Author Topic: Beer volume vs. Profit margin.  (Read 1532 times)

Offline Thirsty_Monk

  • Senior Brewmaster
  • ******
  • Posts: 1842
  • Eau Claire WI
    • View Profile
Beer volume vs. Profit margin.
« on: January 12, 2013, 01:43:10 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
http://www.facebook.com/russianriverbrewing/posts/465864300137336

Just do a simple math how much beer accounts for more then 1/2 of the sales.
Na Zdravie

On Tap At The TapRoom:
Bohemian Pilsner
Bohemian Dark Lager
Smoked Bock
MaiBock
American Brown Ale
Marzen
Root beer

Offline troybinso

  • Assistant Brewer
  • ***
  • Posts: 190
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #1 on: January 12, 2013, 02:23:00 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.)

Offline majorvices

  • Global Moderator
  • Official Poobah of No Life.
  • *****
  • Posts: 6308
  • Polka. If its too loud you're too young.
    • View Profile
    • Yellowhammer Brewing Company
Beer volume vs. Profit margin.
« Reply #2 on: January 12, 2013, 02:39:51 PM »
Running a pub has its virtues and nightmares.
Keith Y.
Self appointed "All Grain" section pruner

Offline hopfenundmalz

  • Official Poobah of No Life.
  • *
  • Posts: 4535
  • Milford, MI
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #3 on: January 12, 2013, 02:46:49 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

Jeff Rankert
Ann Arbor Brewers Guild, AHA Member, BJCP Certified
Home-brewing, not just a hobby, it is a lifestyle!

Offline denny

  • Administrator
  • I must live here
  • *****
  • Posts: 11665
  • Noti OR [1991.4, 287.6deg] AR
    • View Profile
    • Dennybrew
Re: Beer volume vs. Profit margin.
« Reply #4 on: January 12, 2013, 03:35:59 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/
Life begins at 60.....1.060, that is!

www.dennybrew.com

The best, sharpest, funniest, weirdest and most knowledgable minds in home brewing contribute on the AHA forum. - Alewyfe

Offline blatz

  • Brewmaster General
  • *******
  • Posts: 2453
  • Paul Blatz - Jupiter, FL
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #5 on: January 12, 2013, 05:33:10 PM »
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.
The happiest people don’t necessarily have the best of everything; they just make the best of everything they have.

BJCP National: F0281

Offline reverseapachemaster

  • Brewmaster
  • *****
  • Posts: 910
    • View Profile
    • Brain Sparging on Brewing
Re: Beer volume vs. Profit margin.
« Reply #6 on: January 12, 2013, 07:52:17 PM »
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.
Heck yeah I blog about homebrewing: Brain Sparging on Brewing but I'm also a lawyer: The Kielich Law Firm

Offline nateo

  • Brewmaster General
  • *******
  • Posts: 2162
  • Aachen, DE
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #7 on: January 13, 2013, 08:21:01 AM »
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.
In der Kürze liegt die Würze.

Offline phunhog

  • Assistant Brewer
  • ***
  • Posts: 183
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #8 on: January 13, 2013, 07:28:13 PM »
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. 

Offline nateo

  • Brewmaster General
  • *******
  • Posts: 2162
  • Aachen, DE
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #9 on: January 13, 2013, 08:45:54 PM »
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.
In der Kürze liegt die Würze.

Offline Thirsty_Monk

  • Senior Brewmaster
  • ******
  • Posts: 1842
  • Eau Claire WI
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #10 on: January 13, 2013, 08:56:35 PM »
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.   
Na Zdravie

On Tap At The TapRoom:
Bohemian Pilsner
Bohemian Dark Lager
Smoked Bock
MaiBock
American Brown Ale
Marzen
Root beer

Offline Thirsty_Monk

  • Senior Brewmaster
  • ******
  • Posts: 1842
  • Eau Claire WI
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #11 on: January 13, 2013, 08:58:56 PM »
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.
Na Zdravie

On Tap At The TapRoom:
Bohemian Pilsner
Bohemian Dark Lager
Smoked Bock
MaiBock
American Brown Ale
Marzen
Root beer

Offline nateo

  • Brewmaster General
  • *******
  • Posts: 2162
  • Aachen, DE
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #12 on: January 13, 2013, 09:06:09 PM »
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.
« Last Edit: January 13, 2013, 09:08:22 PM by nateo »
In der Kürze liegt die Würze.

Offline anthony

  • Assistant Brewer
  • ***
  • Posts: 234
  • Hoppy to help!
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #13 on: January 13, 2013, 10:05:14 PM »
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.
« Last Edit: January 13, 2013, 10:07:15 PM by anthony »

Offline nateo

  • Brewmaster General
  • *******
  • Posts: 2162
  • Aachen, DE
    • View Profile
Re: Beer volume vs. Profit margin.
« Reply #14 on: January 13, 2013, 10:09:50 PM »
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).
In der Kürze liegt die Würze.