The Realities of Running a Small Brewery

In Loudoun County, we have a lot of breweries, and even more are slated to open.  The business-friendly local government and plethora of flex warehouse space pretty much guarantees the majority of new breweries are going to open here.  I am happy for the success we have had, and I think we will do fine even as the market passes saturation and some breweries begin to close.  However, in my experience in the last three years I have seen an alarming amount of misconceptions about running a brewery, and I think if some people realized the inevitable endgame shaping up here, they might think twice about opening a brewery this late in the game.

First, a 10-15 BBL brewery is not going to make you a wealthy person.  If you have a head brewer on payroll, you are losing a big chunk of your profits.  Your scale isn’t great, it’s a ton of work, and you pretty much have to be an operating owner putting in 50-80 hours per week to make it work.  You might be reading that and thinking “I’m OK with working that hard.”  OK sure, but for how long?  How long until you start to miss spending any time with your family?  I’ve seen it happen.  Also, you might think you don’t have to work that hard.  Some people don’t.  They also don’t do even close to the revenue that we do.  In my opinion, if you invest in the plant, you put it to use.  If you don’t care about making any money, I would urge you to not open a business and take away revenue from people that need it.

Second, your numbers for distribution should be very conservative.  I have heard some just insane numbers from people opening/who have opened breweries.  The distribution market is so completely saturated at this point.  People have told me all sorts of things, like 200 BBLs/month in draught with no sales rep off the bat, or 420 BBLs/week on a 15 BBL system.  Ain’t happening.  What galls me is that I politely try to help people, but it is never well-received.  Well, I have been there and done it.  I spent all summer taking first shift brewing and then doing sales until bedtime.  All to move 6-8 BBLs of beer in distro per week.  I had to twist peoples’ arms to get them to put us on tap, and we make some decent beer.  I have done everything I can to help our accounts and distributor move more beer.  Now our stuff is moving and we have a rep, but that was not something that happened overnight.  I have heard rumors of some 40 BBL breweries in planning with zero industry experience.  That is insane.  No one should be opening with a 40 BBL brewery at this point in the game.

Third, if you are not brewing the beer yourself and selling it yourself, you’d better hire a real ace team.  You probably want to pull a brewer from a really good brewery–just a suggestion.  The beer industry has a lot of intricacies, and figuring out sales can be tough.  Your MBA is not going to be of much use here.  I handle brewing, production management, and sales management myself.  It’s nice in the aspect that I can coordinate planning across all three, but I am working essentially three jobs.  Sales has been the most maddening to figure out.  Constant rotation at bars means I may be selling a decent amount of beer, but I still can’t definitively tell you where we are on tap currently.

Lastly, here is the big one.  If you ever want to sell your brewery, its value will only be in relation to its profits.  If your brewery isn’t profitable, it will be worth its fixed assets, which currently get you about 90+ cents on the dollar.  Well, just wait a year or two.  That number is going to go way down.

You may think your brands or IP will be worth something.  Nope.  First, there is zero loyalty right now with thousands of breweries putting beer on shelves.  Unless you are pretty big, your brands are not worth anything.  Second, who wants brands or IP from a failed brewery?  I have seen two breweries for sale with asking price way over their fixed assets (and I have no idea what their debt is.)  What exactly would I be paying for here?

I hope if you’re planning a brewery and any of this was news to you, you don’t tune it out and think somehow none of this applies to you.  The next five years are going to be very interesting, and I am already seeing some surprising things.  Better bring your A-game.

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Coolship!

IMG_20171127_114736_537Last weekend, we did our first of five coolship beers for the winter.  What’s a coolship?  A coolship is a wide, open-topped vessel for cooling and inoculating wort with wild yeast and bacteria present in the air.  It is a very old concept still used by Belgian lambic brewers, and an increasing number of American breweries.

We did our first simulated coolship beer last year using a 30 gallon kettle as our vessel at the Leesburg location.  Many homebrewers are fixated on the idea that a coolship needs to be a shallow pan, but in actuality the dimensions are all based on cooling rate.  On a small scale, a cube or cylinder with equal length, width, and height is more ideal.  The goal is to cool your beer from near boiling to ~70 degrees overnight.

While the beer cools in the coolship, it is exposed to ambient yeast and bacteria.  The inoculation rates and types of different organisms are determined by what’s around in the environment and the cooling rate.  We did three runs of the test beer last November and December to blend together into one beer.  I am happy to say the results were really good.  Surprisingly good, actually.  Maybe a bit of beginner’s luck, but that first beer will be bottled and released soon, and I think people will like it very much.

We decided to brew the same beer every winter for a release one year later.  This beer, simply called Cuvee, will be our focus for our spontaneous program.  (We may experiment with a spring spontaneous beer as well.)  Our cuvee is a unique spontaneously fermented beer.  It is primarily Red X malt, a red malt with a very bready, toasty flavor, along with a good amount of rye for body.

Lambic producers use a labor-intensive mash and boil method called turbid mashing, which produces a highly unfermentable wort, leaving plenty of long-chain sugars for brettanomyces and pediococcus to chew on as the beer ages.  I decided to opt for a much simpler method.  The grain is mashed at 162, followed by a big decoction to 174, followed by sparging at 190.  The resulting wort is boiled and hopped to around 5 IBU before transfer to the coolship.

The coolship was fabricated by our friend Rod at Matsys, a company that does welding for DoD.  I gotta say, he did about the best job you possibly could on this thing.  Made of 100% stainless, it features all sanitary welds, a 1.5” tri-clamp drain, and 1.5” tri-clamp filling port.  The basin sits on a heavily reinforced base with casters, which can be removed.  The legs are adjustable and are set to slope for a full drain.  Lee also built a framed screen to go over top to keep leaves out.

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Because we aren’t exactly flush with storage space at the Leesburg location, the cooled beer is transferred into barrels in our van and taken away for off-site storage at Beltway Brewing, a contract brewery nearby.  Once we get a second bay in Sterling, we’ll use that to store our sour stuff.  We opted to use third use bourbon barrels for this beer, since they are a bit smaller than wine barrels and our 3 BBL system produces about 110 gallons of wort max, so two 53 gallon barrels is ideal.  Many thanks to Brothers Craft Brewing for some empty barrels!

We plan on four more runs of this beer in the next three weeks.  The beer will then be stored and eventually blended to produce next year’s cuvee.  I am incredibly excited to be doing this, since this represents the pinnacle of advancement as a brewery.  We offer pretty much every other type of style of beer, and soon good mixed fermentation beers will be part of the taproom experience as well!

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Running a Beer Program

Every good bar and restaurant should have a decent beer program.  Your beer program, in simplest terms, is the matter of managing your beer menu, pricing, and supply.  It also involves special events, pairings, and tap takeovers.  Now that craft beer is pretty much cemented as an accepted part of American life, there are a lot better beer programs out there.  There also aren’t enough.

I say this first as just someone who cares about beer, but I also sell beer to bars.  In some aspects I also already manage a beer program by way of managing our production, since we only sell what we make in our taproom.  I try to produce the best beer I can and follow the latest trends.  The problem for me lies in the fact that there are not enough good beer programs out there to support even a small brewery such as us.  Inevitably, myself or our rep has to get in front of someone that doesn’t really know how to manage the beer side of their bar and convince him or her to put our beer on tap.  In a situation like this, which is quite common, the strengths of your beer are not as relevant.  The person may not be able to notice the quality of the beer, but they also might not be able to understand the velocity of the beer–the speed in which it sells.  We only distribute high velocity styles.  Lastly, they may fixate on the price–ours is higher than larger breweries, but not by much, and certainly not by enough to break the bank for a high-end restaurant.

I try to be as patient as I can and educate people about the beers we do.  After all, craft beer is still new to some bar managers, or they may not like beer that much, and that’s fine.  But all of this makes me long to manage my own beer program.  So how do you run a good beer program?  Here are the major problems in beer retail right now, and how to fix them

Constant rotation

Dear God, I could rant about this for several posts.  STOP ROTATING YOUR BEER CONSTANTLY.   Believe it or not, customers are not as obsessed with every tap at your bar being different each day as you think.  You might be reading this and thinking “hey, I like trying new beers.”  I do, too.  But most bars have ten taps or more, and keeping some consistent taps still gives you plenty of room to rotate.

I actually learned this myself first through our own taproom.  Once we settled on three year-round beers, they consistently became our top-selling beers each night.  Brewery taproom customers like to try new stuff even more-so than bar patrons, and yet people still choose Heart and Soul, our core IPA, enough to outsell everything else.  I promise that plenty of people want some static menu items, and I have personally experienced this.

The real issue with rotating beers is worse, though.  You rotate superior beers out for inferior ones.  By this, I mean for example, rotating one brand of a specific style for another brand of the same specific style, but not as good.  You had a good IPA on tap, but decided to change it out for one that isn’t as good.  Why?  Would a restaurant ever replace its proven roasted chicken dish with the same dish, but with overcooked, unseasoned chicken?  It makes no sense.  By all means, rotate seasonal beers, sours, experimental beers, or barrel-aged stuff, but it’s not a bad thing to pick a few cores and stick with them.

The last issue with this is it makes it all the more difficult to predict revenue, keep beer in stock, and keep your menu up to date.  All in all, it’s a way to make life more difficult.

 

Pricing

Restaurant margins are thin, and of course price is important.  But restaurants also make the most money on alcohol sales, and if you run a good beer program, you’ll reap the rewards.  This is sort of a tragedy of the commons situation, where short-term cost savings creates a stagnant, inferior beer program that fails to please customers or draw them in.

Most craft beer falls between $100-$400 for a half barrel keg.  Although that may seem like a big range, the median price lies somewhere around $160 a half barrel.  Since a half barrel is roughly 120 pints, that gives you usually around $700 in pours per keg.  As you can see, that’s a pretty wide margin, which should give you some leeway to spring for some more expensive kegs.  You can have some loss leader-esque kegs, where you spend more but don’t necessarily sell it for too much more, and some cheaper kegs that make you more money, and thusly, things balance out.

Obsessing over price, though, leads to airport bar-style taplists that ensure your beer program is only going to be minimally sufficient and nothing more.  If you’re a decent restaurant, you should have a decent taplist.  These days, your patrons are going to be expecting this.

You can structure your prices to make sense and still make you money.  Price laddering is a very effective tool.  Having a $5 pilsner or $6 IPA allows you to put a $12 imported sour on the menu, and not have that be a problem for your patrons or your bottom line.  We do this all the time in the taproom.  Our big, barrel-aged stuff costs more, but no one has a problem with that as long as there is a cheaper option.  On this note, having high prices on everything and taking advantage of what may be a captive audience is very lame and in these highly competitive times is a good way to price yourself out of peoples’ good graces.

 

Too many taps

Beer is a perishable product.  Each beer you have on tap should serve a specific purpose, and you should be selling it quickly and making money off it.  I think at this point most people have figured this out, but sixty tap bars that are not craft beer Meccas are usually not selling their beer quick enough.  Furthermore, there are “duplicate” beers in the mix–essentially two or more of a very similar beer that fulfills the same menu need, i.e. both Stone IPA, Lagunitas IPA, and Sculpin on tap.

I have seen bars with 8 taps do far more than places with three times that many.  Choosing the right beers to satisfy customers can be done at almost any size.  We do this in the taproom constantly, with a pilsner, sour, IPA, rotating IPA, double IPA, rotating session, rotating Belgian, and BA stout on at all times.

 

The good news is that more and more people are learning about good beer and things are only going to get better.  I see so many cool concept restaurants replacing chains, with educated beer buyers looking for good local stuff.  We are also currently exploring opening a restaurant and craft beer bar, and this has me very excited with the prospect of directing a beer program of my own outside of our taproom.  What would my taplist look like?  Here’s an example of something I might put together.

Year-round:

Eggenberg Pils

Crooked Run Heart and Soul IPA

Weihenstephaner Hefeweizen

Crooked Run Raspberry Empress Sour IPA

Saison Dupont (when available)

 

Rotating:

Rotating Crooked Run

Rotating local IPA

Rotating local IPA

Union Blackwing

Allagash Limited sour

Aslin Macarooned

Commonwealth Tapestry

Oxbow Cletus

Maine Beer Co Dinner

Graft Farm Flor

Charm City Meadworks Wildflower Mead

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New Tank/Canning Line

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Last month, we received our newest piece of equipment, a beautiful 40 BBL fermenter from American Beer Equipment!  Nicknamed Uncle Phil, this big guy alone ups our production capacity by 50%!  It’s a huge step for our brewery, but what I am most excited about is how this changes our production plans–in a very good way.

I’ll get to the farther-reaching implications in a bit.  This tank is big–twice as big as our other tanks.  This also means it was a lot trickier to install.  Our team, along with some help from the guys at Black Hoof Brewing who happened to be visiting, managed to figure it out, but it wasn’t easy!  Our new forklift was very helpful here.

The tank is safely in place now and we’ll be installing glycol next week, and hopefully using it very soon.  The same day, our canning line from Wild Goose arrived!  We purchased a WGC-50, a two-head semi-automated canning line.  We plan on canning 3-10 BBLs of beer per week.  This is not enough beer to use a mobile-canning service, and a bigger canning line is much more expensive and would be overkill for such a modest goal.  In addition, this line does not have a lot of moving parts, so the resale value is pretty good if we ever did want to upgrade.

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Along with the canning line, we have a bunch of shrink-sleeve 16 oz cans in production.  The labels were designed by our sales rep/graphic designer, Dylan.  They look pretty slick!  We plan on selling most of the cans on-premise, but we will have cans at a few places–some local bottle shops and Sterling Wegmans!

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Having a legit canner is going to make us so much happier than we were canning before.  Previously, we had purchased an MK-16 from Oktober.  This little can seamer was an inexpensive way to test out cans, but it was insanely labor-intensive and we had quite a few issues with leaking cans.  This will be much better for us and our customers.

I am very happy that we can up production, but this equipment means more than just more volume.  Our tank configuration is three 20 BBL fermenters, two 10 BBL fermenters, a 4 BBL fermenter, a 20 BBL brite, and a 10 BBL brite.  This has been very good for allowing us to rotate beers a lot.  However, we’ve discovered a few of our beers have become quite popular and need to be brewed all the time.  Originally, Heart and Soul, our core IPA, was going to be our only year-round beer.  Now, we are adding Raspberry Empress sour IPA and Cruise Control pilsner to that list.  We’ll alternate between using the big tank for Heart and Soul and Empress, and make one of our 20 BBLs a dedicated tank for Cruise Control.

The other benefit of the new tank is that it frees up the rest of the production schedule immensely.  Now, we brew pretty much whatever we want in the other tanks.  With four other tanks free to make anything, expect our taplist to get really, really solid.

Here’s an ideal taplist (for me, at least):

Cruise Control NZ pils

Heart and Soul IPA

Raspberry Empress sour IPA

Seek Truth Belgian tripel

Verdant Force DIPA

Best Days hefeweizen

Rotating IPA

Vibes popsicle Berliner

Peach Habanero Storm IPA

Realize Truth rum barrel-aged quad

Sin Nombre imperial stout

Wouldn’t that be cool?  Also, if you’re interested in our beer for distribution, this means that there are now some core beers from us that are proven fast-sellers.  Coming up next: our new line of 375 ml bottles of sours!

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Upcoming Beers

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Here’s a look at what is in the works.  Reminder: nothing guaranteed, all dates subject to change.  Some things to notice: cool collab w/Charm City, more cans including Raspberry Empress, more BA beer, and our first coolshipped beer!

11/3 Boomstick DIPA w/Galaxy and Motueka hops

11/7 Raspberry Empress + cans

11/10 Sun and Moon IPA

11/11 Machismo BBA stout w/habanero peppers bottles.  Realize Truth rum barrel-aged quad.

11/17 Charm City Meadworks collab: Rushlight winter warmer w/honey, cinnamon, and vanilla beans.

11/22 Verdant Force cans, BBA Heartsong Belgian dubbel w/cherries bottles

11/25 Toasty toasted porter

12/1 Lost Forever IPA w/Ekuanot and Simcoe hops

12/9 CUVEE: Spontaneously fermented red ale in bottles!!!

 

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Pilsner

IMG_20171101_074705_847Pilsner is quickly becoming one of the hottest styles in beer right now.  While it’s never going to generate a ton of hype, a well-crafted pilsner is a thing of beauty.  We are not talking macro lager, but a full-flavored, sometimes quite hoppy, beer that manages to be light and refreshing but not bland.

I have more brewers ask us about our pilsner than any other beer.  Brewers don’t typically ask too many questions on individual beers, since everyone has their own ideas and interpretations on what a good beer is.  So it’s rare that someone says “how did you make this?”

Our pilsner is called Cruise Control, and it’s a favorite among staff.  We call it a New Zealand pilsner, since it uses all New Zealand hops.  Cruise Control is a tasty beer because it is extremely full-flavored for the style, managing to be both simultaneously very malt-forward, but also crisp and hoppy.

We accomplish this in three ways: by keeping the IBUs low, using a lot of melanoidin malt, and using a significant whirlpool and dry-hopping regimen of Motueka and Wakatu.

The melanoidin puts the beer at 5 SRM, right at the upper limit for the style.  It’s a bit darker than most pilsners, at a rich golden color.  We do not have the equipment for a decoction mash, and this is a way to emulate the flavor.  It really helps make this pilsner into something unique–I’ve had some craft pilsners that are pretty bland malt-wise.

The hopping schedule is something I may change, because Motueka tends to dominate over the noble-hop flavor of Wakatu, which is a New Zealand Hallertauer.  I like the beer with a bit more of that skunky Wakatu flavor, but the lemon-lime flavor of Motueka is very nice as well.

We also turn this beer in as little as four weeks.  As you can tell from the picture, it is crystal clear despite no filtering.  As a 10 BBL brewhouse, our tanks come up to temperature quickly, with less of a distance for yeast to drop out, so we can really push this beer faster than most.  I am also a big fan of the 34/70 yeast, a workhorse in several great German breweries and a decent flocculator.

So, why am I writing about pilsner?  Pilsner has been creeping up in popularity, and my theory as to why is that it is the style of choice for beer industry people when they’re off the clock, and these preferences tend to trickle into the general population.  I enjoy pilsner immensely because it is so different than hazy double IPAs.  I love IPA, but I cannot drink super-sweet 9% juicebomb beers all night.  I can drink pilsner all day and wake up fine and dandy in the morning.

As I wrote in a guest post, I see another emerging trend to go along with the rise in beers that don’t taste like beer (NE IPA, fruited sour, pastry stout).  That trend is beers that taste like beer.  Yep.  The rise in well-crafted German styles (pilsner, hefe, and other lagers) to round out a lineup of adjunct-laden and super-hopped beers is great for people that just want a good, regular beer.  Our pils sells like crazy in both the taproom and distribution.  We did an ultra-hazy hefe that just killed it in sales this summer.

These styles are popular with people that can really appreciate a well-made beer.  While they aren’t going to turn a lot of heads, the simplicity is what is beautiful about these beers.   Look for more lagers and German styles from us in the coming months!

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Upcoming Beers

Here’s a look at what is in the pipeline.  Reminder: all dates subject to change, no guarantees.  A few new things.  First, we’ll be doing some cask beers on Fridays in Sterling now that the weather is cooling down.  Second, we don’t have as many new beer releases since we are currently putting a lot of stuff in barrels for winter time.  I think we’ll all like the results!  Lastly, after a long hiatus from cans we’ll be firing up our brand new canning line soon!

9/22 Kid Brother collab Spilt Salt gose w/strawberries.  Dolce Vita bourbon barrel-aged imperial milk stout w/coffee/

9/29 Cask horchata Flapjack–Sterling Only.  Sin Nombre Mexican imperial stout–Leesburg only.

10/6 Seek Truth Belgian tripel

10/13 Wayward IPA w/Rakau hops

10/20 Black Hoof collab Orion India pale lager.  Motorhead Schwarzbier.

10/27 Cask German chocolate cake Motorhead–Sterling only

11/3 Raspberry Empress can release

11/11 ***Machismo bourbon barrel-aged imperial stout w/habanero peppers bottle release.  Bravado rum barrel-aged imperial stout w/chocolate and oranges bottle release.  Intensify DIPA can release.  Braveheart bourbon barrel-aged scotch ale.  Guest taps TBA***

 

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