Post by: anthony on January 14, 2013, 05:19:05 AM
In some ways, I think Colorado has reached a point of super saturation where it is hard to draw parallels to other markets that are still developing. There are a few other places like this that come to mind as well.

You must not have gone to Grand Junction, because it's really nothing like anywhere else in CO (read: the front range).

Yeah, I don't get out to the western slope often. I do have a friend that brews at a pub in Durango and in general it does sound like it has some catching up to do :)
Title: Re: Beer volume vs. Profit margin.
Post by: a10t2 on January 14, 2013, 05:35:15 AM
Yeah, I don't get out to the western slope often. I do have a friend that brews at a pub in Durango and in general it does sound like it has some catching up to do :)

Say what now? We have four breweries for 18,000 people, plus a fifth one opening this year and a sixth in planning. Per capita, that would be like the Denver metro area having 800 breweries.
Title: Re: Beer volume vs. Profit margin.
Post by: nateo on January 14, 2013, 03:08:21 PM
Durango is an outlier for the west slope. GJ is the biggest city on the west slope. It's been a year or two since I've been back, but there's one brewpub there that's awful, but always busy. There's another that's way better but not nearly as busy. I think they were working on adding another one, but I don't know the story on that.

In Fruita, there have been a few people who tried to start a brewpub, but they went out of business quickly. The beer was pretty good, but I think most people in Fruita go to bars in GJ. I think Palisade brewing is doing OK, but their beer isn't fantastic.
Title: Re: Beer volume vs. Profit margin.
Post by: anthony on January 14, 2013, 03:21:19 PM
Yeah, I don't get out to the western slope often. I do have a friend that brews at a pub in Durango and in general it does sound like it has some catching up to do :)

Say what now? We have four breweries for 18,000 people, plus a fifth one opening this year and a sixth in planning. Per capita, that would be like the Denver metro area having 800 breweries.

Wasn't necessarily referring to the number of breweries there.  ;D
Title: Re: Beer volume vs. Profit margin.
Post by: Jimmy K on January 14, 2013, 03:34:26 PM
I didn't read the articles, but here's my attempt at some quick math:

Half of 14000bbl is 7000bbl.

7000bbl=14,000 kegs

14000/365 = 38 kegs worth of beer a day

That is a LOT of beer being sold at a pub.

My guess is that less than half the beer being made is sold at the pub, but more than half of total sales is made there (food, merchandise, etc.)
1/2 of sales does not equal 1/2 of the beer -- especially when you add food, schwag, etc.
Title: Re: Beer volume vs. Profit margin.
Post by: micsager on January 16, 2013, 11:23:57 PM
RR just pulled out of WA becasue they needed more beer for the brewpub...

http://seattlebeernews.com/2013/01/russian-river-brewing-company-withdraws-from-washington-market/

(But we still have Fremont.  Their Interurban IPA is quite tasty)
Title: Re: Beer volume vs. Profit margin.
Post by: a10t2 on January 16, 2013, 11:37:28 PM
Durango is an outlier for the west slope.

I think Junction's the outlier, really. It's the only city big enough to support more than a few breweries, and yet it doesn't have them. Every other town of appreciable size has at least one brewpub, and most of them have average or better beer.

Maybe it's the prevailing winds carrying Mormonism across the border. ;)
Title: Re: Beer volume vs. Profit margin.
Post by: nateo on January 16, 2013, 11:54:58 PM
I don't think Craig or Meeker have breweries. Pretty sure Montrose and Delta do, and Paonia. I haven't been to Cortez in a long time, but I'd bet they have one. Even Alamosa has one, it's not too bad either. But I think it's the only one in the SLV.
Title: Re: Beer volume vs. Profit margin.
Post by: a10t2 on January 17, 2013, 12:37:59 AM
Craig had a brewpub last time I drove through, but that's been almost two years. Montrose has two now, Cortez has three, Ouray two, Telluride two... Hell, *Silverton* had two until recently. Everywhere but GJ. It's definitely weird.
Title: Re: Beer volume vs. Profit margin.
Post by: hopfenundmalz on January 17, 2013, 12:42:21 AM
Craig had a brewpub last time I drove through, but that's been almost two years. Montrose has two now, Cortez has three, Ouray two, Telluride two... Hell, *Silverton* had two until recently. Everywhere but GJ. It's definitely weird.
Isn't Colorado Boy in Ridgeway still there?
Title: Re: Beer volume vs. Profit margin.
Post by: nateo on January 17, 2013, 12:59:57 AM
Yeah, I think a brewpub in Fruita has a lot of potential.

I heard through the grapevine the only reason the last iteration went under was that the building the brewery was renting developed major roof problems, and the owner of the building tried to double the rent on the brewery to fix it. I'm not sure why the brewery signed that kind of lease, or what exactly the deal was. That sounds kinda fishy to me, but I'm not surprised someone might miss a detail like that in the lease, or maybe they knew about the clause but thought the building was in good shape.
Title: Re: Beer volume vs. Profit margin.
Post by: a10t2 on January 17, 2013, 01:01:04 AM
Isn't Colorado Boy in Ridgeway still there?

Yep, Tom Hennessey's place. You could do quite the brewery loop driving Durango-Ridgway-Telluride-Cortez-Durango. Even with a DD it would probably take two days.