The ABC’s of Beer Costs

By: Kary Shumway, Craft Brewery Financial Training

Brewery success depends on making great beer and making great profits. Profitability depends on knowing what the beer costs. Craft breweries are small manufacturers. In the finance world, to properly account for the costs of a brewery, we need to use manufacturing accounting. No need to be an accountant, just need to learn a few commonsense concepts. This article will give you grounding in the ABCs of your product costs so that you can make great profits to go along with the great beer.

The ABCs of Product Costing

•    Know your costs: Why it’s important.

•    The Building Blocks: Direct Material, Direct Labor, Overhead.

•    How to Implement a Simple Product Costing system.

Know Your Costs

  As businesspeople, we constantly strive to get better prices on the things we buy for our business: cans, bottles, carriers, mother cartons, etc. If there is an opportunity to save 5% or 10% without sacrificing quality or service, we jump on it. That’s just good business.

  The process of Product Costing is similar; however, we widen the lens and focus on every cost that goes into your beer.

  When you know all the costs, you begin to understand how they work together. Next, you understand how you can influence those costs, so that you can gain control of expenses and improve profitability.

  As your business grows and the numbers become larger this concept becomes more important. Set the foundation now. Know your costs.

The Building Blocks of Product Costing

  As noted above, breweries are small manufacturers, so a basic understanding of manufacturing accounting is required to know your costs. Don’t panic, I will explain this in common sense language. No accounting mumbo jumbo.

  The building blocks of your product costs: direct labor, direct material, and overhead. In a nutshell, these represent the cost of ingredients and packaging, the time to put it all together, and the overhead costs to make sure the operation runs smoothly.

DIRECT LABOR: This is the amount of time and payroll it takes to make your beer. Add up how much time it takes to make the beer and multiply by the pay rate of the folks making the beer.

DIRECT MATERIAL: This is the cost of water, malt, hops, and other ingredients that make up the beer. It includes the cost of bottles or cans, carriers, and other materials used in packaged beer.

OVERHEAD: This is the cost of everything else needed to produce your beer. Examples include the cost of utilities, water/sewer, lease expense, and a portion of the cost of your brewing equipment (based on the depreciation expense).

  All of these items taken together make up what’s called the bill of materials – the beer recipe, and the time needed to make it. Tracking all this may seem like a lot of work. Below I’ll cover two easy steps to get you started.

How to Implement a Simple Product Costing System

  Do these two things to start: calculate your standard costs and count your inventory regularly. These two things are like the 80/20 rule of understanding and staying on top of your product costs.

  If you haven’t heard of it, the 80/20 rule, otherwise known as the Pareto principle or law of the vital few, says that, for many events, roughly 80% of the effects come from 20% of the causes. I estimate that 80% of your product cost effects (improvement) will come from these two causes.

The 80/20 of Product Costs

1.   Calculate your Standard Costs

2.   Count your inventory on a regular basis

3.   Calculate Standard Cost

  Standard costs are the expected costs to make and package your beer. You can also think of this as the average cost of your beer. The actual cost will vary somewhat from batch to batch, but standard cost is intended to provide a good average. This gives you a benchmark understanding of what your beer costs.

  With standard cost, there is no need to record all the time and materials every time you brew a batch of beer, just do it once, and calculate your Standard Cost. The simplest approach is to capture the total costs associated with a brewing and packaging cycle, and then present the costs however they are most meaningful.

  For example, if a 15-barrel batch of kegged beer costs $750, this works out to a standard cost of $50 per barrel. This cost per barrel is useful when pricing your kegs for sale. Packaged beer will have a different standard cost to include the cost of cans or bottles, carriers and cartons, and other packaging.

  To calculate standard costs, begin with the building blocks: direct labor, direct material and overhead. Add them all up, and this is your standard cost. Direct labor + Direct material + Overhead = Standard cost

Count Your Inventory Regularly

  Regular and consistent counts of your inventory are among the most important things you can do to control your product costs. Counts ensure that the materials you think are there are actually there.

  Counts also ensure you don’t end up with a nasty surprise in the form of missing inventory. Missing inventory equals a write off. A write off is an expense that lowers your net income. It’s bad for your brewing schedule and worse for your income statement.

  If you take nothing else away from this article, please remember this: count your inventory regularly, match it up to the records in your inventory system, and analyze any variances. I’ve been burned so many times on this issue, it would be a personal favor if you would do this. I thank you, and your income statement thanks you.

  In previous articles, I’ve written about the basics of a good count process. Your inventory has feet and can disappear. Few things will hurt your products cost more than poor inventory count practices. Use this template to get ideas for your count process.

Wrap Up & Action Items

  Profitability depends on understanding your product costs. Understand your costs so that you can gain control over them. If you can control your costs, you can control your profit, and perhaps your destiny.

Review the ABCs of product costing and try out the ideas in your brewery:

•    Know your costs

•    Learn the Building Blocks: Direct Material, Direct Labor, Overhead

•    Implement a Simple Product Costing system

  You’ve got great beer, now it’s time to work on great profits. After all, if you aren’t profitable, you won’t be making beer much longer. The world needs your beer, and you need to be profitable. Learn the ABC’s so we can all enjoy your beer for years to come.

For more information please visit…inventory-count-process-scorecard/

Grain Handling, Storage & Conveyance: The Beginnings of a Successful Brewing Operation

By: Gerald Dlubala

An engineer, architect and brewmaster walk into a brew space. No, this isn’t the beginning of a joke, but rather the start of a multi-point approach in laying out a successful and reliable grain handling and storage system.

  ABM Equipment works with brewery owners and brewmasters to develop their projects from concept to completion. They use collaborative teamwork and deliver cohesive systems integrated to work together as a complete unit rather than a group of individual machines pieced together. 

  “When you understand the effects that your grain handling and storage system has on your entire brewing process, you realize how important it is to be one of the initial items discussed when laying out a brewery,” said Adam Dubose, Operations Manager at ABM Equipment. “Proper grain handling and storage planning include considering the entire brewhouse and production plans while remaining aware of available space. When all of these things get included early in the planning process, it becomes easier to determine the needed specifications regarding storage options, handling capabilities and system speeds versus available space. Then you factor in expected growth and go from there.”

“We always like to see a brewer mill their grain if possible,” said Dubose. “Pre-milled grain is crazy expensive, so even a small mill with a flex auger is better than using a pre-milled product. You can control crush, increase safety and improve your time and labor costs. Instead of shouldering bags and risking physical injury, you push a button. Most breweries now have a grist case as well. Then you can start talking about bulk storage to cut costs even more dramatically – sometimes in half – over the use of bulk bags. Your return on investment includes cutting physical labor, saving workers’ shoulders and the savings on buying at bulk prices.”

  In terms of brewery installations, almost all of their projects use either flex augers or chain discs for conveyance. “Flex augers are the usual choice for entry-level applications because they are the low cost, reliable choices,” said Dubose. “Their downside includes higher required maintenance, meaning that they need to be oiled more often and will likely require routine elbow replacement after about six months, depending on use. We remind our clients that if they don’t schedule a little downtime to maintain their equipment, the equipment will schedule it for them. Chain discs are a popular go-to method for grain and malt conveying because they’re versatile, run a little quicker, maneuver tighter corners and are gentler on the product while moving it from place to place. Chain discs can connect silos, handle long runs, vertical climbs, bulk bag unloaders or specialty hoppers. The same chain disc line can carry infeed to mill and then loop back around and go from mill to mash. They are also lower friction options, so that translates into lower wear in parts.”

  Dubose told Beverage Master Magazine that silos provide the most significant savings and return on investment when considering grain storage options. Larger bulk purchases translate to a lower price point, offer more opportunities for system automation, better grain consistency, longer storage times and the chance to free up some valuable indoor floor space.

  “We recommend silos with a minimum 65,000-pound capacity so a brewer can receive a typical 48,000-pound grain delivery without having to run their silo dry,” said Dubose. “Larger capacities are available if desired. Bigger may be better when it comes to needing only limited grain deliveries, but it’s more common to link silos for the additional capacity and then use an automated sourcing system. With more than one source available, a brewmaster can mix the contents of multiple sources for new, seasonal or different mixtures and recipes. We can link up to eight sources from one system, allowing the brewmaster to choose which product is needed and from which source. Quality stainless-steel silos have a minimum 20-year life expectancy with proper maintenance, which usually means keeping them touched up with paint to reduce any chance of corrosion. Silos situated closer to saltwater or in coastal locations normally get a paint upgrade to help reduce the corrosive effects of saltwater. Our silos feature smooth walls to deter any grain from getting stuck and deteriorating or rotting, and we manufacture our gates for excellent dust inhibition. We reduce the need for ladders with built-in level indicators, and we help navigate any municipal restrictions by using creative workaround strategies. For brewers that use bulk bag grain, bulk bag unloaders are available in an easily installed, low-profile form. They can use a hoist and trolley configuration to help reduce grain costs and labor through efficient use of super sacks.”

  Spent grain is a related yet separate issue, requiring its own storage area. Spent grain storage should alleviate the mess of raking or shoveling the spent grain into totes and moving them to outside storage by forklift or pallet jack. The type of storage needed depends on the number of daily brew cycles and anticipated spent grain pickups. Spent grain silos are also constructed of stainless steel to fight corrosive contents, but they’re usually not polished like the more visible grain storage units and are elevated for truck access either underneath or along the side. If using a silo for spent grain storage, the brewery may require an additional pump at the mash discharge to get the spent grain over to the silo.

  Dubose told Beverage Master Magazine that it’s crucial for a brewer to partner with a grain handling and storage provider that works within the brewery’s desired layout and approaches it in a complete system mode versus a supplier that sells and provides only equipment and nothing else.

  “We look at all facets of the operation and the speed and throughput of your process to make sure it all works in unison. Control panel automation helps brew consistency and labor control, but it’s also a way to keep your equipment from damaging itself. A brewer has to know their limitations regarding their knowledge in certain areas, and they have to partner with a supplier that will work with them as if it is their own business. Another thing to look for is a supplier that carries spare parts in their inventory like chains and gearboxes to help out when the OEMs don’t have the part. We at ABM Equipment will do that for our clients.”

  “It’s really about taking the brewery’s concept, including the amount of storage or bulk bag storage needed and projected, and then providing the proper mix within the space allotted,” said Dubose. “A workable and successful layout within a brewery’s space and allotted budget ultimately dictate our recommended conveyance and storage design.”

Good Planning Leads To Proper Handling Equipment and Right Sized Grain Storage

  “In so many cases, having adequate space to store enough grain inside the brewery is often overlooked, and you see a variety of bags and pallets placed wherever they can fit,” said Dave Ewald, Director of Sales for Bratney Companies, providers of state-of-the-art equipment, processes and solutions for their clients. “The layout and choices for grain handling and storage should be done in the initial planning stages of the brewery. Then, with more planning and forethought, an area can be designed to store the brewery’s grains in an organized and efficient manner.”

  Knowing what your planned and projected grain usage will be in conjunction with what the expected lead times are for deliveries goes a long way to dictating what type of storage is necessary. Upgrades can include silos, conveyors with floor dump hoppers, bulk bag dump stations, and more. These save time and minimize physical labor like bag hauling and ladder or stair climbing.

  “Conveyor types range from simple, flexible conveyors to chain disc systems to drag or screw-type conveyors. Conveyor mechanics typically include either a screw type, helical coil type or disc system that runs by chain or cable. Each has benefits and treats the grain differently while conveying,” said Ewald. “The key factors in determining the best conveyance solutions come back to the capacities needed, distances to convey, the number and complexity of the rises and runs to get the malt from point-to-point, and the ability to still facilitate a good cleanout between malt types. For example, leftover dark malts mixed in with pilsner malts will affect the color and taste of the beer.”

  “The capacity needed by any brewery is largely determined by the brewery size and the capability of their roller mill,” he said. “Many mills run between 1,500 and 3,000 pounds per hour and run a simple flex conveyor or chain disk system. Flex conveyors are quite simple in their design and construction, usually featuring tubing constructed from PVC or steel. It is fair to say that many breweries only operate their conveyors once or twice a day for a couple of hours, so the system’s longevity is naturally extended. On the other hand, breweries that run several batches would look for longer-lasting and more durable solutions. It really is a balance between needs and overall cost.”

  Ewald told Beverage Master Magazine that storage most often falls into the use of a hopper-bottomed silo to hold a truckload of malt. Suppose a brewery can get their grain by the truckload. In that case, they enjoy the economic advantages of buying in bulk, and the higher initial investment in the equipment is usually recovered in a relatively short time. Likewise, with conveyors, the brewer can slow a conveyor system down to handle lesser capacity if needed. For example, if the conveyor runs 4,000 pounds per hour, the brewer can alter and decrease that through a frequency variator or drive system change. Conversely, the brewer can’t modify a 2,000 pound an hour conveyor to run twice the speed, so if they can afford the higher speed systems upfront to match their planned production increases, it’s a better option.

  “Most applications are pretty straightforward,” said Ewald. “Working with an equipment provider on the head end of your brewery planning and knowing what considerations need addressing upfront goes a long way in ensuring a successful, properly sized and reliable system. For example, a case in point might be if the conveyor runs overhead across the taproom or restaurant portion of a brewery. The last thing you want in an area where patrons should be enjoying themselves with your food, conversation, and your beer is an excessively noisy conveyor.”

  When the economics of buying in bulk versus bags make sense, that’s generally when changes, including expansion, take place. Ewald said it’s not too difficult to make a case for a brewery producing as little as 1,500 to 2,000 barrels per year to justify the expense of a silo and slab and be able to recoup that cost in less than a year. From that point on, the cost savings goes right into the brewery’s bottom line. A brewer should inquire with their malt providers to confirm the exact savings point on a per pound basis and see if there are any partnership incentives available through the supplier to help obtain a grain storage silo.

  “I suggest that a brewer engage a company that has the history and knowledge to be able to discuss overall plans and can look at their entire grain handling and milling systems,” said Ewald. “Being able to provide and take responsibility for a total solution versus looking at one piece from one manufacturer, another from a different supplier and so on, is critical. It is often the little things in a brewery’s overall flow that get overlooked, like transitions, gates, spouting and the system control interface.”

  “Another consideration,” said Ewald, “Is after all the fun that comes with grain conveyance, milling, and brewing, you’re then going to have to deal with the spent grain. So it’s best to have an idea of how much spent grain will be stored, the time that it will be in storage, how it is going to be moved out and where it will be going. [These are] all things to think through before you brew that first batch of goodness.”

The Basics of Nitrogen and CO2 Use in Breweries & Distilleries

By: Alyssa L. Ochs

For many years, carbon dioxide has been used in brewing and distilling processes. Recently, some producers have switched from CO2 to nitrogen or use both CO2 and nitrogen because each has unique advantages. To help make the right choice for your operations, here are a few things to think about regarding the use of carbon dioxide and nitrogen for craft beverages.

Using CO2 in Breweries & Distilleries

  For brewing and distilling, beverage producers use CO2 to remove air and protect the product from oxidation. This ensures good taste, mouthfeel, quality and shelf stability. CO2 can be pumped into kegs and kept at pressure to carbonate beer and give it a foamy texture. CO2 is often transported as a cryogenic liquid, which requires trailers and railcars for transportation.

  Ken Hoffman, vice president of sales for Allcryo, Inc., told Beverage Master Magazine that the first factors his company considers for CO2 tanks are tank size and monthly use volumes. He also said to consider the proximity of the use site to the supply source. Based in Montgomery, Texas, Allcryo manufactures, refurbishes and services cryogenic tanks, CO2 tanks and related equipment.

  “With a refrigerated CO2 tank, you can have more storage than you might need because there is no loss of product,” Hoffman said. “It is important not to have an undersized tank, as the expense of additional delivery charges and the threat of run-outs is far more expensive than the savings of buying a smaller tank. It is also important to size for future growth.”

Using Nitrogen in Breweries & Distilleries

  Nitrogen serves some of the same purposes as CO2 in craft beverage production, such as protecting against oxygenation, extending shelf life and improving taste and aroma. Nitrogen is used in pressurized containers and can be incorporated before or after filling and before capping and seaming. For small breweries, nitrogen often comes in liquid form from gas distributors. For larger nitrogen needs, it can be transferred from a supply tank using vacuum-insulated piping.

  Vacuum Barrier Corporation is a cryogenic engineering company that manufactures vacuum jacketed piping and equipment for use in multiple industries, including breweries and distilleries.

  “Our Semiflex and Cobraflex vacuum jacketed piping are used to safely and efficiently transfer cryogenic liquid nitrogen. Our Nitrodoser systems are used for inerting or pressurizing containers and for nitrogenating beer and coffee,” Dana P. Muse, the international technical sales engineer for Vacuum Barrier Corporation, told Beverage Master Magazine.

  Allcryo also offers systems for liquid nitrogen, and Hoffman said that the primary application of their products is to strengthen thin-walled plastic bottles and aluminum cans.

Equipment Needed for CO2 and Nitrogen

  Specialized equipment is needed to facilitate the use of both CO2 and nitrogen in beer or spirits production.

  “The Vacuum Barrier Nitrodoser system drops a single dose of liquid nitrogen into the top of the container just before the cap or lid is applied,” Muse said. “The drop of liquid nitrogen is trapped inside the container, and as it evaporates and warms up, it expands, pressurizing the container.”

  Muse said that for pure spirits, a plastic bottle could benefit from some internal pressure to reduce jams on the filling line, improve stacking strength, improve storage efficiency and improve the product appearance.

  “We have also seen an increase in the market for pre-mixed cocktails in aluminum cans,” he said. “Carbonated cocktails, like a Cuba Libre or Moscow Mule, already have internal pressure created by the CO2. However, still cocktails, like a margarita or a screwdriver, in an aluminum can are extremely flimsy and easily crushed without internal pressure created by liquid nitrogen.”

  For breweries, liquid nitrogen has two different applications. On a canning line or a bottling line without a pre-evacuation system, a drop of liquid nitrogen into the empty container purges out oxygen and creates an inert atmosphere. This helps reduce the amount of dissolved oxygen in the beer to improve the shelf life. Liquid nitrogen is also used for nitrogenated beers in single-serve containers.

  “A drop of liquid nitrogen in the headspace will pressurize the container, and under the right conditions, the nitrogen will dissolve into the beer over time,” Muse said. “When the container is opened, the nitrogen will come out of solution and create the cascading bubbles and creamy foam that customers expect. However, in order to get the nitrogen to come out of solution quickly, either the container needs to have a ‘widget,’ or the consumer needs to be aware of how to ‘hard-pour’ the beverage. Without a widget or a hard pour, the nitrogen will not create the cascade or foam, and the beer will be flat.”

Tanks for CO2 and Nitrogen

  Breweries and distilleries can buy a new or refurbished foam insulated tank for their equipment. Allcryo’s refurbished tanks are a cost-effective solution that performs as well as new tanks because the refurbishment process comes with a warranty and includes all-new, two-part poly-foam insulation, paint, pipes and safety valves.

  “Typical cost savings on a refurbished tank over a new tank is between 20% and 30%,” said Hoffman. “If purchasing a new, refurbished or used vacuum jacketed tank, it is extremely important that the vacuum is sound and the tank is complete with refrigeration coils that afford the opportunity to add refrigeration if the vacuum becomes compromised. The coils are necessary to allow pressure control and avoid the possibility of high pressure and venting of CO2.”

  Both the foam insulated and vacuum jacketed tanks are offered by Allcryo and work well under most conditions, with the significant differences being cost, application and the installation site.

  “A vacuum jacketed tank does not require electricity, but the ability to control pressure in the tank is limited without an inner coil,” Hoffman said. “With a foam insulted tank, the refrigeration loop maintains the liquid CO2 in a constant pressure range. The system is set to automatically kick on when necessary, and the balance of the time is not running.”

  Concerning installation, Hoffman said that most vacuum jacketed tanks are vertical and require a substantial foundation. However, a horizontal tank might be more affordable if there is enough space available. 

Pros & Cons of CO2 and Nitrogen

  CO2 is the industry standard, which means that it is readily available and well-tested for craft beverage purposes. However, CO2 can be challenging and expensive to transport. Also, recent shortages of CO2 have slowed production for some beverage producers.

  Nitrogen offers a unique mouthfeel and smoothness because it is less soluble than CO2. Yet, it is not beneficial for hop-forward beers that are meant to have a bite to them rather than a creamy consistency. Nitrogen can be used for various applications, including cleaning, pressurizing and inerting. These applications make it a practical choice and cost-efficient since it is often cheaper than CO2, especially with onsite nitrogen generation. With onsite generation, a producer can be more efficient without waiting for a supplier’s delivery or wasting gas. It may also be a way to reduce the company’s carbon footprint since nitrogen releases fewer greenhouse gas emissions.

  Some beverage producers are using CO2 and nitrogen blends to meet their needs. However, no other substitutes have proven effective for these purposes at a cost-effective rate.

Safety Considerations for CO2 and Nitrogen

  Working with CO2 or nitrogen in any capacity can be dangerous without the proper training and safety protocols in place. Gas can collect at the bottom of tanks and spill out onto the floor to create hazards. Production facilities should have a gas detection system to alert workers to dangers or automatically activate ventilation systems. Preventative maintenance should include testing tanks for residue buildup and ensuring that gas supply lines do not have condensation or standing liquid inside. In-line filtration can be used to scrub away undesirable chemicals and moisture that collects during the production process.

  “Most people understand liquid nitrogen is cold enough to cause frostbite and cold burns if it directly contacts the skin,” Muse said. “Cryogenic gloves and face shields should be used anytime there is a risk of direct exposure to the liquid nitrogen.”

  Liquid nitrogen should only be used in a well-ventilated area, where it may be necessary to install oxygen monitors. Also, nitrogen expands to 700 times its original volume when it changes from a liquid to a gas.

  “We use this expansion to pressurize or purge out oxygen from containers, but if there is a nitrogen leak, it could eventually push all the air and oxygen out of an entire room,” Muse said. “If someone enters an area without enough oxygen, it can cause asphyxiation and death. Proper ventilation and oxygen monitors help minimize this risk.”

  Vacuum Barrier provides pressure relief valves at critical locations to eliminate the risk of over-pressurizing and prevent explosions. If too much liquid nitrogen becomes trapped inside a sealed volume, the expansion from liquid to gas could create enough pressure to explode. Relief valves must be set at the correct pressure, so if they must open, the gas escapes in an area away from people.

  “Vacuum Barrier works with each of our customers to ensure that any personnel working with or near our equipment will have the correct training for proper and safe handling of liquid nitrogen,” Muse said.

  “To help mitigate the risk of asphyxiation, it is very important to monitor the atmosphere in process areas to ensure that OSHA-mandated oxygen levels are maintained,” Hoffman from Allcryo said. He also suggested producers install alarm systems to constantly monitor the atmosphere and warn of dangerously low oxygen content.

  Both liquid CO2 and liquid nitrogen are stored at very low temperatures and can cause injury if not handled properly. “Allcryo can work with site safety personnel and assist in the design and installation of safety systems,” Hoffman said. “Allcryo can also provide input on foundation design to meet seismic and wind load requirements of the specific location and provide guidance on NFPA-adjacent exposure requirements, such as proximity to overhead electrical wires, sewer drains and vehicular traffic.”b

Expert Advice Goes a Long Way

  CO2 and nitrogen can be great choices for a brewery or distillery, depending on its specific needs and production level. When making this decision, make sure to communicate your needs and goals with your supplier to assess the risks and maintain top quality.

  Muse from Vacuum Barrier said that for anyone considering using liquid nitrogen for any reason, the most important thing to do is speak with an expert.

  “Certainly, talking with coworkers and associates in the industry who have experience with liquid nitrogen might provide some basic information, but they might also pass along some bad habits or incorrect assumptions,” Muse said. “Many people get frustrated when first trying to use liquid nitrogen and jump to the conclusion that it doesn’t work when in reality, they might just be using it incorrectly. Not only is this a waste of time and effort, but if not handled properly, there is a risk of injury.”

Craft Gluten-Free Beers and Spirits That Will Win Fans for All Occasions

By: Laura K. Allred, Ph.D., Regulatory Manager, Gluten Intolerance Group and Jeanne Reid, Marketing Manager, Gluten Intolerance Group

The desire to gather over good food and drink is a powerful urge for most people. For those who have adopted a gluten-free diet, finding ways to socialize is often complicated by the need for refreshments that don’t contain gluten. Members of the gluten-free community crave a sense of belonging and normalcy as much as anybody, but they don’t want to eat or drink anything that will make them sick. Makers of gluten-free craft beers and spirits can instill trust in consumers by following best practices for manufacturing gluten-free beverages, heeding recent changes in labeling requirements, and ensuring that their product is truly gluten-free.

The Gluten-Free Market for Alcoholic Beverages

  Along with the rest of the gluten-free market, which exhibits a compound annual growth rate of 9.2% and is projected to reach $43 billion by 2027, demand for alcoholic beverages that are gluten-free is growing. The growth in the gluten-free market is driven by rising rates of various forms of gluten sensitivity, in addition to increased diagnosis of celiac disease.

  While the market for gluten-free alcohol is comparable to that of other gluten-free products, consumers are particularly concerned about the safety of alcoholic beverages because so many of them are made from grains that contain gluten. Gluten-free consumers tend to be avid researchers who carefully read ingredient lists and doublecheck claims by visiting manufacturers’ websites. Given the choice, gluten-free consumers will always opt for products that are labeled gluten-free. What’s more, they’re often willing to pay more for a product that lives up to its gluten-free name.

Recent Rule Changes for Fermented and Distilled Beverages

  For people with celiac disease and other forms of gluten sensitivity, finding gluten-free products isn’t a dietary or wellness fad; it’s a requirement for remaining healthy and avoiding unpleasant physical symptoms. Brands getting into the gluten-free market need to understand that consumers with a medically prescribed diet will have more demands than the average consumer, and thus companies also need to go the extra mile to be transparent about their processes. You can reassure consumers by demonstrating you understand legal requirements for labeling gluten-free products, particularly recent rule changes by the Food and Drug Administration (FDA) and the Alcohol and Tobacco Tax and Trade Bureau (TTB).

  In 2020, the FDA responded to growing awareness that ELISA tests used to identify gluten proteins in foods and beverages don’t reliably detect residual gluten in fermented products. To address the issue, the FDA passed a new rule that requires manufacturers to start with gluten-free ingredients if they want to label products as gluten-free. At the same time, the FDA ruled that distilled products made from grains containing gluten could be labeled as gluten-free because distillation removes gluten proteins from the finished product. Following the lead of the FDA, the TTB released a ruling that allows makers of distilled beverages to advertise and label those products as gluten-free—even if they are made with grains that contain gluten.

Fermentation vs. Distillation What’s Involved?

  To understand the rationale behind the FDA and TTB rulings, makers of craft beers and spirits need to be aware of the differences between fermentation and distillation. Typically, production of alcoholic beverages starts with fermentation. The fermentation process converts sugars into ethyl alcohol by breaking down substances like grain or potatoes through the introduction of yeasts, bacteria or other microorganisms. Beer usually starts with the fermentation of wheat or barley, two gluten-containing grains. Distilled spirits like whisky start with wheat or rye, while vodka can also be made with sugar cane or potatoes. Fermentation processes may break down some of the gluten proteins in beer or spirits, but it won’t remove all of them.

  Distillation involves the boiling and condensation of fermented products to separate particulates in a liquid. During the distillation process, fermented liquid is heated up in a still. Under high temperatures, the most volatile compounds like alcohol become gases that rise to the top, while the heavier, less volatile  compounds, including gluten, sink to the bottom. Once the alcohol is re-condensed and collected, the resulting product becomes protein- and gluten-free.

The Benefits of Third-Party Certification

  The safest bet for gluten-free consumers is to look for products that are labeled or certified as gluten-free. The benefits of certifying alcoholic beverages as gluten-free are many. According to FMI U.S. Grocery Shopper Trends, 29% of all shoppers look for certification claims on packaging for food and beverages—and this is particularly true for gluten-free consumers. These consumers look for brands that inspire confidence, which means that in addition to labeling products gluten-free, taking the step to get third-party certification, like that of the Gluten Intolerance Group’s Gluten-Free Certification Organization (GFCO), goes a long way in building brand loyalty among the gluten-free community.

  For one leading producer of vodka, obtaining GFCO certification and prominently displaying the certification logo on a paper sleeve attached to their bottles has made their product the vodka of choice for gluten-free consumers, who are very brand loyal. For manufacturers, certifying alcoholic beverages can be a real differentiator and selling point in a booming market.

Best Practices for Producing Gluten-Free Beer and Spirits

  Producers of craft beers and spirits can capitalize on demand for gluten-free products, but it’s important for companies to follow the correct procedures for manufacturing these beverages. The process of producing gluten-free alcoholic beverages starts with sourcing gluten-free ingredients for products that are fermented but not distilled and ensuring that all gluten has been removed from products that are distilled. Manufacturers should also make sure their facilities are set up to avoid cross-contamination. One option is to produce alcohol in a dedicated gluten-free facility. While only 15 of the 8,000 breweries in the US are dedicated gluten-free facilities, this number has grown from just around three in 2016.

  However, using a dedicated facility to produce gluten-free beverages isn’t your only option. Provided you follow best practices for preventing cross-contamination, there is no reason you can’t produce gluten-free products in a non-dedicated facility. You will need to take extra precautions by cleaning and testing any shared equipment, and some certifications, like GFCO, recommend using dedicated gluten-free equipment on production lines, simply because the equipment used to distill alcohol can be difficult to take apart and clean thoroughly. On the other hand, if you’re doing small batch production and you can get inside your equipment to clean and swab it, you can use shared equipment. You just need to verify that you’ve removed all traces of gluten before you make your next gluten-free batch.

  As far as cleaning solutions go, you don’t need to spend top dollar on any specialty products. Standard soap and water will do. The important part of the process is swabbing to test for the presence of gluten or protein once you’ve cleaned your equipment. To demonstrate the effectiveness of your distillation process at removing proteins, GFCO recommends performing a lab procedure called an “amino acid analysis” that uses mass spectrometry to measure the amount of residual amino acids in distillates. A commercial lab can assist with the testing process, particularly for smaller distilleries that don’t have the equipment to conduct independent testing.

Things to Look Out for When Producing Gluten-Free Alcohol

  If you are not making a distilled product—if you are, say, brewing beer—you should start with higher quality grains and do a visual inspection once they enter your facility to ensure they really are gluten-free. You should also beware of advertising “gluten-removed” beer to gluten-free consumers. Gluten-removed beer is manufactured using wheat, rye, barley or some other common gluten grain, and then, after fermentation, is typically treated enzymatically in a way that makes the product test negative for gluten. However, because testing does not reliably detect the presence of all residual proteins that people with celiac disease react to, the TTB has ruled that only beer that starts with gluten-free grains can be labeled as gluten-free. If you want to produce a gluten-free product, another option is hard seltzer. Although many of these products start with malt, which is most commonly made from barley, hard seltzer can also be produced using sugar to create an inherently gluten-free product.

  Distillers of hard alcohol should also pay careful attention to any added flavorings: some of these ingredients include gluten and thus introduce the potential for cross-contamination. Manufacturers should also take care when using old barrels to season alcohol, because some of these barrels are sealed with wheat paste and may contain trace amounts of gluten.

  As the gluten-free market continues to grow, more consumers are seeking options for gluten-free alcoholic beverages and many are willing to pay a premium for products they know they can trust. Starting with quality ingredients, adopting best practices for cleaning and testing your equipment and obtaining third-party certification, like GFCO, are three ways you can assure consumers that your gluten-free product is safe for consumption. Take the right steps, and your gluten-free alcoholic beers and spirits can become the next must-have brand for any occasion.

  Laura K. Allred, Ph.D. is the regulatory manager for the Gluten Intolerance Group’s Gluten-Free Certification Organization (GFCO). Allred’s experience includes a background in immunology and eight years of directing a food testing laboratory and test kit manufacturing operation. The GFCO certification logo is the symbol of trust for the gluten-free community, with more than 60,000 products certified worldwide.

  Jeanne Reid is the marketing manager for the nonprofit Gluten Intolerance Group. Reid is a marketing and advertising professional with 20 years in the retail, restaurant, and CPG industries as well as cause-related efforts. A difficult family battle with celiac disease was an eye-opener for Reid and provided an opportunity for her to gain extensive knowledge and expertise on the gluten-free market.

For more information, visit…www.gluten.org and www.gfco.org

The Best Approaches for Safety in the Brewery and Distillery

By: Alyssa L. Ochs

As a craft brewer or distiller, it’s easy to get caught up in the day-to-day operations of the beverage production process. After all, from securing supplies to marketing products and everything in between, there’s a lot to keep in order.

  Among the many competing demands, safety sometimes gets taken for granted or overlooked. However, it’s essential to always keep safety on the radar and on the minds of staff. Beverage producers can benefit from a little refresher on safety to protect their valuable workers while also maximizing efficiency and productivity.

Safety Hazards in Breweries & Distilleries

  Because of everything involved in the brewing and distilling processes, many things can go very right or very wrong depending on how operations are run. Various hazards exist in a beverage production facility that workers need to be aware of and trained to address.

  Injuries can occur due to lifting, pushing and carrying equipment or because of falls on slippery floors. Working at tall heights and on ladders can cause injuries, while clutter left behind on floors and in confined spaces can cause tripping. Carbon dioxide gas, boiling liquids, steam, hot surfaces and not being properly trained to use machinery pose hazards. Other causes for concern are flammable chemicals, broken glass and grain dust exposure. Meanwhile, repetitive movements without good ergonomic tools can put employees at risk, and high noise levels can cause ear damage.

  “All semi-finished and finished products are flammable, so proper engineering and procedural controls must be designed, installed and tested, and all staff trained on these controls and procedures,” said Rich Buoni, founding owner of Pennsylvania Distilling Company in Malvern, Pennsylvania. Pennsylvania Distilling is a small distillery that produces grain-to-glass vodka, whiskey, rum and gin. Its location offers tasting flights, artisan cocktails, tours and bottle sales in a relaxed environment.

  “As a chemical engineer with significant global experience, it is my opinion that distillery stills should never be direct-fired, as that is simply too intrinsically unsafe regardless of how large the installed base may be,” he said. “Steam, preferably through a vessel jacket or coils, is the best and safest design, although other heating fluids, such as circulating nonflammable hot oil, are acceptable. Electric heating coils are also acceptable but less preferable for a number of reasons.”

  On the brewery side of things, Beverage Master Magazine connected with Chad Gunderson, the president, CEO and head of brewing operations at Half Brothers Brewing Company in Grand Forks, North Dakota. Half Brothers is a family-friendly craft brewery specializing in creating unique beers with innovative ingredients and techniques in a relaxed gathering spot with a taproom, kitchen, live music and local art.

  When asked about the most important safety concerns that brewery owners and employees should be aware of, Gunderson said that “how to properly handle cleaning chemicals, hot water, hose management and cleaning floors” are his top recommendations.

The Role of

Personal Protective Equipment

  Personal protective equipment is vital across many industries, including craft beverage production. Breweries and distilleries should ensure that employees wear the proper clothing and footwear to do their jobs safely and without distraction or hazards. Protection for the eyes, ears and hands should be worn when operating specialized pieces of machinery that can put the body at risk.

  PPE has played an even more significant role in the craft beverage industry due to the COVID-19 pandemic. Depending on where a producer operates and what the ever-changing guidelines dictate, front-of-house staff members who interact with the general public may also need to utilize face masks, face shields, gloves, hand sanitizer and other sanitation measures.

Responsibilities of

Workers and Supervisors

  Ensuring that a brewery or distillery operates in a safe environment starts with good communication among everyone who works onsite. Owners and managers can begin this process by asking employees if they feel safe in the workplace and encouraging them to raise concerns about any potential hazards they have noticed in the facility.

  Buoni at Pennsylvania Distilling Company told Beverage Master Magazine that employee safety training is conducted by him directly. This includes testing equipment controls and safety procedures. 

  “Our safety checklist includes proper use of PPE, fire extinguishers, proper storage of products and chemicals, proper use of pumps and compressors, understanding of peripheral equipment including the steam boiler and chiller, use of any electrical equipment, grounding of tanks and pumps, food processing safety and how to lift objects like grain bags safely,” Buoni said.

  At Half Brothers Brewing, “Each new employee has an SOP manual and exam they must complete before working alone in the building and factory,” said Gunderson.

  The first places to look for safety hazards include the production facility and anywhere open to the public. But don’t forget about behind-the-scenes locations such as the shipping and receiving area or the bathrooms. A safety plan might include briefing delivery drivers and vendors about safety protocols unique to the facility.

Safety Tips for Brewers and Distillers

  Flooring-related slips, trips and falls are among the most critical safety concerns in a brewery or distillery. To ensure that the floors are safe to walk on, spills should be cleaned up as quickly as possible, relevant signage posted, and obstructions moved out of walkways. Obstructions include cords, boxes, bottles, cans and employees’ personal bags. Employees should wear sturdy, closed-toe shoes to protect themselves from broken glass, chemical spills and slippery surfaces.

  Chemical leaks, spills and handling are significant concerns for craft beverage producers because of how dangerous these substances can be when misused. Goggles, protective footwear and safety aprons can help prevent injuries due to chemical exposure. Make sure to clearly label hazardous materials, so employees know to avoid these products or use extra caution when handling them. Ensure proper ventilation in areas where chemicals are used, particularly in small spaces.

  Initial and ongoing safety training is important to prepare employees for potentially dangerous situations and common scenarios that could turn deadly without a moment’s notice. In smaller operations with just a few staff members, it might be necessary to cross-train all employees on the various safety procedures, so everyone is prepared to handle diverse tasks throughout the day. Being proactive with training is always preferable to training in response to an incident. In addition to how to safely use specialized equipment, it may also be beneficial to train employees on first aid, CPR and basic safety tips for seemingly simple tasks like opening boxes and stocking supplies.

  OSHA compliance is required of brewery and distillery owners in order to keep their licenses to operate. Laws and regulations in the alcohol industry frequently change, so producers should keep up with any updates. OSHA is known to show up unannounced to inspect and ensure that safety regulations are being followed. Some of the main things these inspectors look for are cluttered walkways, chemical storage and labeling, keg storage and written records that document training plans, hazard assessments and injury logs.

How to Keep Your

Staff and Customers Safe

  Safety in the brewery or distillery may seem like little more than common sense at first glance, but gentle reminders can go a long way in helping staff members remember what’s most important. Without suitable safety protocols in place, a beverage business could be subjected to extra inspections and incident investigations that disrupt normal operations and put the company at risk of fines or discipline.

  Buoni from Pennsylvania Distilling Company said that his best advice for a new distillery concerning safety is to ensure that they have a solid understanding of the distillation process from beginning to end. 

  “It’s critically important to know how the dots are connected rather than just taking somebody else’s recipe and making liquor,” he said. “Appropriate education is the best answer. For the tasting room, it is really very similar to any bar that serves alcohol to patrons. Having appropriately certified bartenders and servers is key. Staff must understand the uniqueness of a different license class so that all laws are followed.”

  Gunderson at Half Brothers Brewing Company recommends that brand-new breweries thoroughly research the proper chemical training, dosage, time and handling.

  “Clean beer starts at the source of cleaning SOPs,” he said.

  Keeping up with all of these safety requirements and regulations might feel like a hassle, but there’s no way around it if you want to run a reputable craft beverage business. By encouraging a proactive safety culture in your brewery or distillery, you will ultimately attract the types of employees and customers you want and need to stay in business while also letting people know that you honestly care about their health and safety.

What’s In a Name?

The Craft Beer Industry’s Obsession with Styles

By: Erik Myers

When Kevin Davey, the brewer at Wayfinder Brewing Company in Portland, OR spoke on record about what his new style of “Cold IPA” meant from a process and ingredients standpoint, the craft beer industry erupted with contention. Soon, like Brut IPA before it, it was the buzz of online brewer forums. Some brewers were eager to make their own version, some ranted in angry indignation about a new sullying of a classic style, already much maligned.

  If you’re unfamiliar with the “style”, I’ll catch you up now. A Cold IPA is made with lager yeast and fermented at around 65F – much like a Steam Beer. It is dry-hopped during active fermentation to take advantage of yeast’s ability to biotransform hop oils. One could almost consider it a cross between an Italian Pilsner and a Hazy IPA. Almost.

  Somewhere on the Internet, the debate still rages. If it’s made with lager yeast, how can you possibly call it an IPA? After all A stands for “Ale.” And if you’re fermenting with lager yeast at a warm temperature, doesn’t that stylistically make it a California Common? If you’re hopping during active fermentation, it’ll certainly pick up some haze. Does that make it New England Style? We may never know.

  It’s not an unfamiliar debate. A decade or more ago, beer industry veterans will remember a similar debate around Black IPA. How could you possibly call it an IPA? After all the P stands for “Pale.” We’ve had Brown IPAs, Red IPAs, Belgian IPAs, Brut IPAs, Session IPAs, Hazy IPAs, Juicy IPAs, and even IPLs. “India” is one of the most over-used meaningless words found in beer styles, yet the industry is happy to pedantically argue about every word that happens to land anywhere near it.

  The industry is both obsessed with style classifications and their definitions and crippled by its hyper-focus on them. At the largest beer competitions in the world – The Great American Beer Festival and the World Beer Cup – beers are judged as “best” by how closely they adhere to style guidelines written and maintained by the all-holy gatekeepers of beer, the Brewers Association. The US-based organization essentially functions as the worldwide arbiter of what makes a beer “authentic”.

  Here’s the problem. Brewing “to style” is not a measure of quality, and customers would rarely recognize it if it were.

  The arcane and specific definition of beer styles emerged at around the same time as the country’s first craft breweries with the 1985 founding of the Beer Judge Certification Program (BJCP) by Pat Baker of the Home and Beer Trade Association along with support from the author of The Complete Joy of Homebrewing, and veritable Godfather of Craft Beer, Charlie Papazian. From its originators, it seems quite clear that the purpose of defining beer styles was to further interest in homebrewing.

  Using styles as an educational tool created a common language for homebrewers to learn how beer differed around the world. It created a framework for writing about historic origins and context. It gave homebrewers a language for their dreams of recreating that beer they had when they were traveling right in their own kitchen. It gave them the ability to share recipes with other homebrewing enthusiasts in a shorthand that they could all recognize, to save the countless hours that would otherwise be needed to explain over and again the nuanced differences between an American Brown Ale and a Robust Porter.

  The vast majority of the craft breweries in this country were built by homebrewers which amplifies these definitions on a commercial level and gives them an outsized importance, particularly to the people within the industry itself.

  According to the Trade and Tax Bureau (TTB), there are 5 classifications allowed on a label: beer, ale, lager, porter, and stout. Well-style-versed brewers scoff at this list for the same reason that they roll their eyes at Cold IPA. Porter and stout are both ales, and both ales and lagers are beers. It’s not so much a list of styles as it is a Venn diagram.

  By contrast, the 2020 GABF Style Guidelines listed 91 different styles, with 127 subcategories. The style guideline document itself I     s 61 pages long and is updated every year. Somehow, though, brewers still think that when they put the words “Czech Pilsener” on the can, that their customers can accurately determine that, of course this isn’t a “German Pilsener” and obviously it’s not an “American Pilsener” or an “International Pilsener.”

  Styles are great tools. They’re good communicators. In a short description, they can communicate to the drinker exactly what they should be able to expect inside the package, assuming, that is, that they know what the words in that description are referring to.

  Unfortunately, craft beer consumers don’t have this level of education. Their knowledge of beer styles has been imparted to them through one reality television show hosted by the irreverent Scottish founders of Brew Dog and another focused on the weird antics of the country’s “extreme” brewery, Dogfish Head. They’ve learned styles from airport menus and that one brewery tour they went on a few years back when they got a Groupon, and they’re pretty sure they learned something at that beer festival that they went to on their birthday when they tried to have one of every single beer there and passed out in the parking lot.

  The fact is that styles are industry jargon. They are not marketing materials, or a meaningful form of communication to customers. They don’t really describe what’s inside a glass, so much as they describe what’s inside a recipe. Every brewer in the country has a story about a customer walking into their bar, looking blankly at the list of beers and asking, “Do you have any ales or lagers?” That’s because the meaningful differences between an ale vs. a lager can be summed up by describing what a beer tastes like, rather than referencing the species of the fungus that digested the barley sugar.

  Sure, because of the growing popularity of the industry, some of those terms have made it into modern beer-drinking vernacular, but only on a limited basis. In fact, the reason IPA has worked so well as a moniker for craft beer is that it is short, easy to remember, and is attached to a bold flavor profile. Consider, though, that the term IPA has been on a centuries long journey. What currently constitutes an IPA today would be completely unrecognizable to the people who originally made them. Consider, too, that many customers do not know that IPA is an acronym. Nor do they associate it with a particular color or the species of yeast, and they would be hard pressed to tell you why the word “India” is involved at all. It probably involves boats.

  Calling Davey’s iteration of a style a “Cold IPA” is fine, even though it’s not really cold, nor an ale, nor Indian, because it’s created a term in which industry members can communicate the techniques he’s using in order to iterate upon the idea at another brewery. Like the homebrewers that created this classification system, he’s using familiar points of the naming system to communicate to others how they should take a stab at their own version of this creation – and that, ultimately, is the soul of what the craft brewing industry is about – and what will insure it moves on into the future: experimentation, innovation, and creativity, and then, iteration. Style guidelines are merely the framework with which that is communicated, and nothing more. They are not a holy book of information and to most of the rest of the world, the words used within them are largely meaningless.

  Style guidelines are excellent tools for internal communication. They’re great for recipe development. They’re even okay when used to classify beer for competition. But that’s where they stop being useful. When you’re selling beer in packaging or across a bar, it’s important to meet people where they are. Communicate with your customers in their vernacular, not your jargon.

Barrels & Racking:

Modern Systems, Historic Preservation and Refurbished Options Producing Optimal Results

By: Cheryl Gray

In 1879, distiller Frederick Stitzel patented a revolutionary method that put a new spin on how barrels for spirits and other crafted drinks are stored.

  Some 150 years later, the practice of racking barrels, also known as ricking, is an industry-standard. Placing barrels on their sides, rather than upright, and supporting them underneath with either timber or metal, increases air circulation and space.  Racking keeps pressure off barrel staves, a problem that Stitzel and other early distillers learned could result in losing a barrel’s precious contents through leakage.

Space to Breathe

  Western Square Industries, headquartered in Stockton, California, has been in business for 43 years and is among the global leaders in its field. The company originally catered to the agriculture and livestock industries, specializing in two main products, steel gates and corrals. Western Square Industries now manufactures a broad range of barrel racking systems for distillers, breweries, wineries, meaderies and cideries. It serves clients across the United States, with a significant client base in California, Texas and the Eastern U.S.  

  President and CEO Trygve Mikkelsen took over the company in 1993 and quickly recognized its potential in manufacturing barrel racks. Mikkelsen told Beverage Master Magazine about one of the company’s most popular barrel systems for distillers expanding their operations.

  “The Barrel Master is our most popular model for distilleries in growth since the user can mix and match sizes of barrels in a safe forklift-able stacking system. The Barrel Master can also be bought with the barrels sitting on wheels for easy rotation if desired. This is possible because there is no weight on each barrel.”

  The Barrel Master 30/53 allows barrels ranging in size from 30 to 53 gallons to be stored on the same rack. The rack-on-rack design allows barrels to be more visible and accessible. There is also the opportunity to stack barrels higher without compromising stability. An optional wheel design provides 180-degree barrel rotation in either direction. Unlike other systems, which are more like pallets between barrels and require a uniform barrel shape and size, Mikkelson said Barrel Master’s rack-on-rack function eliminates any barrel putting pressure on another below. The rack also features a storage-saving design in that it can be nested into a stack when empty.  The racking system is manufactured from stainless steel and is available in several color and coating options.

  Mikkelsen said breweries and distilleries also use his company’s seven-inch two-barrel racks and another product known as Big Foot. Sometimes, Mikkelsen said, full access is less important than space.  In that case, clients choose the company’s low-profile rack, known as two-barrel four-inch racks.

Tradition and Preservation

  While newly established distilleries may look to modern-day solutions for ricking, the name Brown-Forman evokes a history like no other, including that it is the only distillery company in the world to make its own barrels, which are stored in a range of distilleries, some with warehouses and barrel ricking systems dating back to the late 1800s.

  When a young Jack Daniel first learned the art of making whiskey under the tutelage of a soon-to-be ex-slave-turned-master-distiller, Nathan Nearest Green, neither could have imagined that the whiskey created would become synonymous with the tradition and preservation of some of the most historic distilleries in the world. Brown-Forman is the keeper of that tradition, in the form of four distilleries, three in Kentucky and, of course, the Jack Daniel’s Distillery in Tennessee. 

  With some 130 years of warehouses spread across four distilleries, the barrel ricking found in any given Brown-Forman warehouse depends upon many variables. Chris Morris, Woodford Reserve Master Distiller for Brown-Forman, explained that while a modern distillery can install all one type of ricking, the historical distilleries of Brown-Forman have operated on a different premise.

  “The date of construction for the numerous warehouses at our distilleries ranges from 1890 through 2020.  Needless to say, this means we have many types of barrel rick material, from wood to metal. Within those two groups, we find different types of wood and metal in use over the years. That depends on the era an individual warehouse was constructed and who built it. We also have some palletized storage as well as floor dunnage. The Woodford Reserve Distillery, for example, has warehouses with wooden ricks and others with heavy iron rails. Woodford also has some palletized space and floor dunnage. 

  “While our ricks are made of various materials, they are all using the same design that was patented in 1879: the ‘open rick’ design. Now, this again will vary in length and height, based on the size of the warehouse. Some wide houses will have a rick that holds 31 barrels, while others may only hold 11 due to the narrow width of the house. Most of our warehouses have ricks that are ‘three high’ or have three tiers of ricks.  However, we do have one house that has ‘six high’ ricks. Still, the design doesn’t change.  When our cooperage makes a barrel for a distillery, like a Woodford Reserve specific barrel, it doesn’t know which warehouse it is going to be entered into, so that barrel has to fit in every warehouse’s ricks.”

  When it comes to proper storage, Morris said, some things never change. “The proper storage for a barrel in the rick is simple. Rick it with the bung in the 12 o’clock position to minimize leakage. If a barrel already has a leak, rick it with the leak point at 12 o’clock. Otherwise, it is the condition of the warehouse that is important, rather than how the barrel sits in the rick.  We want clean, dry conditions in the warehouse.”

  Morris also said that there is no need to rotate barrels if there is good inventory control, along with batching barrels together to make a consistent flavor profile. A barrel matures based upon warehouse temperatures and the length of time the barrel spends in the warehouse, not by how it sits.

  “There has been a tremendous amount of study conducted on the impact temperature has on the maturation process,” he said. “Brown-Forman has research papers that date back to the 1920’s – we operated during Prohibition under medicinal permit KY—3. Based on these many studies, we never allow our Kentucky warehouses to drop below 55 degrees Fahrenheit in the winter. This requires that each of our warehouses be constructed with thick masonry walls so they can be heated as necessary. They will get as hot as they will in the summer because they can’t be cooled. Jack Daniels has ‘iron clad’ warehouses, so they can’t be heated and will, therefore, get cold in the winter. So, Brown-Forman matures its whiskies across a variety of maturation styles.”

Reusing Resources

  Menomonee Falls, Wisconsin, is home to The Barrel Broker, co-owned by John and Kathleen Gill, who started the business 11 years ago in California. The company sources and supplies used barrels and racks for breweries, wineries and distilleries. While its clients are primarily in the Midwest, The Barrel Broker also has business overseas.  The company’s customer base prefers barrels freshly emptied and slightly wet. A lot of that barrel stock comes from bourbon distilleries which, by law, can only use a barrel once for bourbon.

  Accordingly, The Barrel Broker has some insight to share on how to store barrels and what its customers prefer when selecting used racks. John Gill, who has a background in the wine tourism industry and heads quality control for the company, said that for his clients, choosing a racking system really comes down to need, preference and budget.

  “Racks are designed to safely store barrels two wide and up to five stacks high while being able to be moved with a pallet jack or forklift. The seven-inch racks allow ample space to access the bungs while stacked for pulling samples or topping off.  We suggest used, refurbished or new two-barrel racks in three-to-seven-inch sizes.  We sell them all for barrels, 15 to 60 gallons.” 

  Gill agrees with other experts, such as Morris, who say that barrels don’t need to be rotated. He told Beverage Master Magazine that he also believes that keeping the proper temperature in a warehouse is key to a successful product outcome from any barrel.

  “Ideal for breweries is high humidity, 60% to 70%, and cool temperatures to minimize evaporation loss. Ideal for distilleries is a continuous change of temperatures and humidity to achieve complex flavors and complexity in barrel-aged spirits.”

  Price and preference dictate what racking systems a brewery or distillery may choose. However, experts agree that controlling warehouse temperature, avoiding undue pressure on barrels, and keeping tabs on inventory control produce the best results.  Whether wood or metal, racking is a matter of knowing what will stack up as the best outcome for the product inside a barrel.

Breweries: How to Price your Beer

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I recently bought a book called Priceless, The Myth of Fair Value. The book is 300+ pages long and provides great information about pricing and the role of human psychology in how purchasing decisions are made.

While the book contains a lot of interesting stories, studies, and research, it doesn’t do much to help with the fundamental question: How should you price your products?

Ideally, to price your beer, you would determine the costs, add a healthy markup, and sell it to your wholesaler (or retailer) at a fat profit. Unfortunately, the market forces and your competitors have some influence here.

So, how do you price your products?

You can look at what everyone else is charging and follow suit. You can take a wild guess and hope it will work out profitably in the end. Or you can go along with what your beer wholesaler suggests for pricing.

Regardless of how you may have priced your beer in the past, today we’re going to talk about how you can price your products profitably for the future. To make the concepts easier to understand, we’ll use hypothetical pricing numbers and examples. And we’ll walk through a template you can use to make pricing easy. Best of all, you don’t have to read a 300-page book to find the answers.

Disclaimer: Since we are talking pricing, all examples listed are hypothetical only and used for illustrative and informational purposes. Prices, costs, and margins will vary widely based on market conditions and other factors.

How to Price Your Products

  • Pricing Terms: PTC, PTR, PTW
  • How Pricing Works in the Real World: Margin needed by the brewery, wholesaler, and retailer
  • Use the Pricing Model: Plug n’ play Pricing tool for your Beer

Pricing Terms

The typical beer sales cycle looks like this: the brewery sells to the wholesaler, who then sells to the retailer, who then sells to the end consumer.

At each stage in the sales cycle, there are different prices and markups that are charged. The Price to Wholesaler, or PTW, is the amount the brewery charges to the wholesaler. The Price to Retailer, or PTR, is the price the wholesaler charges to the retailer. Lastly, the Price to Consumer, or PTC, is the amount charged to the consumer. This is the amount listed on the store shelf for your beer.

You won’t be surprised to hear that the price the consumer pays for your beer is significantly higher than what you sold it to the wholesaler for. The reason, of course, is that each stakeholder in the sales cycle needs to make money. The brewery, the wholesaler and the retailer all have margins that they need on the sale of the beer in order to run their business profitably.

Those terms again…

  • PTW = Price to wholesaler
  • PTR = Price to retailer
  • PTC = Price to consumer

How Prices Work in the Real World

To properly price your beer, it may be useful to work backwards from the Price to Consumer. This is the price of the beer on the shelf at the retail account. If your competitor’s brand is selling for a hypothetical $12.99 a six-pack, you may want to price your beer accordingly.

The challenge is to figure out how much to charge your wholesaler, who then will charge the retailer, who then will price the beer at the $12.99 price point. How does all that math work? We’ll take this in small steps.

Here’s a hypothetical example. Let’s say you charge the wholesaler $25 for a case of beer. The wholesaler needs to make, for example, a 30% margin when they sell it to the retailer. To get a 30% margin, the wholesaler then charges the retailer $36 for the beer.

The math: $36 minus $25 = $11 Margin for the wholesaler. $11 divided by $36 = 30.5% Margin percentage.

Continuing the example, let’s say the retailer also needs to make 30% on the beer. Since they will sell it in six-packs, they markup the beer and charge the customer $12.99 per six-pack.

The math: 4 six-packs times $12.99 = $51.96 total sales to consumer for the case of beer. $51.96 minus $36 cost of beer = $15.96 margin.  $15.96 margin divided by $51.96 sales price = 30.7% margin percentage.

Each stakeholder needs to make their margins at each point in the sales cycle. This is what keeps the world going round, and the beer being sold. The numbers can get confusing fast. Thank goodness we have a Pricing Model that will do the math for you.

Use the Pricing Model: Plug n’ play Pricing for your Beer

There are many variables to consider when pricing your beer. You can break out the calculator, pen, and pencil, or you can use this Pricing Model spreadsheet. Below is a snapshot:

The first step is to determine what your beer costs to make. These costs include direct labor, direct material, and overhead. Next, determine the margin that your brewery needs to cover operating costs and realize a net profit.

In the example above, the total costs of the package are $14.80. The PTW, price to wholesaler is $25, and the brewery margin is 40.8%.

The next step is to understand the required margins for the wholesaler and retailer and expected price to consumer.

In the example above, the wholesaler sells to the retailer at $36 per case. The retailer then sells the case in four units (four six-packs) at $12.99 each. This is the price to consumer. 

The pricing model takes all the variables involved in setting the price and combines them into an easy-to-use spreadsheet. Simply enter a few numbers and you’ll have the information to get your beer on the shelf at a competitive price.

Wrap Up + Action Items
Read and understand the pricing terms – Price to Wholesaler (PTD), Price to Retailer (PTR) and Price to Consumer (PTC). Know that everyone needs to make money at each step in the sales cycle. The wholesaler needs to make their margin, and so does the retailer. Most importantly, so do you, the brewery owner.

Don’t guess or follow the herd when it comes to pricing. Use the pricing model to properly price your beer and achieve profitability. Your income statement will thank you.

You can download a copy of the pricing model at www.CraftBreweryFinancialTraining.com.

 

Mixology Mishaps:

How To Turn Negative Online Reviews into Successful Sales

By: Chris Mulvaney, President (CMDS)

Sticks and stones may break our bones, but words will never …hurt us? Wait, never mind.  In the craft beverage industry, words can do damage, especially online where your reputation is always one Google search away.

  Facebook, Yelp, and Google are the three most-trusted review sources for local searches.  Reviews on these sites matter.  The way that your business treats a negative review can tell your customers a lot about you.  So, if you do happen to receive one, you need to act fast.

And while you are no doubt used to handling the difficult customer in person, social review channels are open for all to see, and negative comments can reflect poorly on your craft brand and, ultimately, cost you sales — right?  Well, yes and no.

  Yes, if you don’t manage your negative comments properly, then it could be bad news for your revenue stream. However, there are ways to offset negative reviews. And, if you respond the right way, you can turn those negative comments around and avoid having a damaging social media mishap.

  In fact, you can leverage them to actually improve your conversion rates, “boost” your sales, and ultimately create success for your craft beverage brand.

Create a Game Plan

  Before you take any action on a review, you should always have a game plan in place. That way, your social media presence remains consistent across all review platforms.

  Look at it this way: think of each negative review as an opportunity to show your customers that you care.

  Here are some game plan directives to put into place:

1.  Don’t Ignore Them or Be Defensive:  Hearing someone criticize your business hurts. It can be tempting to close your browser every time you read a bad review, or, even worse, to respond with a cutting retort, but burying your head in the sand or exhibiting online “road rage” isn’t going to solve anything. Instead, come up with the right response. Address them by name. Humanizing your approach will demonstrate your brand ethics. Make sure that you remain genuine. Don’t answer with an auto-reply. Take the time to actually investigate each issue. Don’t debate the validity of their statements, argue, or respond in an aggressive or combative way, even if you don’t agree. Arguing with a dissatisfied client online makes their original complaint seem more valid, and worse, it never makes you look good.

       Instead, thank the reviewer for their feedback and offer a sincere apology for their experience. You don’t have to take responsibility, but do show empathy.

2.  Respond as Quickly as Possible: It is vital to respond to negative comments as quickly as you can.  Doing this will give you a better chance to salvage those bad reviews. Each minute matters on social media because everyone has real-time access to it.

       To help you manage your social media responses in a timely manner, it’s best to hire an agency. They can assist with implementing tools so you are alerted in real-time whenever you receive a comment on one of your channels. You can quickly resolve any issues and prevent significant customer loss.

3.  Really Make the Effort to Solve the Problem: Making something right will also show potential customers that you are completely committed to ensuring satisfaction.

       In addition, many reviewers will go back and post their experience if it turns into a positive one, and every positive review takes the sting out of a negative one. Highlight these experiences so customers see that you care about the outcome.

4. Keep it Real:  An imperfect, but pretty strong rating appears much more believable to customers than having a perfect record. Unblemished reviews can look “fake” and more untrustworthy than their blemished counterparts. In a nutshell, negative reviews provide some honest feedback on your craft beverage product or service and can mix in nicely with the positive commentary.

Leverage Other Business’s Negative Experiences

  As the saying goes, a person who learns from other people’s mistakes is a wise person. And leveraging other people’s negative experiences can offer many benefits.

  Learning from others by doing your research helps you avoid the same obstacles.

  For instance, here are some top online customer complaints about various craft beverage establishments swirling around social media right now:

●    Place not open as advertised/Website not updated/Hours not listed.

●    Want a bigger pour for the price.

●    Employees are rude/non-compliant with safety.

●    Tour was longer than it stated.

●    Not clear about rules (kids, food, etc).

●    Not enough offerings/limited selection.

●    No Flight Layout (for breweries).

  All of these comments boil down to the same two issues: Online presence and customer communication.

  You know what takes to manage your business and your inventory. And, with the popularity of craft beverage businesses, there is a steady stream of new customers. Some patrons, used to a different type of establishment, or ones who are simply impatient when it comes to being served at a busy place, offer a different level of frustration.

  To counteract this, make sure you take notice of negative reviews from similar businesses to limit having the same thing happen to you.

  Here are some counter-acting responses to the above examples:

●   Always keep your website and hours of operation updated. Do you require reservations or are you first come, first serve? Do your hours change with the seasons? Close for private parties? Planning these updates in advance and keeping your business information up to date ensures you do not get disgruntled customers who are more likely to chalk up their “bad” experience through a negative review.

●   Be CLEAR with your pricing, online and in person. Be transparent about promotions and their start/end dates. State whether sales tax is or is not included. Be open about the size of your pour. Being transparent can avoid any unwelcome surprises.

●   Train your employees in the art of customer service. While you know there will be times when it will get busy and your staff may get pulled in different directions, the customer should always be treated in kind.  Consider security cameras to give peace of mind to both the customer and the staff so that any situation can have an objective eye.

●   Be aware of the most up-to-date safety and cleanliness measures. Make sure your business adheres to them to keep everyone as safe as possible all round.

●   If you provide tours, state when your tours begin and finish. If they can be more lax, state that too. Make sure this is stated online and in person.

●   Let your customer be prepared before they come to your business on what your rules are by posting them and in your place of business. Do you have a food menu or do you use a trusted vendor? Are kids allowed? Is there an “Adults-Only” area? Tasting rules? Your menu and offerings should be clearly stated online and in person. Make sure to keep this updated. Are you a brewery with a flight menu? Let them know either way. Some things cannot be avoided (such as running out of a flavor or not being able to offer growlers) … try to keep up on this as much as possible. Mention it on social or display it on a board at your business.

  You will always have to take the good with the bad, but the more you know, the more you can prepare for.

  It’s True: Those Bad reviews Can Actually Improve Your Sales. Believe it or not, bad reviews have the power to improve your sales and conversion rates, too.

  As previously mentioned, if your business gets only positive reviews, consumers might question whether those reviews are legitimate.

  Since nobody is perfect, having a healthy mix of both positive and negative reviews will help customers view your business as more trustworthy. Most customers actually expect negative reviews on your site, and if they don’t see them, they think your reviews are fabricated.

  And, when there are negative reviews mixed in with the positive ones, that reduced skepticism will add to your brand’s authenticity.

  For that reason, it’s important not to delete your negative comments on your social channels because they can actually work in your favor by making the positive comments that much more credible.

The Last Gulp

To recap:

●   Create a uniformed GAMEPLAN.

●   Use other competitors’ negative review experiences to improve your brand strategy.

●   Leverage negative comments to drive beverage sales and conversion rates.

  That’s why it’s important to hire the right agency to manage your online presence with these initiatives and more. Doing so ensures that you uphold a valuable asset – your business’s reputation, without taking away from your valuable time.

  All in all, your social media strategy in how you respond to negative comments can flip the unsatisfactory customer experience on its head, turning them into positive sentiments and increased sales, resulting in the happy sound of clinking glasses.

  Chris Mulvaney is a business developer, entrepreneur, and an award-winning creative marketing strategist. His extensive professional background includes working with some of the world’s leading brands – and personally helping clients refine their corporate vision and generate the kind of eye-popping results that too many companies only dream about. Visit… cmdsonline.com

Exploring Brewing & Astronomy with John Harris of Ecliptic Brewing

By: Becky Garrison

Upon meeting John Harris, one might not realize that this soft-spoken man is, in fact, a legend in the world of craft beer – not to mention a seasoned astronomer. Chris Crabb, Director and Or-ganizer of the Oregon Brewers Festival, calls him “a warm, wonderful soul” and says she is “honored to call him a friend.”

  Harris has been a seminal figure in the Oregon craft brewing scene for over thirty years. “He’s the only brewer that has brewed a beer for every single Oregon Brewers Festival, representing three different breweries during its 32-year run,” says Crabb. “The festival often coincides with John’s birthday, so he has one of the largest birthday parties thrown in his honor every year.”

  Steven Shomler, author and culinary storyteller, reflects on Harris’ stellar course. “John has gone from home brewing and following Fred Eckhardt’s book ‘A Treatise on Lager Beers,’ to apply-ing for his first professional brewing job at the Hillsdale Brewpub, to being the very first profes-sional brewer in Bend, Oregon, to running his own successful venture: Ecliptic Brewing.”

  Harris’ interest in home brewing began in the early 1980s, just as microbreweries started popping up in Washington State and Oregon. For over thirty years, he worked as a professional brewer, working with some of the Pacific Northwest’s biggest brands. While working with the McMenamins brothers, he was the first brewer to make Hammerhead in its all-grain formulation. His accomplishments at Deschutes Brewery include devising the recipes for their Black Butte Porter, Mirror Pond Pale Ale and Obsidian Stout beers. During his 20- years at Full Sail Brewery, he ran their Brewer’s Reserve program, where his formulations included Slipknot, Hop Pur-suit and the Sunspot Series. After the brewery eliminated Brewer’s Reserve in 2012, Harris felt the need to move on.

  So, he found a former body shop located at 825 North Cook Street in the Mississippi district of  Portland near Widmer Brothers Brewery. He oversaw the shop’s transformation into a 15-barrel brewery, replete with a taproom featuring a 145-seat restaurant and a patio in the parking lot. In October 2012, Ecliptic Brewing was incorporated, and then, on October 20, 2013, it opened for business.

  Harris knew that his brewery needed to have an astronomy name and theme. His interest in as-tronomy was rekindled when he saw a Sky and Telescope magazine on an airport newsstand while traveling for work. He bought a copy, and the astronomy bug was back.

  When asked what prompted his interest in astronomy, Harris points to his uncle, who gave him a telescope when he was a child. From there, astronomy became a hobby that he got in and out of over the years. A year after spotting this magazine at the airport, Harris bought a new and bigger telescope and began going to star parties.

  Initially, Harris had another working name for his brewery, but it was already taken. The Eclip-tic, the astronomical term for the plane of Earth’s orbit around the sun, kept popping up and eventually became the name for the brewery. A 25×25 foot mural of an Ecliptic plane, created by Loey Hargrove, graces the restaurant’s bar wall. Spaced themed label art, marketing catchphrases like “Pour some space in your face,” and signature beers such as Ecliptic Starburst IPA and Phaser Hazy IPA give the feel of a brewery founded by someone with their eyes clearly looking upward at the stars.

  “In hindsight, there is no better name than Ecliptic, as this ties into our seasonal beer and food we make here at our brewery and restaurant, as we go around the sun on planet earth,” Harris says.

Signature and Seasonal Beers

  Ecliptic’s beer names represent more of a marketing decision than coordinating a release follow-ing the seasons. For example, during the 2017 solar eclipse, they got some national press for hosting eclipse-themed events and releasing their Chromosphere Blonde Ale. This special release eclipse beer was made using Amarillo and Cascade Hops and had a citrus nose and flavors with a light yellow color that resembled the summer sun.

  For the 2019 Oregon Brewers Festival, they brewed LIGO Key Lime Gose. This beer, named after the world’s largest gravitational wave observatory, featured Ecliptic’s house lactobacillus strain and key lime purée. During this festival, Ecliptic was selected as the host for the 13th an-nual Oregon Brewer’s Brunch and Parade, and LIGO Key Lime Gose was the first official keg tapped at this event. OBF was canceled in 2020 and 2021 due to the Covid 19 pandemic, with plans to resume the festival July 27-30, 2022.

  Their other Cosmic Collaborations included Blood of Jupiter, a Belgian-style Tripel. They teamed with Umpqua Valley’s TeSóAria Winery, with the base beer brewed by Ecliptic, and then aged in Sangiovese wine barrels furnished by TeSóAria.

  Customer demand for IPAs has led to their signature Ecliptic Starburst IPA, as well as Vega IPA and Phaser Hazy IPA. However, Harris’ creativity includes brewing darker beers and sour beers, which are appearing in greater frequency on their taproom menu.

  Most patrons frequent Ecliptic for the craft beers and space vibe. However, for those bent toward astronomy, Ecliptic hosts occasional star gazing events on their patio for amateur astronomers. Their menu also describes the meaning behind names like Capella (a bright star in the constella-tion Auriga), Phobos (the Martian moon that circles the red planet), and Oort (the mysterious re-gion of our solar system that breeds comets). In addition, they occasionally offer astronomy triv-ia via their social media channels.

Pairing Food and Beer According to the Seasons

  While pairing Oregon’s wines with locally sourced food has always been considered standard practice in the Portland dining scene, beer tends to be treated as a stand-alone beverage.

  “Portland is such a foodie town, and yet there was no brewery that was taking food seriously,” Harris says.

  From Ecliptic’s inception, Harris wanted to create a brewpub that could be on the list of Port-land’s 100 best restaurants. Their menu continues to play off Ecliptic’s name, emphasizing sea-sonal ingredients and beers.

  They continue to host occasional food and beer pairings, such as the Cosmic Brunch, held as part of their “5 Beers for 5 Years” series, commemorating the brewery’s fifth trip around the sun. At this brunch, held on February 3, 2019, Harris and Brooklyn Brewery’s Brewmaster, Garrett Oli-ver, released their Tangerine Farmhouse Ale collaboration along with a five-course meal and several beers from each brewery. They gave away signed bottles of the collaboration beer to each attendee. Other similar collaborative dinners include Firestone Walker Brewing Company (Hazy Double IPA), Breakside Brewery (Nectarine Sour Ale), Bell’s Brewery (Juicy IPA) and Russian River Brewing Company (Belgian-Style Hoppy Golden Ale).

Working at Ecliptic Brewing

  Harris’s history and reputation in the beer industry enabled him to bring on employees like sales manager Erin Grey Kemplin. She met Harris when she was the on-premise rep for Full Sail’s distributor. During that time, she got to know Harris.

  “I was able to not only drink John’s creations but also get to know him as a friend,” Kemplin says. After Ecliptic opened, she frequented the brewery nearly every week. “When he decided to build out a sales department and came to me about the role, I knew the answer had to be yes.”

  She stays at Ecliptic due to the delicious beer, the staff and a boss like Harris. “He is the kind of boss that will support you through thick and thin, but also help you figure out solutions when you are stuck without talking down to you.”

  Like Kemplin, Alisha Goddard, Ecliptic’s human resources and business manager, got to know Harris during his tenure at Full Sail, where she felt drawn to his friendly and fun energy. When she heard of an opportunity six months after Ecliptic opened, she jumped at it. “I had worked at a large operation for a while and wanted to be a part of something smaller that felt more tangible and community-oriented,” Goddard says.

Looking into the Future 

  During the global pandemic, Ecliptic Brewing, like other Portland food and drink establishments, found themselves at a crossroads. When possible, they would offer indoor seating, outdoor seat-ing on their large patio, with beer and food-to-go.

  Pre-pandemic, the brewery hosted a couple of events each month, usually celebrating the release of a new beer. On October 1, 2020, they hosted their first event since March 2020, when they teamed with the Oregon Museum of Science and Industry to offer a sold-out Star Party. OMSI set up a large telescope on a projector, showcased various celestial bodies on the screen and handed out different learning materials. This social distanced event took place outside with all tickets pre-sold. During the event, people could order food and beer from their regular menu along with a special dessert for all attendees.

  Moving forward, Shomler sees good things for Harris and Ecliptic Brewing. “John continues to sharpen his own skills set, and he has the foundational capabilities needed to have a successful brewery: the ability to brew great beer, lead a terrific team and successfully run his business. Many breweries fail due to deficiencies in one or more of these three mission-critical areas of expertise.”

  Currently, Ecliptic’s beers are available in Washington, Oregon, Idaho, Colorado, North Caroli-na, Canada and Japan. To learn more about Ecliptic Brewing, go to http://eclipticbrewing.com/