Tuesday, 16 September 2014

Not quite sure about this one from SABMiller

About two year ago we attended a beer dinner hosted by SAB. The CEO at the time was Norman Adami. He was actually on stage promising that they will never compete with small brewers and that they would like to assist the small guys and grow the beer segment of the market for all.

I do not quite think this is in line with his promise. This smacks of pay-to-play, undercutting the small guys, etc.

At least people who appreciate proper beer are not really brand loyal. If SAB converts fizzy yellow water drinkers to beers with a bit more character we all may end up winning a bit. Unfortunately their tactics will create a barrier to entry for many of the smaller breweries.

Sunday, 14 September 2014

Lazy Sunday Afternoons... Planning, thinking, over-thinking

Lazy Sunday afternoons are supposed to be fun. Quite frequently I end up day-dreaming, planning and running through different scenarios in my head. In many cases these scenarios involve setting up spreadsheets in order to plan, calculate and decipher the best way forward. Not quite the kind of fun I normally have in mind earlier on the weekend... Often it turns into a bit of a depressing thing really.

The one thing that remains heavy on my shoulders is to tackle our brewery upgrade the right way... As right as one can go... The risk of taking the wrong direction or going bust is simply part of starting and growing any business, I suppose.

Getting any business of the ground is no easy task. In fact running any business profitably is quite a challenge. Running more than one is a serious challenge.

Brewing is capital intensive and requires hefty investment up-front. It is not realistic to grow from generated income without substantial money injections. When starting small you simply do not have the advantages of critical mass...
Being able to buy raw ingredients and materials in bulk is what gives larger operations a considerable advantage. Larger orders can cut the cost of certain items by half or even to a fifth. In turn margins are much better and it is possible to pay off debt or provide some return on investment.

Where we stand now there are basically three options:
1. We increase capacity and production to grow the business
2. We carry on as is and break even at best
3. We quit (I don't like quitting, so this is not really an option)

At the moment it looks like we are going for Option 1.

The biggest question is... How big do we go?
Too small a system will mean that you may end up reaching full capacity way too soon.  (In less than a year we have already doubled production) When using a small system it is possible to churn out a vast quantity of beer, but it will mean that it needs to run 4 to 6 times a day and you will end up working yourself and/or your staff into the ground.
Too big a system and the initial capital outlay will be prohibitive. The bigger the system the more expensive the equipment; the bigger the electrical capacity required; the more intricate the fermentation control; the bigger the cooling capacity needed; the more expensive the bottling solution; and the more staff you need.
Where is the middle ground...? Not too big and not too small. And hopefully only a couple of staff members to worry about.

I am of the opinion any brew-house with a capacity below 300L per batch is too small. A brew-house of around 700-1000L in capacity is probably too big... So it looks like the 500-700L system size range is the middle ground.

At around 600L it is possible to churn out a considerable amount of beer while still brewing yourself. Our current fermentation concept will still work and with a bit of tweaking we can make our packaging process work too. All in all we should be able to produce more beer with less effort for a while.
This size system would also work if you were to employ a few people to brew and package beer in normal hours. For the foreseeable future we will probably still run the show as an after hours gig. Before handing over some of the brewing to paid staff we will most probably employ people to run the packaging, cleaning, preparation and other smaller administrative tasks first.