Brewing by the numbers

By Вen Li

So you want to make beer?

The art of beer brewing was once a domain reserved exclusively for those with seven-figure disposable incomes. It once required hundreds of thousands in equipment and building infrastructure, with a similar cost for people to run and look after the thing. It used to be that only substantial beer brewers such as Budweiser, Molson, Miller and Guinness could afford to build breweries and the commoners would have to live with whatever they chose to put out.

With the advent and wide-spread legalization of microbreweries, that has changed. Microbreweries-breweries which output less than 15,000 US barrels of beer per year-can brew the same or better beer as the big guys and are more agile in both brewing and distributing their goods, resulting in an increasing market share.

According to the Institute for Brewing Studies, there were a total of 158 craft breweries in Canada, consisting of 17 regional specialty breweries, 65 microbreweries, and 76 brew pubs in 2001.

Microbrewies can now be had for as little as $60,000 for a 1,000 litre system, with all the necessary brew house equipment such as kettles, fermentation tanks, pumps and other widgets included. All one needs is 1,000 square feet or so of warehouse space in an industrial park, a couple of lackeys and a passion for beer, according to The Power Brewer Custom Brewing Systems President Ken Rich.

"It takes 3.5 months from the time of the [initial] deposit until all of the equipment is manufactured and ready for shipment," says Rich. "It will take one day to one month to install the brewery depending on size."

Rich’s company, based out of California, manufactures and refurbishes breweries. Depending on the brewery size and location, installation and training can cost anywhere between $6,500-12,000.

"If you intend to operate as a brew pub you can install as little as a
4 1/4 barrel (500 litre) system. An average system size is 8.5 barrels (1,000 litres)."

The choke point to the growth of all breweries is the number of available fermentation tanks. Every 1,000 litre batch of beer needs to ferment for about two weeks after brewing before it can be bottled or kegged. With tanks costing $10,000 to $12,000 each and the limited space in a microbrewery, most can only afford to brew once or twice a week.

Once it’s made, getting the beer out to customers is the next major hurdle.

"A beer kegging machine will be an additional $17,000 to $21,000 for a premium unit," says Rich. "This kegger will wash out the used kegs and then fill the clean kegs with fresh beer. Kegging is an inexpensive way to start selling your beer."

For really successful microbreweries with sufficient demand, a bottling line becomes an option, starting used at $75,000, plus the cost of labelling for each jurisdiction in which the beer is sold. The main advantage of bottled versus kegged beer is at the retail counter. Beer stores don’t generally stock kegs, and bars can more easily devote fridge space than a tap to a low-volume beer.

With all the equipment and logistics in place, the cost of producing the beer itself is the final concern, although not a significant one. For each pint of craft beer, that pint of yellow-brown liquid that you pay $3–5 for at the Den only contains an average of about 13 cents worth of stuff (see chart), according to Rich. Excluding wages, most of the price of beer goes towards taxes-about 52 per cent in Canada-with retail markup and transportation making up the remainder. With labour, taxes and energy, the cost of a pint rises to about 42 cents, still less than 15 per cent of what we pay at the bar.

While the work can be hard and beer legislation difficult to navigate, a decent profit margin for both brewers and retailers now entices many home brewers and entrepreneurs to take their chances at craft brewing.

"Brew pubs and microbreweries are expanding at a rate of 30 to 50 per cent per year in North America," says Rich. "Beer has a high profit margin and typically sells well."