According to the Brewers Association the Craft Beer industry continues to grow across all regions. Production of craft beer has nearly doubled between 2012 and 2015 as you can see in this graph below:
New craft breweries are opening every day across the country and it seems like this trend will continue.
So now the question is, if you are looking to launch your own craft brewery, how much beer will you need to sell in order to breakeven, and is that realistically possible?
How Much Capacity Should your Brewery Start with?
This is the first important question that will determine how much it takes to breakeven. There is a great article by MicroBrewr that answers this very question. Once you determine your initial production capacity and startup costs for that capacity then we can move on to breakeven analysis.
Calculating Breakeven for a Craft Brewer
I think the best way to calculate breakeven is by determining how many barrels of beer you need to sell in order to breakeven. So the first step is to calculate all of your costs for a barrel of beer at the size of your brewery.
Variable Costs for a Brewery
There is a helpful analysis posted on Beer Advocate that explains some of the costs and economics for a brewery with a 5,000 barrel capacity. The costs that go into each barrel are as follows:
- Grain – cost of grain per barrel
- Hops – cost of hops per barrel
- Yeast – cost of yeast per barrel
- Misc – Cleaning, Nutrients, Clarifiers, etc per barrel
- “Other” Costs – According to one of the writers on the Beer Advocate forum you should assume “other” costs of $40 a barrel – “I think it’s a safe bet that your ‘other’ costs for each barrel won’t be less than $20 unless you’re very fortunate and hard working, so let’s say $40/bbl at the low end.” I think this should include your labor, utilities and other variable costs.
- Kegging – the cost per barrel to keg the beer
- Bottling – the extra cost per barrel to bottle the beer
Once you get your total cost per barrel at your given production capacity then you need to determine what you can sell a barrel for and what your fixed costs are in order to determine your breakeven.
Fixed Costs for a Brewery
The fixed costs for a brewery would include the following expenses:
How Much can you Charge for a Barrel of Beer
Lastly, we need to know how much you can charge for a barrel of beer. There are 2 kegs in a barrel of beer. Here is a price list for what a keg of beer usually sells for, so you should multiply that by 2 to get your price per barrel.
How Many Barrels of Beer do you Need to Sell in Order to Breakeven
Now that we have all of the pieces, we just need to put them all together to determine how many barrels of beer you need to sell in order to breakeven.
If you need a full set of financial projections including this breakeven analysis, we would love for you to check out our Brewery Template on ProjectionHub.