Monday 11 January 2010

The BrewPub concept

I've been spending a bit of time resting and recuperating ready for a new season. Getting to spend weekends away when one runs a pub is not easy. During our winter close-down we spend quite a lot of time working on the property and a little bit of time doing what normal people do - having a life.

I probably need to start thinking about brewing some beer ready for us opening. I also have some very nice beers I need to bottle; a 10%+ barley wine and a 7%+ whisky cask aged stout. Time, as always, is getting limited and there is insufficient winter left in which to complete all the jobs I have to do. In a pub beer matters more than anything else, we know that, so I need to get my finger out.

In pubs the difference between what beer is bought in for and what it is sold for is what helps to pay the staff wages, the electric bills, insurance, maintenance bills and all manor of things. Hopefully there will be a little bit left over for the publican, although most people would probably be surprised to know that this amount is often less than 10p per pint. Yes. Really.

As with most things, beer gains some economies of scale as the brewery gets bigger. Small breweries have the advantage of a reduced duty rate to counter this. The smaller the brewery the more expensive per pint the beer is to produce. It is generally considered that for a stand alone brewery to make money for a single owner/brewer, with no additional staff costs, it needs to produce around 10 brewery barrels1 per week, minimum.

Below this volume then the economies of the BrewPub take over. In this situation the elimination of transport costs, amalgamated overheads, shared administration and other factors help to further benefit the economics of this dubious business model. But there is again a limit to how viable this can be. At a brew length of 2 barrels, the size of my brewery, I would say that the economics are right at the limit of viability. Making beer for the pub, without any external sales, is just about viable because I can sell the beer over the bar at £2.50 or so a pint. At this price my efforts as the brewer pay off. Selling the same product at wholesale prices makes no sense to me whatsoever.

I regularly get requests to supply my beer to beer festivals all over the place. My answer is almost always that I can't. 2 days of my time makes about 600 pints of beer. At wholesale prices it doesn't pay for my time. If I sell beer to other pubs my pub loses out either because I lose a day off or because my pub has less Hardknott beer. Or perhaps I get less time to finish the tiling in the gents loo or tidy up the cables that hang unsightly in the bar, or 1001 other jobs that really need to be done.

So, if you ring me up and ask for beer please understand "no" does actually mean "no" not "maybe if you keep pestering me I'll give in and say yes". My beer is worth at least £2.50 a pint whether it's in a glass or a cask, end of.


1A brewery barrel is 288 imperial pints or about 160 litres. 10 barrels is, obviously, about 1600 litres or 16 hectalitres.


Cooking Lager said...

When you say it's worth £2.50, what you mean is that it is priced at £2.50 and you are using a cost plus pricing method. Price is what you pay and value is what you get. The market will determine its worth, and from what you describe I wouldn't dispute that it is a quality product. A quality product that could be contracted out to a more efficient brewery and produced for a more agreeable cost.
What is it about your grog that makes people want to shell out £2.50 for it rather than 99p? If it is a tangible then it is in the recipe and the value you describe is not in the fact you make it in a shed round the back but in your recipe creating genius. You can get rich on the recipe and let others do the graft of making it. If the value is the intangible of your customers liking it not for an intrinsic quality but simply because it is made in a shed round the back then that’s your business.
And so long as enough people pay the price, you can say it’s worth it.

Stonch said...

Getting to spend weekends away when one runs a pub is not easy.

I find it easy enough...

Denzil said...

Cookinglager's point about contract brewing doesn't really hold water as evidenced by Morrissey Fox. The primary ingredient in Dave's recipes is water. This is unique to his location. The other factor is process. The process is as important as the recipe and simply usingndifferent brewing vessels will create a marked difference.

Many brewpubs do allow their beers to be sold elsewhere however and you don't have to wholesale it to achieve that. Instead of buying in guest beers you could swop with local brewers who would in their turn wholesale the beer to festivals or whatever thereby promoting the Woolpack as it would always be the only place where customers would be sure of getting it. It would also mean you were getting your gust beers at your cost of production instead of their wholesale price thereby improving your bar gp.

When all's said and done though, your idiosyncracies are part of the pub the beer and the brand. All brewers are unusual characters and they will all do it their own way more power to your elbow Dave.

Unknown said...

Cookie, what I'm saying is that session bitter brewed here is worth £2.50 a pint to me. Enough people want to buy it at my pub for me not to want to sell it elsewhere. If people want my beer they have to pay £2.50 a pint for it.

Jeffrey, perhaps you ought to read my mind.....

Denzil, the problem with swaps is that people still come here for my beer. Swapping, bartering or exchanging money it doesn't matter, I do not have time to brew more beer, the pub would suffer if I tried. My own brewed beer outsells guest ale 2:1.

However, your point about idiosyncrasies is very valid. My pub is a brew pub and my beer is a reason for people to come here. If they get my beer elsewhere then it is one less reason for them to come here.

Besides, I've recently been described as "admits to being a little eccentric" - only a little?

Cooking Lager said...

You guys say that, but assuming there is something special about your water it only H20 with minerals and the mineral content can be duplicated. It's the 21st century. Brewing is a science. As for the vessel, I doubt ones mans copper is different to another.

A contract brewer will be consistent, and if your shed product isn't then that is indeed a change, but a bad one?

Séan Billings said...

I'd say your missing the point cookie, but I know better than to think you are even aiming for it.

Value is not intrinsic to an item and the fact that a similar item can be obtained for less at another location does not lower the value of all such items everywhere. It is my understanding that £2.50 a pint is about the going rate for a pint in that neck of the woods, which in itself compares favourably with the price of a pint in many other parts of the UK.

I know you can get a pint of some cask beers in Spoons for 99p, but that does not change the value of Dave's beer one iota. Dave's pub is not a Spoons and even if it was, it is not one of the brands on sale for 99p.

Weatherspoons have a different business model to the Woolpack and I know you are a fan, when you can prise yourself away from your couch and can of lager.

I can't say I'm a fan myself and would rather pay more to drink beer elsewhere, but then I also pay more for my take home beer than you.

Small batch brewing allows Dave to brew unique beers for his customers to enjoy. Some of us like to try new things and don't mind paying the going rate for them.

Cooking Lager said...

Actually I'm not trying to be facetious, I’m merely saying that beer is an industrial product (it doesn’t stop it being artisan, a car can be a work of art), whether small or large scale and Dave is saying he cannot supply other outlets as his cost base is too high. I can understand why a small brewer has higher per unit costs, and if anything I agree with you that value is subjective and different from price. That was a point I was attempting to make, even if badly.

Now Dave can keep beating the drum that beer ought to be priced higher and valued more, but he is in a wider market that is largely commoditized. Good luck with that.

One answer, not the only answer, is to address the cost base and lower the per unit cost. That could be done without harming quality. Many UK businesses outsource production to achieve cost savings without loss of quality and when you look at what differentiates Dave’s beer from a 99p Spoons pint my suggestion wasn’t that the small brewer kudos had value but his beer recipe had value. The recipe isn’t the ingredients as pretty much all beer has the same basic ingredients. The recipe is the proportion and processing of those ingredients. That it is possible to brew his beer to the same quality and lower cost at a larger and more efficient plant, and thus supply a wider market and build his brand. The idea that it would reduce interest in his pub is not entirely true.

The one and only reason I visited a small German town of Kelheim was to go on a brewery tour. I necked a murky looking beer in a trendy bar in Liverpool, liked it, saw it in Sainsbury’s, went to a Brauhaus on a business trip having remembered it then looked them up on the internet, got a train and bus and went on the tour at the actual brewery/brauhaus. The only English guy there. I’d have never bothered unless the wider availability made me aware of the product. There it's out in the open. I’m a beer geek; I’ve been on brewery tours. I photo my pint in pubs and put in on a blog. I’m a geek. But the point that the wider availability of Dave’s grog will grow interest and not detract is I think a valid one.

One course, I gather that Dave likes brewing. He likes the graft. He doesn’t want to let others do the work as he enjoys it. That’s fine, but the idea that Dave’s shed has a magic property that makes his beer special is not the case. His recipe’s are special and those recipes can be replicated anywhere on the globe.

Whorst said...

Christ, this Cookie guy knows his stuff. I have to say I agree with The Cookster 100%. I've been brewing various English beers for over 20 years. A staple recipe for Bitter is 95% English 2-row and around 5%-10% Crystal Malt. Some brewers use more or less, with some using various adjuncts. Hops are of the traditional varities. Fuggles, Goldings, Target, Challenger, Brambling Cross, Progress, etc, etc. The character of a low gravity English beer comes largely from the yeast strain. I prefer either the Brakspear or Ringwood strains.
WLP-023 and WLP-05 collectively.

What your beer is worth is dependent on what someone's willing to pay. I've never tasted your beer Dave, but being it's brewed on location, I don't think 2.50 is unreasonable.

MicMac said...

I've helped to contract-brew Cumbrian beer in Oxfordshire, helped return a historic regional brewer's recipes to their home town & cuckoo-brewed my own beers at a local microbrewery, so I know that with attention to detail you can replicate fairly exactly beers on different plant & scale.

Will it be identical? - possibly not, will it be near enough - probably, if you take enough care.

(interesting piece kind of on this subject over on Sharp's headbrewer Stuart Howe's blog - )

But the interesting thing about Cookie's last post is that he took the trouble to go to a distant family brewery because of the quality of their beer - he didn't go to a larger brewery that the family hired out to brew their increased commodity brew - he went *to the source*.

In time, Dave could expand his brewplant - several near neighbours either opened with larger plant, or expanded & seem to be doing well - e.g. Barngates (10Bbl?), Coniston(10Bbl?), Watermill(7Bbl?) & Hesket(10Bbl?).

But I quite like the idea of a brewer choosing to remain at a certain size, perhaps because it just works - life could be more profitable, but more of a headache with a larger plant?

Unknown said...

Cookie does indeed make some very good points. It is only one perspective and states that any beer can be scaled up with more or less no deterioration in quality. That is not necessarily true and I'll tackle that one in a future post as we're getting rather off topic.

Yes, I could organise contract brewing of my beer but that would then mean me focussing on a different business model. I could expand the brewery but again that would be a different business model. I have no intentions in doing either as I think this location and building suits the model I have. As a result I am not interested and it is detrimental to my business to have my beer leave this property in any other form than my customers bellies.

Cookie, an interesting point though that is worthy of acknowledgment. I do appreciate the benefits of exposure by getting my beer further afield. However, I feel that the benefits of that are small compared to the time I would have to put into it to make the beer.

Tim said...

Dave your house beers sell 2:1 over guest beers due to the branding. People want to drink Woolpack beers, but they don't need to be brewed there.

A better business model would be to contract brew your staple offerings and use your setup to brew one off's and specials which would appeal to the beer geek market.

MicMac said...

Cookie - "Now Dave can keep beating the drum that beer ought to be priced higher and valued more, but he is in a wider market that is largely commoditized. Good luck with that."

Dave is only in this wider market in the way that Mrs Kirkham's Extra Tasty Lancashire is in the same market as Kraft Singles & Cheese-Whizz - it's a high-value niche product, and he seems to be selling about as much as he can brew without leaving the premises! - doesn't sound like he really needs anyone's good luck wishes.

PigMan - "People want to drink Woolpack beers, but they don't need to be brewed there.
A better business model would be to contract brew your staple offerings..."

What makes someone so sure that contract-brewing some of the beers won't change the way that people view the place & the beers? (or indeed will be as profitable as brewing in-house?)

Or perhaps, as Dave suggests - he just likes working this way - apparently that's not so important, though?

Now it might only upset those in the know that a beer isn't brewed where it seems to be brewed, but in a craft/honesty/authenticity/reputation based niche like 'good beer', I'd put some weight on the importance of this.

I think Coniston came in for some stick when they outsourced brewing of some cask & bottled beer a while back, ditto Morrisey-Fox, but the young folks that used to drink expensive contract-brewed bottled lager rather than excellent house-brewed ales & wheat-beers at Freedom Covent Garden seemed not to give a monkey's.

Tim said...

@MicMac - there is no duty to disclose where a beer is brewed. Dave's customers would most likely be none the wiser.
As Dave stated that his time is at a premium and hence how he values his beer. It is logical that by removing the task of brewing the routine offerings would free up his time and allow him to compleet teh other tasks that are required to keep a 400 year old establishment in operation.
The time gained could be used to brew interesting beers which reach the emerging beer geek/ticker market.

Tandleman said...

For what it's worth, I reckon while Cookie has a fair bit of logic behind what he says - for some - I doubt it'd work for Dave - Dave has the right of it and £2.50 seems fine to me as a price.

Coniston won Champion Beer of Britain with Bluebird. Dave isn't ever going to do that, therefore the point seems moot. He may well brew great beer, but to most it will just be beer without any particular reason to buy it over others (especially if brewed elsewhere.)

Coniston had that reason, but of course implied the beer brewed elsewhere was brewed in Cumbria without ever saying so.

Re-reading this it sounds a bit muddled, even without any beer, but it is too late at night to change it now. It'll have to do.

Tandleman said...

Pigman. He couldn't keep it a secret if they were brewed elsewhere and I can't see Dave telling his customers lies about it.

MicMac said...

Pigman "there is no duty to disclose where a beer is brewed. Dave's customers would most likely be none the wiser."

If the beer is Bud or Fosters then yes, most would neither know nor care where it was brewed (or really care what it tastes like, as long as it's cold, fizzy & fairly low on flavour). But it's simplistic to assume that craft-beer drinkers are as uninterested in where their beers come from.

I also think we're confusing the legal & moral senses of the word "duty".

If a brewpub's is selling beers actually brewed elsewhere, I think there is a moral duty to tell people. To not do so is misleading, even if it's not illegal.

As Tandy suggests, the truth would probably come out anyway, perhaps leading people to feel cheated.

Anonymous said...

Dave I will happily volunteer to brew your beers for you in the West Midlands. Please could you send me some examples of your products so I can be sure to get them right.


Unknown said...

Tandleman, you are right, I could not tell lies about it. I may have some personality defects it's true but being dishonest I really don't think is one of them.