Smaller is Better in Craft Brewing
This isn’t a quality judgment–you might love a cool Coors Lite, we might favor HOMES Brewery’s Same Same Different IPA, and that’s all good.
But from a strictly financial perspective, the smaller a brewing operation is, the easier it is for it to stay financially healthy.
According to the Brewer’s Association for Small and Independent Craft Beers (BA), over the past year, total U.S. beer sales dipped by about 1 percent. But craft brewers grew by about 5 percent.
BA found that, “Generally, things get tougher the larger and more widely-distributed you are.” Based on their own recent survey data, “we see that 60% of the regional … craft brewers that responded are up, while 76% of micros/brewpubs are up.”
Digging into the numbers, they found that breweries that annually produce under 10,000 “case equivalents” (or “CEs,” something in the neighborhood of 750 barrels) have mid-year growth rates around 30 to 40 percent. Breweries producing 10,000 to 100,000 CEs annually saw only 5 to 15 percent growth. Above that, the numbers started to dip into negative territory for the last several years. (For context, the fifty fastest-growing breweries in the U.S. typically produce under 1,000 barrels–or about 13,000 CEs–each year.)
Microbreweries Doing Well, Taprooms Even Better
Those figures only count off-premises (store) sales. The numbers get even better when you look at at-the-brewery sales. These are generally the domain of smaller “taproom” operations, which produce just a few hundred barrels each year and have little or no distributed retail presence–even regionally.
Mary Ellen Shoup of BeverageDaily notes “a trend away from off-premise retail beer sales to experiential drinking occasions such as those offered in local taprooms and tasting rooms.” These have been growing at about 15 to 20 percent per year.
And taprooms aren’t just growing faster–they also have better profit margins, according to financial modeling done by Kary Shumway (a certified public accountant, experienced chief financial officer for beer distributors, and founder of the online magazine Beer Business Finance and Craft Brewery Finance). According to his numbers, a smaller taproom (say, one producing and selling ~300 BBLs annually) will tend to have slightly better margins than its larger compatriot (producing ~1000 BBLs per year–which is on the large side for a taproom).
“Results will vary,” Shumway notes (in typical accountant’s style), “but make no mistake, the margins on taproom sales can be very strong.”
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