In an effort to measure the operations of America’s craft breweries, the Brewers Association – which represents the interests of small and independent U.S. brewers – recently published the results of its annual “Brewery Operations Benchmarking Survey.”
This year’s review, based on 2014 operations, featured responses from 310 unique breweries in 46 states, all of which responded to questions in the areas of human resources, sales & marketing, brewing and financial operations.
The Financial Picture
Everyone knows that scaling up comes at a price. In an attempt to increase production, however, brewers trade sizeable gross margins for a marginal decrease in their cost of goods.
According to the survey, production breweries making less than 1,000 barrels, on average, enjoyed gross margins of nearly $243 per draft barrel and a cost of goods (COGs) per barrel totaling nearly $107. At 15,000 or more barrels, per barrel gross margins were about $209 while COGs totaled $97, according to the survey. So by doubling production at least four times, breweries save only $10 per barrel on their cost of goods and lose about $34 of gross margins on every barrel of draft beer.
Packaged goods are even less profitable, according to the survey. At 15,000 or more barrels, a brewery’s COGS total about $148 per barrel while gross margins total about $184, on average.
Expressed in a different way — growing capacity costs, on average, about $233 per barrel, according to the survey.
Package Mix
Small breweries that made less than 1,000 barrels in 2014 filled an overwhelming majority of their beer in kegs – about 89 percent, according to the report. Another 9 percent of that beer was packaged in bottles and the other 2 percent found its way into cans.
But as breweries scale, package assortment begins to drastically shift toward cans and bottles, presumably because those companies are broadening their presence in off-premise retail chains.
Companies making between 1,001 and 5,000 barrels packaged 70 percent of their beer in kegs, 20 percent in bottles and 10 percent in cans, on average. Those making between 5,001 and 15,000 barrels only packaged 47 percent of their beer in kegs while 31 percent was filled into bottles and another 21 percent in cans.
Additionally, according to the BA’s own data, about 29.9 percent of all craft beer – 6.6 million barrels — was put into kegs last year. 60.3 percent – or 13.3 million barrels – was packaged in glass bottles while 9.8 percent – 2.1 million barrels – were filled in cans.
Distribution & Sales
Want statistical evidence of how small and local producers actually act in the marketplace? Look no further than survey results in the areas of distribution and sales, and how those operations change as companies grow.
On average, breweries making less than 1,000 barrels annually worked with 1.2 in-state distributors and 0.3 out-of-state distributors. Those companies also self-distributed (or directly sold) more than 63 percent of their beer while keeping 97 percent of those sales in their home state.
The picture changes considerably for companies making more than 15,000 barrels yearly, as those outfits rely more on sales in out-of-home markets. In fact, those breweries work with just 4.7 in-state distributors and 57.1 out-of-state distributors, on average.
That makes sense when you look at where the beer actually ends up. On average, more than 93 percent of production from breweries making more than 15,000 barrels annually is distributed at the wholesale level and 42.7 percent of that beer travels out of state, according to the survey.
Employees and Salaries
According to the survey, production breweries making more than 50,000 barrels annually have, on average, about 42 production employees and 102 non-production employees. Breweries making between 15,000 and 50,000 barrels annually currently employ 23 production and 14 non-production employees, on average.
Salaries for essential production employees – head brewers, brewery operations managers and brewmasters – at companies making more than 50,000 barrels annually range between $58,000 and $95,000, respectively. Perhaps unsurprisingly, the highest paid non-production employees (excluding owners) at breweries making more than 50,000 barrels per year are the folks in the legal and sales departments. On average, those workers raked in $119,000 and $103,000, not including bonuses, in 2014.