Page 3 of 11 FirstFirst 12345 ... LastLast
Results 31 to 45 of 159

Thread: Nanobrewery - The Lessons I've Learned

  1. #31
    Join Date
    Mar 2008
    Location
    Baxter, MN
    Posts
    143
    Quote Originally Posted by bmason1623
    In manufacturing, your overhead is almost always covered by the equipment that you run to manufacture your 'widget'. The equipment usually has an hourly rate associated with it. If we accept the notion that brewing 2 BBLs takes pretty close to the same amount of time as brewing 6 BBls, then brewing larger volumes allows you to ammortize (spread the cost) the equipment hourly rate across more barrels.
    This is a very good notion and definitely something worth exploring in further detail. One consideration to make is that the per BBL cost of equipment is not linear. One needs to think about how much beer can be produced with the equipment purchased. When you're comparing a 3.5 BBL system vs a 15 BBL system from a similar manufaucturer, the difference is obvious - the 15 BBL system is the most cost-effective in the long run.
    Now, enter in home-built systems and plastic fermenters and all of a sudden you don't have the high capital expense that you're trying to ammortize over the cost of your very small batches. At this size, even an over-zealous health inspector can completely kill your budget, however. (or, in my case, an over-zealous city with multiple levels of permits and fees).

  2. #32
    Join Date
    Mar 2012
    Location
    Greeley, Colorado
    Posts
    45

    Overhead Absorbtion Rate Vs. Labor Cost Per BBL

    I think what is trying to be highlighted here is the labor efficiency gained as the brewhouse size increases -- i.e. if it takes you 6 hours for one brew length on a 3.5BBL amd 6 hours for one brew length on a 15 BBL system, the total labor cost is the same for the brew length, but the per BBL labor cost is approximately 4X higher on a 3.5 BBL system. Therefore, you either take lower gross margins or you figure out how to charge more per BBL.

    Similarly, equipment cost absorbtion rates are impacted in the same manner; however, machinery costs are typically spread over units produced rather than "hours run" (hours run is typically the driver of costs like maintenance/repairs, insurance and some indirect costs). Just throwing out numbers: if a 3.5 BBL system costs $35k with the capital cost spread over 5 years (depreciation), your absorbtion rate per year is $7k. With a 3.5BBL system, maybe you can produce 500 BBLs per year (?). So the absorbtion rate with these numbers would be ~$14 per BBL.

    Meanwhile at the brewery across town, a 15 BBL system with intial cost of $150k is expected to produce 3,000 BBLs resulting in an absorbtion rate of ~$10 per BBL, causing the same dynamic as above (take lower margins or charge more per BBL).

    Total overhead absorbtion (generally) takes into account rent, utilities, indirect labor, depreciation, admin expenses, cost of insurance claims related to production, etc. Bmason is correct, in that, manufacturing accounting (and thus a business plan's financials) takes total overhead costs for a period and divides by the expected production over the same period -- variances (favorable or unfavorable) follow the inventory/beer produced.

    As previously stated, nano brewing has a (limited) "place" in the industry, and anyone opening a nano should take measures to assess how their plans fit within the scope of that "place" and the competitive landscape that is (and always has been) the beer industry.

  3. #33
    Join Date
    May 2012
    Location
    Ireland
    Posts
    12
    I have to agree with the trend of the last few comments. Wether you are making beer or coat hangers it is prity much the same business principles. Ive worked across numerous industries as a manufacturing Engineer, from Pharma(Also heavily regulated) - Teir 1/2 electronics - Dairy equip manufacture. It ALWAYS boils down to a few key ingredients and how well you manage these dictates how long you will last.

    Operational accounting - Return on Investment, Margins, bottom line profit
    Operterations/Process - Effeciency and Effective use of resource
    Supply chain management - Steady cost effective supply/ Quality
    Quality - Good product
    Sales - For the sake of the Nano conversation I am assuming this is unlimited
    Planning planning planning -- Check check and double check

    Just my $0.02.

    I think the Nano can really work in the short term but long term you will need growth to reach a sustainable level.

  4. #34
    Join Date
    Mar 2008
    Location
    Baxter, MN
    Posts
    143
    Quote Originally Posted by Squintymcguinty
    I think the Nano can really work in the short term but long term you will need growth to reach a sustainable level.
    I think this hits the nail on the head right here. There can be certain situations where I could see it being sustainable, but most will find it to be a means to an end.

  5. #35
    Join Date
    Mar 2012
    Location
    Saint Albans, VT
    Posts
    25
    Quote Originally Posted by WitsEnd
    I think this hits the nail on the head right here. There can be certain situations where I could see it being sustainable, but most will find it to be a means to an end.
    Let me start by saying that I wholeheartedly agree with the thread's original post.

    Speaking of reaching sustainability and "means to an end", I thought I would post our nano-planning and our nano-philosophy, in the hopes that it rings true with some and clarifies a nano's place (again, in our opinion) to others:

    (AND, it might entertain some military veterans out there)

    Our background is not brewing. Well, not our professional background. We're soldiers and will remain so for a few more years (come on, 20 year retirement!). Whilst drafting our business plan, we analyzed the situation, the same way we did in Iraq and Afghanistan: see the terrain, see the enemy, see yourself. Terrain refers to the competitive terrain. We live in a GREAT beer state (VT), but in a major population center without a brewery within 40 min. The city in which we live is very favorable toward new businesses. So, for us, the "terrain" looked good. The "enemy" refers to all of the impediments to opening a brewery. Licensing, fees, start-up capital, etc. Working for the govt, we're pretty familiar with bureaucratic licensing procedures (which really aren't THAT bad). We made extensive lists of the "enemies". Seeing yourself meant that we had to assess our assets (money, recipes, contacts, etc), our liabilities (not knowing really ANYTHING about commercial brewing, not having trust funds, inability to work more than part-time on the project due to our current employment, etc), our strengths and weaknesses.

    Once that "visualization" was complete, the solution (as it often does in our line of work, assuming you've done your homework) seemed fairly simple: Our area could support a brewery. There wasnt one. We had the cash for a small brewery, not a large one. We we're not comfortable operating a $400k manufacturing operation without first having a deeper understanding of the industry. We didn't have the time (yet) to devote to 4x double brew days/week. Our beer had a good local reputation on the home brew side.

    All of these factors pointed to a nano. Which we opened in June. We're currently expanding.

    Strategically, we view a nano like a small assault force (think the beach scene in "Saving Pvt Ryan" - ok, not small, if anyone wants to nitpick, but I tried to pick something familiar). Small, able to adapt, and only designed to secure a foothold. Sustainable? No. Can you win the war with it? No. Can you secure a foothold from which to expand your force (brewery)? Absolutely. If the assault fails because you didn't know enough about the enemy or terrain (industry, costs, etc), you've only committed a small force and can reassess and redeploy...

    If your goal is to sustain yourself on a nano, I would hope you come from the industry and your estimates are much closer than our were (amen to the "double your estimates" post), AND you can sell all your beer by the pint.

    If your goal is to secure a foothold in a favorable local market and expand your operation from there, be realistic but be bold. Fortune favors the bold. Best of luck.

    Steve
    14th Star Brewing
    Vermont's Veteran Owned Brewery

  6. #36
    Join Date
    Mar 2006
    Location
    Ex-Germany / California
    Posts
    579
    Quote Originally Posted by gagners

    All of these factors pointed to a nano. Which we opened in June. We're currently expanding.
    Two months after opening you are expanding. This is the "problem" that many encounter, not planning for success, or having the financial means to take it to the next level. It takes a lot of cash flow for that, and for me the rhetorical question begs "is the expansion worth it?" and the ROI over 5 or 10 years.

  7. #37
    Join Date
    May 2012
    Location
    Ireland
    Posts
    12

    My $0.02

    It depends what you mean by expand - If you are adding a few FV and going from 2-4 brews per week then I would think this is increasing capasity and getting a better ROA not expansion(Operational efficiency). When you say expansion I think of ripping out the a 2BBL Nano and putting in a 15BBL Micro. I think "Expansion" would be a good target within a 1.5-2yr timeframe for a Nano.
    As an aside, an ROI of 5-10yrs seem huge(Im not saying it is not being done successfully). I would look to 1-3yr ROI is a less risky venture but Ive not seen the accounts for many brewerys. ha ha
    Either way guys, it looks like you have a good handle on it. The best of luck with the new venture and Ill keep an eye out at the local for a pint of 14th Star.
    Steve

  8. #38
    Join Date
    Nov 2011
    Location
    Chestertown, Maryland
    Posts
    459
    A 15bbl system is only relevant if you can sell that volume of beer in your business market, whatever that may be.

    There's a lot of variation around the country on liquor laws, distribution laws, and realistically what can be sold on-premises within different regions outside of off-premises distribution.

    Why is this so hard for people to understand? To paraphrase an old campaign slogan, "it's the laws, stupid." If you can sell pints on premises for $4 versus sell the same pint to a distributor at $1, you may be able to make a living selling those $4 pints if you have enough foot traffic coming through the door of your premises.
    Last edited by ChesterBrew; 08-24-2012 at 10:06 AM.

  9. #39
    Join Date
    Mar 2006
    Location
    Ex-Germany / California
    Posts
    579
    Quote Originally Posted by Squintymcguinty
    As an aside, an ROI of 5-10yrs seem huge(Im not saying it is not being done successfully). I would look to 1-3yr ROI is a less risky venture but Ive not seen the accounts for many brewerys. ha ha
    What sort of business model looks at ROI over 1-3 years? Possibly the LA or NY restaurant scene, but surely no machinery-oriented business like brewing.

  10. #40
    Join Date
    Mar 2012
    Location
    Saint Albans, VT
    Posts
    25

    Expansion

    Is it (going through the hassle of expansion) worth it? Yes. You mention costs, which is funny to me for one reason: the sale of our 1bbl system paid for our 3bbl system. The only costs we are incurring are the lost sales during the few weeks we'll be "down".

    If we're expanding, why 3bbl? As I enumerated earlier, because we are growing organically and incrementally to keep up with demand (which we can't meet yet). Our beers have been selling out in 6-7 hours, on the average. (we're only open two evenings a week for growler fills. No wholesale sales)

    But why not a 7 or 10bbl? Because we're currently carrying zero debt, and until we can devote more time to it (I'm not throwing away a military retirement THIS CLOSE to the end of my career), we'd prefer not to carry debt. If we can pay all of our bills without selling any beer, how can we fail? It gives us time to learn and to make mistakes, without them being catastrophic.

    Some people don't agree with our approach. I can respect that. At the end of the day, however, I am a commercial craft brewer, and people are enjoying my beer. That works for me.

    Cheers
    Steve
    14SBC
    Last edited by gagners; 08-25-2012 at 04:55 AM.

  11. #41
    Join Date
    Mar 2012
    Location
    Henderson, NV
    Posts
    196
    Steve,
    Sounds like for your situation you are doing things exactly right. Debt free and a retirement income on the horizon! Who cares if anyone disagrees with you. There are hundreds of different ways to make it work and millions of ways to fail. We have all seen 7-15 Bbl highly funded brewpubs come and go so that doesnt automatically work either.
    One option I rarely hear about is simply opening a nano with a taproom and serving other high margin beers so you dont run out. Most locations that need a brewery also could use a great beer bar. Obviously this depends on local laws but it seems like a good compromise. A small walk in properly designed could hold quite a few kegs. Focus on hard to find beers and brew higher end beers while also buying some more standard styles to keep everyone happy. If your state allows you sell growlers of other breweries beer so much the better.

  12. #42
    Join Date
    May 2012
    Location
    Manteo, NC
    Posts
    4
    Mattdog,
    You described our operation to a "t". We have owned our restaurant for 18 years. Added a brewpub (Nanobrewery) last year. People ask why we dont bottle . We tell them we only brew for our taps. We dont even do growlers . Most customers expect a $15 growler. That works out to 3.75 a pint. I sell a pint for $5.50 over the bar. Why reduce my profit. I love beer and love to brew. The nano added to the restaurants bottom line.Beer sales jumped 110%I also carry as many local micros as I can. 70% of beer sales are our beers. The cost to brew our beer is about half of the cost to purchase
    micro beers. I make roughly $600 a 1/2 barrel. To sell whole sale I would only be able to charge $150 tops to stay competative. At this level thats nuts.
    We have increased sales and lowered cost. Dont let ego get in the way.
    Every day I have a home brewer who says " I tell my wife (girlfriend mom, dad, friends, potential investers) I can do this." I say sure. Start a restaurant.Work 16 hour days 7 days a week for 10 years. Then cut your hours to 14 a day for the next 5 years. Bump this back up to 18 while starting your new addition. Hire a bright young brewer to take your place when you realize you need to manage this biz. You see its easy. but I love every minute of it.
    I am sorry to get political,but PRESIDENT OBAMA I DID BUILD THIS BIZ AND ITS BEAUTIFUL.
    Paul
    A very happy nano brewer!

  13. #43
    Join Date
    May 2012
    Location
    Manteo, NC
    Posts
    4
    Mattdog,
    You described our operation to a "t". We have owned our restaurant for 18 years. Added a brewpub (Nanobrewery) last year. People ask why we dont bottle . We tell them we only brew for our taps. We dont even do growlers . Most customers expect a $15 growler. That works out to 3.75 a pint. I sell a pint for $5.50 over the bar. Why reduce my profit. I love beer and love to brew. The nano added to the restaurants bottom line.Beer sales jumped 110%I also carry as many local micros as I can. 70% of beer sales are our beers. The cost to brew our beer is about half of the cost to purchase
    micro beers. I make roughly $600 a 1/2 barrel. To sell whole sale I would only be able to charge $150 tops to stay competative. At this level thats nuts.
    We have increased sales and lowered cost. Dont let ego get in the way.
    Every day I have a home brewer who says " I tell my wife (girlfriend mom, dad, friends, potential investers) I can do this." I say sure. Start a restaurant.Work 16 hour days 7 days a week for 10 years. Then cut your hours to 14 a day for the next 5 years. Bump this back up to 18 while starting your new addition. Hire a bright young brewer to take your place when you realize you need to manage this biz. You see its easy. but I love every minute of it.
    I am sorry to get political,but PRESIDENT OBAMA I DID BUILD THIS BIZ AND ITS BEAUTIFUL.
    Paul
    A very happy nano brewer!

  14. #44
    Join Date
    Feb 2011
    Location
    Northern Baltimore County, MD
    Posts
    52

    teatard

    There are plenty of places for people to argue that they did everything themselves, and nobody ever fixed a pot hole or changed a damn street light for them.. But this is not the place.

  15. #45
    Join Date
    May 2012
    Location
    Manteo, NC
    Posts
    4

    ouch teatard ?

    Really, teatard ? insults? I'm a registered PUBLICAN anyway, as in barkeep. Insults aside your right, wrong forum. Teatard, though, why I never!

Page 3 of 11 FirstFirst 12345 ... LastLast

Similar Threads

  1. We'd like to hear your lessons learnt... Planning to set up a Stout 3BBL System
    By GallowsHillBrew in forum Equipment Q&A (Sponsored by Sungood Machinery)
    Replies: 36
    Last Post: 11-20-2017, 06:34 PM
  2. Nanobrewery - The Lessons I've Learned
    By ParishBrewingCo in forum General Discussions (Sponsored by Stout Tanks and Kettles)
    Replies: 127
    Last Post: 01-26-2015, 08:09 AM
  3. Nanobrewery Layouts
    By SharkTank in forum Stupid Stuff Q&A (Sponsored by Premier Stainless)
    Replies: 0
    Last Post: 10-11-2012, 07:16 AM
  4. NanoBrewery - How many to allow in club?
    By apoxbrew in forum Marketing
    Replies: 3
    Last Post: 10-04-2012, 01:01 PM
  5. Nanobrewery CO2 Tank(s)
    By NigeltheBold in forum Equipment Q&A (Sponsored by Sungood Machinery)
    Replies: 3
    Last Post: 09-18-2012, 01:19 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •