Growing a Brewery to be viable

The beer market is incredibly sensitive to price. It might well be possible to sell a very limited amount of beer at an increased price, but basically, the vast majority of beer can only command a price that falls within fairly tight limits. The off-sales market seems to show significantly greater variation as a rule, than the on-sales market, but even so, these limits are in my view quite tight. For the purpose of this discussion I'm not intending to criticise that position. It is a fact, and one that has an influence over the economics of businesses that make beer; the breweries.

I guess beer is a bit like bread, they are both made from grain and yeast is an inherently important part of the processes. But they also share other traits on an economic level; bread is a staple food and as such its price has upper limits beyond which demand drops to zero. Of course the same could be said of potatoes, carrots, onions, rice, milk.....

Beer has one great benefit, much the same as bread; it can be made at industrial scales. Massive plants, with massive tanks, in huge buildings can ensure highly efficient processes. This has always put micro-brewers at a disadvantage. We have small brewers beer duty to help us out in that respect. The key reason for the proliferation of micro-brewers is as a result of the small brewery beer duty. Without it a brewery of the size of Hardknott would just not be economically viable.

Actually, as we currently stand, our brewery isn't really viable anyway. To make enough beer to earn an honest living we need to make more beer. We don't actually need to do very much to what we already have, but we still need to make and sell more beer if we are to make any profit. It's all to do with overheads.

Progressive beer duty starts to reduce rapidly when a brewery starts to sell more than 5000hl of beer. That's about 3000 barrels a year or about 230 firkins a week. Putting it into context that's an exclusive VAT turnover for the brewery of around £700k per year. About 24% of the turnover goes out in beer duty - £170k, and an equal or greater amount goes on raw materials. There are then some variable overheads in the form of energy, costs of ownership of the building and plant¹, rates, transport and for a brewery of the size indicated there would have to be employees and so a wage bill. To achieve and maintain the level of beer sales there would be essential cost of marketing the products. It is highly likely that net profit would be less than 10% of turnover. Perhaps a £50k per annum profit is reasonably achievable, and is an above average salary, although conversely it is unlikely that a business of this size is owned by a sole individual. By today's standards this is in no way a large business. Indeed, many successful town centre pubs turn over much more and probably make much more profit than a brewery under 5000hl production.

This probably represents a sweet-spot of operating size. Above this there is a steep drop off as Progressive Beer Duty is increased steeply. Below this size overall margins can shrink due to dropping efficiencies of scale and simply because percentage net profit for any brewery is unlikely to increase above the 10% mentioned above. Reduced turnover represents reduced profit.

With the stainless steel I have in my brew house I probably have a maximum achievable turnover of around £100k. At an overall net profit of 10%, the maximum we can reasonably expect to achieve, we might earn £10k a year between us. I don't know about the reader, but I think this is insufficient for a reasonable standard of living in the 21st century. This is dependant on us successfully and efficiently brewing to capacity and selling every last drop. Bearing in mind the fact that any business person is risking financial ruin should it all go very wrong, the fact that actual disposable income available is achieved due to a determined and consistent dedication to the operation rather than just turning up 9 to 5 and doing a bit.

I don't want to appear to be complaining too much; running a business has many rewards beyond financial recompense. Some of us do it because we have tried the working-for-someone-else game and don't get on with the concept. Additionally, brewing beer is extremely rewarding. Positive comments from people who drink my beer almost, and note I say "almost", compensates for the poor rewards that today's modern competitive market creates.

It does baffle me, as a result of the key financial issues above, why there is an inherent misunderstanding of the need for breweries to grow. When I have discussed the BrewDog growth or our own plans for growth there seems to be objection to the plans.

I'm aiming for the 5000hl sweet-spot. Going above that would require world-domination plans of BrewDog proportions. However, at that level there are key problems that could reduce the overall profitability. I want to use more hops. If I increase my hopping rate by 1kg per hl, which is not overall a great increase which may seem a lot to the reader, but is what I need to do to compete with the best breweries, at current prices it would represent an increased cost of £40k per annum at this proposed level of trading. That would eat away at my profitability. The only way to negate this would be to increase production and sales, by quite some quantity, overcome the initial disadvantage of the hump caused by the onset of variable beer duty.

My chart here has a logarithmic scale for production. It makes it easier to show the full range of sizes of brewery from nano to regional breweries. It does however mean that the effect of the variable duty rate across the range 500hl - about 2000hl looks less steep than if shown on a linear scale. Either way it can be seen that any increase of capacity above 500hl is going to be incredibly significant for any expanding brewery.

BrewDog are now in this range. In a recent document, sent to me by James Watt, they state that their prices are going to have to increase to account for this increase of beer duty.

"In 2010 our production increased from 8700 HL to 14500 HL meaning the beer duty we have to pay increased by, for example, £5.50 on a 50L keg of Punk IPA."²

As the company gets bigger the increases of beer duty will become less significant therefore I would expect further economies of scale to cut in and help to counter the effects of the duty. From a business point of view, having broken the 5000hl barrier it makes sense to carry on growing.

When talking about specfic problems with the operation over the last year; things that I've also heard customers complain about, BrewDog state:

"The positive thing is that all of these is caused by the demand for our beers."

Again, more reason to carry on growing their enterprise.

So, I hope the reader might now see why the most successful breweries have to grow.

In fact, if Adnam's have their way, those that don't grow will fall foul of proposed changes to progressive beer duty anyway. However, that particular issue is another blog subject.

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¹I don't owe any money on the stainless steel I currently own, however, it represents capital tied up. If I had not bought the plant and put money in an ISA instead then I'd earn some interest. We rent the building and so there is a cost there. We are likely to have to borrow money if we are to grow, this will have a cost implication.

²If my readership is as clever as I expect you all are you will realise that BrewDog turnover for that level of brewing doesn't match my earlier figures. At 14500hl, from my model, they should be turning over less than £2m rather than the £3.7m. I expect the main reason for this is that a large volume of their beer is stronger and bottled, both putting an acceptable increased price on the product.

Additionally the company also now has retail outlets, further increasing gross margins.

The ever-fragmenting beer-world

Just over a year ago, the other side of his 50 week reign as beer writer of the year 2009, Pete Brown complained about fighting within the beer industry. I could see why he felt it was a problem, although some weeks later he then accused us bloggers of becoming complacent and boring. I notice that in that post I was number 7 in the Wikio rankings. I'm now 13th which is simply due to a much lower number of postings this year. I could blame Pete for confusing me and creating my reduced frequency of blogging, after all, one minute he wants us to stop arguing about the issues and the next he wants us to start again. I'm kidding of course, I've just been busy and now I am trying to ramp up my blogging frequency.

I've always been more interested in writing about the issues surrounding beer rather than writing about a specific beer and how awesome it might be. I do sometimes think about writing a bit about beer and food matching; I think I could be quite good if I only put my mind to it. But, the things that are bound to get me most fired up are the various issues surrounding beer, beer drinking, brewing, pubs and the way various people perceive all of this.

This post was inspired by the piece in The Publican by Caroline Nodder which seems to be somewhat scathing about the current phase of modern brewing. BrewDog are of course named, and as much as I don't wish to be labelled as another BrewDog fan club blogger, they are going to feature in this post a little as well. Tandleman posts in response to Caroline too.

When Pete complained about the beer industry fighting with itself I understood what he was saying. At the same time I felt a little worried that some of the issues he claimed we shouldn't be fighting about were the very issues I myself was concerned about. We all have our own perspectives on these things and being able to discuss them is no bad thing. So its good that he later said, we should tackle issues again.

This is the thing; we have to be able to be open, we have to be brave enough to discuss what we feel about our own view of the beer world. Caroline of course does that with her attack on the beer geek world, I don't agree with her particularly, but perhaps I'll come back to that later, as certainly there are some points to pick up. To me, and this is the key thing, it highlights a broadening of the beer industry in a most exciting and provocative way, that can only be a good thing, providing we can all learn to get along rather than feel the need to get the digs in.

BrewDog has had a go at SIBA¹ earlier this year. I'm with them all the way. It is perhaps something that comes out on this blog from time to time; the fact that I have a suspicion that the organisation has matured into something that is less than entirely useful to the micro-brewer. SIBA, as one commentator has put it to me, the Society of Increasingly Bad Acronyms. It would seem the club likes things the way they are and new comers are not particularly welcome, especially if they seem to be having some success. Even worse if they question what is happening.

So it seems to be the case across the industry. BrewDog find themselves in a fight with SIBA, the beer geeks run hot and cold about them and many ask why they want to be as big as they are getting anyway. This comes from the same people who support similar larger breweries who would fail were it not for the tie system. Or the same people who fight for the survival of long since milked-to-death brands that would be better off left to pass into history with dignity. The same people who fight to keep pubs open despite the fact that it is obvious that the market is shifting and some will inevitably shut as a new wave of Indie Beer Bars open up in Sheffield, London, Aberdeen and Edinburgh.

I love cask beer and I love the old fashioned country pub. I don't particularly care for the type of pub that manifests itself in town and city centres. Some are still good I'll grant you, but it takes an exceptional one to impress me. The reader might like them, that's fine, good for you, but beware of hanging onto a bygone age that has a limited future. There is a danger, and it worries me, when observations are made about the beer world having too much reverence for the very substance that we care about. Is it really just a low down drink that shouldn't be described with passion? Is it really just a middle of the road drink suitable for the common man only? Does it only deserve to be found in seedy places, so low is its self esteem? Are we, the writers who care about it, not allowed to use whatever language we want to describe it to the very people who we believe should be able to understand it well: educated intellects with refined palates who may well like home-made scotch eggs, but would never dream of putting ketchup on them? Or perhaps we are too scared that we might actually end up being bettered?

Of course the vast majority of beer made will be made by the large brewers. I don't care about that. Some of them actually prove to me that they care as much as I do, and I hope I give them a nod when I think they deserve it. Even if it is not by making great beer, but caring about me the beer drinker - although normally caring about the beer drinker does result in better than just acceptable beer.

This brings me to promotion of the product. Many beer communicators complain about the way that beer is promoted. Perhaps it is done in a sexist way, perhaps it is silly childish puerile fashion that undermines the seriousness that beer deserves. Or perhaps, as BrewDog does, it is brash and sensationalist and sometimes even offensive. The fact is, it is not good enough just to brew great beer. I know many brewers who brew beer better than me but are stuck because they can't, or perhaps don't want to promote more than they do. If they are happy that way then great, leave them be. However, building a brand is about making a good product and telling people about it, somehow and in the most cost effective way. BrewDog might well be sensationalist with their marketing, but they also make beer that is good, and because they don't actually spend much on advertising their brand, they have more money to spare to make the product good. Why do we hate that so much?

What of the brewers that want to make bigger waves? Like BrewDog, perhaps like me? Are we somehow wrong to want to get our names out there? I don't think so. Publicity stunts are the best and probably only way to do it. I bet many in the music industry hated Richard Branson when he started Virgin Records, but look, whatever you think of the brand now, it probably wouldn't be where it is without the occasional record breaking balloon flight.

What is wrong exactly with making the strongest beer in the world? Or for that matter any other gimicky product enhancement. Every industry does it, like for instance, putting bubbles in confectionary? Why do we think we shouldn't have a bit of exciting diversification in the beer world, we don't have to believe it will ever become mainstream, but if it adds interest then why should we be scared of it?

I like the increasing diversification and the challenging of perceptions that we are seeing. I like the fact that some regional brewers are scared that at least some of the "breweries in sheds" kick out some good stuff and are taking part of the market share. It is also good that some long established brewers understand this and don't join in with the try-and-kick-the-new-idea, but instead go for the I'll-have-a-bit-of-that-too approach.

So, by all means lets have the discussions, it's good. The sparklers argument and the cask verses keg argument will continue for ever I suspect. The best way to describe a particular beer is perhaps a more important one but we will never agree and choosing between good quality and imaginative beer descriptions, accessible beer tasting notes or simple and condescending pictures of noses, eyes and mouths I'm sure will divide us for some time to come. What we expect from a pub or bar, how to market beer and many more important discussions should take place. But why do we have to have a delineation across the beer world and keep falling out over it? We're on the same side are we not? Are we not all beer enthusiasts in some way or another? There is another type of beer drinker, I call them pissheads.

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¹There is background to this on the BrewDog blog.

Taking it higher

When I sold our pub and set up Hardknott as a stand alone brewery I thought about what sort of brewery I would like it to be. I knew that the local market for standard cask beer was saturated and gaining the necessary market share for me to make a viable business was almost totally impossible. I had also gained a passion for stronger esoteric beers that could be packaged and distributed further afield in bottles. We've had reasonable success in this area, so much so that when I recently mentioned my session cask output to another brewer he was surprised I produced any at all.

We're doing OK and there is the possibility that sometime next year we will pull a profit, or at least break even. However, it is still somewhat knife-edge and costs are a continual concern. The reader might then understand why, based on the above, upon learning of the Governments latest Review of alcohol taxation, I was somewhat angry. Overnight the costs of operating, for a core part of my business, are threatened with large increases; there is to be an additional tax on all beer above 7.5% ABV. As a small brewer I would be lumbered with exactly the same amount of tax as big producers, effectively reducing the benefits that I had partly based my whole business plan upon.

Currently there is a reasonably fair beer duty system. Above 1.2% ABV beer is taxed based purely on the amount of alcohol it contains. This is 17.32p per unit of alcohol, or 10ml of pure alcohol. A 4.2% pint of beer will have had 41p of duty paid on it. A 330ml bottle of 7.2% beer will have 41p of duty to pay too. A 500ml can of Carlsburg Special Brew at 9% will attract a duty of a whopping 78p!¹ It's difficult to see how it can be argued that Special Brew isn't already taxed to the hilt.

By contrast a pint of 2.7% beer attracts duty payment of only 27p. This is already a small value compared to the total price of a typical pint of beer. Although I don't want to deny any reduction in beer duty it seems that this one has been engineered to benefit the mass producers as none of the new tax systems will have the current small producers discount applied². You'll be OK if you continue to produce 4% session beer, but if you are part of the growing section of progressive brewers, or the distributors and retailers of such products, watch your back.

I'd like to look at the drivers for this new beer taxation system. It is based on the premise that despite a reduced overall alcohol consumption the amount of alcohol related crime, health harm and social harm continues to rise.

Very specifically "super strength" lagers are singled out as one of the main offenders. It's drunk by tramps and vagrants and the thought process is that if it is taxed more these people will simply stop drinking it. I think that all it will do is move alcoholics onto some other form of cheap alcohol such as industrial vodka. It's not treating the cause of alcoholism, therefore will not stop it. Increasing the price of strong alcohol as a way of reducing alcohol harm caused by homelessness is just as barmy as suggesting that increasing the price of street heroin will reduce heroin addiction. It won't, the victims who find themselves in such desperate situations will simply move onto other drugs or commit more crimes, or possibly both.

Meanwhile my business, which includes a very small but growing wholesale business in stronger imported beers³, is threatened with a significant increase in tax burden. I feel this is simply unfair and I'm very, very angry about it. On top of alcohol escalator and VAT rises this is going to hit our niche very hard indeed.

Just to make me even more suspicious that our small sector of esoteric beers have been threatened by the larger beer industry, that includes regional as well as national producers, there is this in the report:

4.15 Beers over 7.5% abv represent less than 2 per cent of total production of small breweries. Small breweries have an incentive to produce stronger beers because the absolute value of the relief increases with the strength of the beer produced.

This is nonsense. The absolute value of everything goes up when a brewery makes strong beer. Generally the cost per unit of pure alcohol stays fairly constant so a beer twice the strength costs twice as much to make. The saving that small brewery discount gives me is currently a proportion of the overall cost. This cost is due to go up.

But much, much more importantly my production of beers above 7.5% is much more than 2%⁴ of my overall production. Indeed, as a proportion of the amount of beer duty I pay it is probably around 30% of my total beer duty. I have not been properly represented in the consultations surrounding this review.

Just as a new wave of progressive beer is starting to emerge and a new wave of bars showcasing these new beers it seems that the industry and lobbying groups have let this innovation down and frankly for dubious reasons.

An additional kick for me, just when I was feeling down:

4.12 The Government intends to introduce a new reduced rate of duty for beers at or below 2.8% abv to encourage the production and consumption of lower strength products. This reduced rate will be introduced alongside the new tax on high-strength beers in a broadly revenue neutral way.

So this means that the low ABV reduction in tax must be overall neutral, so us craft beer producers are paying for a reduction in tax on low ABV beers, and we all know who asked for that.

This is a direct attack on the growing, if very small, esoteric craft beer market. I believe that BBPA, CAMRA, SIBA and BII will have very little interest in this, but if you enjoy stronger beers, and I know it's not for everyone, or sell stronger beers, or make stronger beers, your prices are going to go up.

The report looks at cider and sprits and talks about leaving them alone as small producers and responsible drinkers would be affected. Indeed, I keep finding sections, like in the wine section, where producers have bucked against fiddling with duty based on strength due to the difficulties of making a product that had a demand for it. For this reason wine duty is left alone - this is despite that fact that wine is just as likely to be used as a product for what is considered harmful drinking.

I'd like to do something about this, but I really don't know what. As far as I can tell the rates and method of these new systems are yet to be finalised. With everyone and their Granny trying to take on Government right now I don't know if our voices will be heard, but if you care about craft beer, please, can we do something?

Grateful thanks to Jeff Pickthall for pointing out silly typos. Now corrected.

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¹I don't like using exclamation marks, they are an overused form of punctuation that often trys to tell the reader they should be surprised. This one deserved it I feel.

²The details of how these schemes will be implemented are still unclear. We don't know if it will be an added, or discounted, amount per volume of pure alcohol, or an amount per total volume. It seems to hint that the lower rate will be a new scale paid instead of the current duty and will not attract small producers discount. The higher rate will be on top of existing duty.

³All imported beers attract HMRC duty and tax rates at full value.

⁴I make Æther Blæc 8.0%, Granite 10.4% and my new baby, which you lucky people can look forward to, Queboid 8.0% which is a Belgian style double IPA. Due to be released in bottle very soon.

Beer Branding

My previous post expressed my frustration about the lack of concern amongst many on-sale beer emporiums failing completely to have any concern about putting the correct beer brand in the correct branded glass. Some readers might think I've gone a little over the top on this one, and clearly, for most drinkers, it is really something that is of little concern to them. Drinking a pint of quality real ale, for instance, out of a major lager brand glass is no big deal, the beer tastes no different just because the glass claims to be for a different beer.

I find it curious that in the beer enthusiasts world there is a faction that harbors an objection to any form of proactive brand promotion. I'm getting really quite interested in the reasons for this objection. To me it is very simple; a product sells well because people want to buy it. They will not want to buy it if they are not aware of the brand.

I'll start with an analysis of my survey. From a beer drinkers perspective it shows, that really, glassware doesn't matter much; the majority (68.2%) either don't notice, notice but don't care or only get a little irritated by incorrect glassware. From my own experience of people in pubs this is probably about right. I'd even go as far as to say that some drinkers would actually get irritated if service was slowed up due to bar staff spending a few moments looking for the correct glass.

I can turn all of this on it's head however. Very few respondents, one actually, reported that they never notice beer being put into the wrong branded glass. So, 68 of you do notice, even if you don't care. That is 98.6% of the people who responded at least notice the branding on the glass that they get their beer in. From the perspective of someone, me that is, who wants his beer branding to be noticed this is a very, very important fact. Branding on the glass is a key and important part of brand awareness; drinkers notice it.

When we launched Hardknott as a stand alone brewery, as opposed to one that was attached to a pub, we knew we would have to be much more proactive with our branding, marketing and sales. We would no longer have a guaranteed outlet and we would need to sell a lot more beer to be able to make a living at the job. We engaged a design company¹ to help us out.

One of the key briefs to our designers was to be a little like BrewDog, without it being obvious that there was any copying going on. Some say that there was a failure in that last part, but then I'm not sure I care and neither do I think that BrewDog do, especially as we have a good relationship with that brewery.

Moreover, there is even more reason why copying ideas is not only acceptable but even the right thing to do. If it works then why change something if you don't have to? BrewDog after all have already copied what Stone have done. Using similar graphics, fonts, prose or any other form style copying, be it deliberate, or often subliminal, is nothing new at all, either in the beer world or for branding in general.

Take the curvacious shape of a Coca Cola bottle, or glass; it's representative of the curves of a sexy lady, so I'm told. Think of the shape of a Weissbier glass, spooky eh? You can find that curvaceous shape all over the place if you look, sexiness sells, as does controversy......

....I have had a go at BrewDog myself over the naming of Sink!. I think a few of us middle aged beer geeks were a little outraged about this. But perhaps this is just Punk marketing, shock tactics. Some commentators would like to say that it won't work, BrewDog are not going to continue to grow with this approach. Perhaps there is a limit, but currently they are brewing 50 barrels a time, 11 times a week and are turning over approximately £4M a year. That's a tripling of turnover in 12 months. They are a £4M a year business, I almost feel I need to say no more, but of course I will.

So you don't care? What you want to do is sit in a nice pub with a nice pint of real ale, no fuss, no hype, no branding and nothing to clutter up and confuse your enjoyment of a good pint. I'm with you all the way. Good beer, that's all we want. Some of us would like to see more real ale available. Some would like to see a more diverse beer styles, strengths and some way-out innovation, but that's just my personal view. Whatever our choice of beer we don't want it all cluttered with this silly commercialism that takes over the world.

CAMRA's main aim is to maintain and perhaps grow the availability of real ale. The Cask Report would seem to suggest that indeed the real ale market is quite healthy. The very same report also suggests that more could be done to grow the cask market and presumably CAMRA and real ale enthusiasts would be pleased if this happened.

If you are reading this blog then the chances are that you do not need to be told that cask beer, and more generally craft beer, is a fantastic drink; I would be preaching to the converted. Despite the fact that much of the beer that I and presumably you, the reader, drink is a far superior, and often better value for money beverage than mass produced brands, the big brands continue to be the best sellers.

WHY?

Take Carling², which I estimate to have a market value of over £1 billion³. Why has it been Britain's number one lager for over 30 years⁴? Branding and marketing, that's why.

Branding is crucial to growing and maintaining a product market. Branding, marketing and advertising, which are different but related activities, and to be honest I get a little confused about where one leads into another, are all important. Of course, that tacky homemade cardboard pump clip might well send a message to you that the beer is handcrafted in a shed by someone who has more time for caring for the beer than for branding. It might well be that you don't care that you got that beer in a Carling glass, or that the beer mats on the table are for a brand that the pub doesn't even have on sale at the moment. Why should you care? Perhaps you shouldn't. But the reason that your hand crafted beer is still made in a shed and the brewer is living from hand to mouth and probably unlikely to gather together enough money to buy an annuity⁵ when he retires is because he didn't invest in branding and so grow his business.

The reason Carling is successful is because you got served your micro-brewed ale in a Carling glass.

PumpClipParade concerns itself with poor beer branding. Perhaps it is overly concerned about branding that is objectionable to the instigator of that site, after all, there are people who like that sort of silly joke. But to be fair, the proportion of the population that will buy a product because it comes with a silly joke, badly designed graphics, or even in some cases grossly offensive sexism is rather small.

So, you may not care about the branding on the glass you drink out of, but you do notice, don't you? You might not care that the beer mats and bar towels in the pub are provided by and carry the branding of a major corporation, but you do notice, don't you? You might not care that the pump clip looks bloody awful, in fact you notice and you like the fact that the unprofessional style makes it obvious that it's made by an amateur, don't you?

All those people who don't drink real ale, but you think should, also notice too.

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¹They are, like us, doing well enough for their website to be a low priority. I expect that as our increased brewing capacity will soon necessitate our web presence to be improved.

²Yes, take it, take it a long way away as far as I'm concerned. But it is not going anywhere, really, not without strong brands that compete with it.

³That's a reasonable estimate of the value to the owner of the brand, Molson Coors. Based on 5 million barrels per years and a brewery gate price of £200 per barrel. If all that volume was sold through pubs it would be nearer £4 billion as total contribution to the UK economy. Moreover the contribution to reducing the deficit is over £500 million per year. I suspect Molson Coors put a shed load of £millions into branding too.

⁴At least, that's what I believe. Heard it somewhere, can't think where.

⁵I hope to be able to live a reasonable life when I retire. For this reason I am greatly concerned that my brewery is successful. If that means I have to copy stuff other people have done then I think I may well do so. To have a reasonably comfortable retirement I may well not need a £1 billion business. I may not even need a £4 million business. However, I will probably need to be a lot closer to that last figure than I am now, and to do that I'll have to work on branding.

Appropriateness of beer technology

At the Great British Beer Festival I was invited to the Tasting of Fullers Brewer's Reserve No2, and a damn fine beer it is too. I had already been drinking a few beers of the Bières Sans Frontières and am still not convinced I have fully appreciated this beer, nor do I remember the exact detail of the talk John Keeling gave. I have a couple of bottles here so I will try to rectify my lack of full appreciation on another occasion, just so long as I don't do what I did last night and weigh into a bottle after the pub, when my palate is half shot.

Whilst I can try the beer again, what I always fail to do when listening to great brewers talk is remember all the detail of the brewers knowledge. John talked about the technicalities of bottling barrel aged beers, not a subject I'm completely incompetent at, as the success of Æther Blæc has proved, but I'd be a fool if I even pretended to know as much about the microbiology of beer as John does.

I seem to remember John talking about the brewers reserve No2 being a little more susceptible to Brettanomyces generated flavours as brandy has a lower ABV than whisky at cask strength. Actually, I can find no evidence that cask strength brandy is any weaker than cask strength whisky, so I may have misinterpreted¹ this point.

Whether specifically about the No2 or generally about barrel aged beers the point about the microorganisms in the wooden cask is important. John indicated that to enable the beer to be stable after bottling, chill filtering is required, and the beer reseeded with yeast. Although I don't chill filter I am very careful to get very good, recently emptied, long matured whisky casks for my whisky aged stout; this ensures as sterile an environment as possible before the beer comes into contact with the spirit soaked wood. Storing in as cool an environment as possible during maturation is also important.

I know of beer commentators who are horrified at the idea of bottle conditioned beers being re-seeded with yeast. Some purists think that the only correct way to make bottle conditioned beer is to chance the yeast from primary fermentation being strong enough to ensure secondary, anything else is cheating. This could not be a more erroneous point of view.

It is also worth referring back to a post by Zak Avery about beers that go wrong, the dicussions in there about Brettanomyces and a suggestion about pasteurising is interesting; every brewer has to consider what is best for their beer and moreover may not get it right every single time.

I would never make a bottle conditioned beer that wasn't first cleared in conditioning tanks, or perhaps a whisky cask, and then re-seeded and almost certainly primed at the bottling stage. I choose to use finnings where appropriate to clear the beer. Chill filtering may well have advantages to ensure unwanted spoilage microganisms are removed. I understand that Thornbridge have a shiny new centrifuge² which should remove these pesky little guys but leave the flavours much more intact.

I suspect that any good bottle conditioned beer will undergo some form of treatment indicated above. I certainly re-seed every bottle conditioned beer I make, it's madness not to.

This makes me wonder about the "fizzy chemical beer" mantra that occurs in some circles. The use of modern techniques and equipment to ensure quality beer doesn't mean the beer is not a high quality worthy product. It does not mean that re-seeded bottles are inferior to the purity of a bottle that depends on the primary fermentation yeast, quite the reverse. It does not mean that a keg of unfiltered beer is somehow inferior to a poorly kept cask of some poorly executed clone of yesteryears mild, quite the reverse. It does not mean that a week old cask kept under a gentle blanket of carbon dioxide is inferior to a 3 day old cask of the same beer even under ideal cellar conditions, quite the reverse.

As we improve our brewery and our abilities we will be turning to technology to help us out at any point we feel it is appropriate, we hope it will make our beer better and better and better. If it loses us points with the purists then so be it.

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¹I sometimes wonder if my honesty is what keeps me from getting any paid writing roles; after all, a real journalist wouldn't be caught admitting that the story might not be true.

²Look in the comments in this post.

When it all goes wrong.

Some time ago I read a couple of posts by Zak Avery regarding beers that are distributed by brewers despite them not being up to scratch. It has to be a tricky one for any brewer. Beer will vary from batch to batch. The precise flavour profile will be subject to variation. Large breweries making many thousands of barrels of beer a year can reduce this variation by using an arsenal of quality assurance weapons, consistent beer is the result. The smaller brewer's beer is likely to have greater variation due to the combination of consistency being traded for interest and the practical inability to apply all the techniques bigger breweries can employ.

A key activity undertaken by some of the bigger brewers, to avoid destroying beer that is out of specification, is to blend with other gyles. Clearly there is a limit to this, if a beer is so truly awful then no amount of dilution with good beer will save it, except perhaps at homeopathic rates. But still, many of the so called "off" flavours are present in all beers. Phenols, diacetyl, DMS, esters, lactic and acetic acids are probably all present in a well balanced beer. Most of the time they are below detection levels for most palates or counteracted by other compounds to simply augment the overall flavour profile. Of course in some beers these compounds are deliberately accentuated as part of the appeal of that particular beer. It is much easier for a large brewer to keep consistency and balance within limits.

Zak asks why brewers release beers that are not quite right, that fall outside what the drinker considers acceptable. I very nearly commented on his posts, as a brewer, but felt that the reply to this simple question is quite complicated. Much more complicated than I could attempt to answer with a simple blog comment. It doesn't help me in answering the question as the beer Zak cites is unknown to me. I'd love to have tried this particular beer so I could draw my own conclusions. However, I know there are many beers I love that other people just don't like, for whatever reason. Against this background I want to try and answer Zak's question from a brewers perspective.

I think I have distilled my own answer into two basic components. One is to do with the acceptability of the damaging flavour compounds and the other is a very simple financial consideration.

Firstly, the perception of flavour is very much a personal thing. Many people just don't get lambics or gueuze for instance, they would consider such beer more suitable for putting on their chips. Indeed, anyone who believes that a true lambic or wood aged beer does not contain any acetic acid¹ is somewhat deluded, acetobacter is everywhere and balanced with other compounds, specifically lactic acid, gives these beers their distinctive flavour. Some people cannot cope with the levels of phenols found in some stouts², I love them as it so happens. I'm also quite keen on tannins, which although generally considered a bad thing in beer does have some provable benefits when drinking with food and are present in many wines. I know people who adore diacetyl, which is a compound I'm reasonably sensitive to, and find objectionable in higher quantities, and Jeff Pickthall can detect it two blocks away and finds nearly any level unacceptable. It is interesting to me that many traditional British cask beers have levels of diacetyl which make them unpleasant to me.

It is apparent to me, that across the spectrum of beers available in the UK, the opinion of what is good and what is not is open to personal preference. An example of this is that I've been working hard to reduce the levels of tannins extracted from the grain husks during mashing and sparging. Although I'm convinced the effort is resulting in me producing more widely palatable beer there are at least two of my staunchest fans have commented that they are not as happy with the results.

Returning to Zak's question of why brewers release beers that are, in his view, unfit for sale. I think it comes down to a commercial judgement. Even a relatively small batch of beer can represent a significant investment, to simply destroy that beer can represent several weeks worth of bottom line profit to be lost. If, in the brewers view, the product passes his acceptability criterion for palatable beer then it will be released for sale. It might not be perfect beer and indeed I doubt many good brewers regularly brew beer that they don't feel could be improved.

There is the grey area where the beer might well be on the border line between acceptable and unacceptable. Especially in these difficult financial times the need to destroy a gyle of beer might well tip the balance between being able to continue trading or the brewery failing. The long term effect of the good name of the brewery being spoilt becomes academic if the business becomes insolvent.

It becomes more complicated with experimental beers; If a large amount of time and resources are poured into the production of a particular beer and the result is somewhat interesting, to the point that it divides opinion, then perhaps it is not wrong to release a beer for wider consideration and take any criticism as part of product development. The difficulty is knowing if the brewer, and perhaps his immediately available tasters, have called it correctly before release. Additionally there might be problems in knowing how the beer might develop in bottle before it is consumed, an almost impossible task for one off and experimental beers unless sterile chill filtering is employed.

It is important for brewers to receive feedback on their beers. This is even more important for experimental beers and I think Zak's posts and subsequent comments represents a little bit of a stand-off between discerning beer drinkers and craft brewers. It seems that beer drinkers aren't quite sure how to approach brewers and the brewers in turn are perhaps unable to field this feedback to their best advantage. Brewers are, after all, brewers and not communicators. I'm sure there will be a time when I make a beer that attracts negative reviews, indeed there are several beer enthusiasts who regularly give me constructive views for which I am very grateful and all goes into making changes to what I do.

This whole issue has been brought home to me very clearly recently when a bad batch of yeast generated impossible levels of diacetyl in two gyles of beer. Towards the end of fermentation there was a somewhat strange smell. The temperature in the brewery was quite hot at the time and although the fermenting vessels have a good temperature control I convinced myself that the yeast tide mark was drying out, warming and going off in the glorious weather we were having.

During racking I was still very unhappy with the smell of the bulk of the beer. I started to think that something had gone badly wrong. I continued to put the beer into cask, a total of around £1500 worth of beer. I put some into bottle for later considered tasting and quarantined the offending casks. A few days later I cracked open one of the bottles. Condition and clarity were very good, but sadly the butterscotch aroma was way over the top. Flavour wise I find diacetyl most unpleasant in any significant levels, the beer simply got tipped down the drain after the first sip.

This is the very first time I have ever had to consider destroying complete batches of beer, but there really was no option. £1500 of lost revenue is tough to cope with, especially as the brewing industry operates on quite tight margins. The cost of the malt, hops, energy and the notional value of my time has all come out of my cash flow and represents a set back to the engineering improvements that I really need to make to my brew kit. The beer was way out of specification and there was just no option.

On the plus side the mistake has also been quite liberating. There is a sort of self-satisfaction at preventing unacceptable beer being made available for sale. It has also taught me some important lessons for yeast handling and stock control, or rather, I should say re-reminded me.

I hope this post goes someway towards explaining the difficult decisions facing the smaller brewer when trying to get his product both profitably produced and to a standard that will protect the good name of his business. I'm not trying to make excuses, although there are many opinions as to what makes good beer and at this end of the industry I think many brewers find it difficult to sort out the many often contradictory comments. This can result in a head in the sand approach. When does balance become bland and when do extreme flavours become off flavours?

There is no doubt in my mind that the brewers that can engage in active communication in this way can look forward to improving their beers. We cannot afford to have official tasting panels, although my own small band of enthusiastic volunteer tasters are invaluable. After that I depend on feedback from further afield. It's a pleasure to hear positive comments. Equally I enjoy the nicely and tactfully put constructive points for improvement. Often I even find myself agreeing, no really, I do agree with people sometimes.

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¹Check out this link on acids in wine. It seems that wine buffs understand the process of fermentation a bit better than beer buffs. OK, it is true that grape juice contains significant acids not found in grain, but even so the PH of correctly brewed beer is surprisingly low.

Further indications of the acceptability of acetic acid is the fact that peracetic acid is used by many good brewers as a "terminal sterilant" as it requires no rinsing, at levels just above detection I've known experienced beer tasters to confuse this with a "Belgie" characteristic.

²I am finding the subject of the generation of such compounds intensely interesting. I originally thought that phenols were completely generated by the fermentation process. Looking at this article it would seem that they might well originate in the grain, which explains why stouts and other drinks with heavy use of darker grist are naturally more prone to having this compound in them. However, I have from time to time found it in lighter beers where in my view it doesn't belong.

It is interesting that wine making features more in the description of these flavour compounds on Wikipeadia than brewing. Further evidence that more understanding of how we can tame these various compounds is required in craft brewing. I'm trying to increase my understanding and will never profess to be an expert.

Market research and brainstorming

This is an odd post, I'm not going to give you any opinion at all. It is possible you know, occasionally I like to listen to what other people have to say.

Imagine you have just inherited a large amount of money, enough to set up a brewery to your own exacting specifications, enough so that for the first few years you don't need to make a profit. Imagine you have the ability and financial resources to make any beer you want, any style, any quantity and using whatever dispense method you like.

What would be the beers you would make? What would you call them and how would you package them? What style of label design would you have, closures and bottle shapes and sizes?

Would you try to recreate something somebody has done before but has ceased production? Would you try and develop new styles? Strong beers, weak beers or standard session beers? What would you do?

You can say anything you like, providing it doesn't mention the war. Golly, you can even suggest making beers with drinkability if you really want.

Size and provenance

Cooking Lager is a great guy. He makes lots of interesting and corrective comments on this blog, and many others, helping to keep a balance of reality going. It was an important lesson learnt the day he flawed me with "everything is made of chemicals" and indeed he is right, every single thing consists of chemical compounds. The beer that you drink consists of water, alcohol, sugars and some flavour and aroma compounds all of which have chemical compositions. Indeed, with sufficient technology it is theoretically possible to produce these compounds completely without the use of hops, malt and yeast. It is probably possible to do it without most of us being able to tell that it wasn't made in a shed rather than a large chemical plant.

Recently, when I was trying to explain why I only sold my beer over my bar, there was the suggestion from Cookie that I should contract out my brewing to enable me to benefit from economies of scale. That way I'd get rich. The discussion was getting a bit off topic but was non the less interesting. At the moment I am not interested in significant expansion of brewing capacity to the extent that the economies of scale of contract brewing become viable, but I do understand the principles and I want to explore the drawbacks of such methods of production.

Provenance

I am in the beer geek market and the tourist market. My best customers are tourists who are also beer fans of some description. People who travel to the Lake District and are interested in where the beer is produced. If I started to make my beer elsewhere and sell it to people as if it were made here I would be dishonest and so I will not do that. It is possible, like with Coniston Blue Bird for instance, to make sufficient a name out of the product to be able to sell off the reputation and the brand is what sells rather than the geographic location. Increasingly the specialist beer market is getting concerned about where the beer is made and will snub Brewed Under Licence beers (beware of BUL).

If my products gain sufficient reverence in the market so that I think I could gain enough market share, without the necessary attached provenance, then I would consider contract brewing for my beers, but it's not in my business plan at the moment.

Water

It's just a chemical. It's H₂O, that's all. There are trace elements in it, but they can be replicated anywhere. Even at Burton-upon-Trent, where there is allegedly the best water for making beer, Coors de-ionise the water to remove the trace elements and then add back in the exact amounts required for the particular brew. Doing this improves consistency and optimises for particular recipe. So really it doesn't matter where beer is brewed from the point of view of the water. After all, beer is really over 90% water so why hump large amounts of water about, just brew near your market, contract brewing if required.

However, I'm going to be slightly contrary here. The analysis of water that is done by the big brewers focuses on a few elements that are important to brewing beer and a few that are very detrimental. Obviously the correct amount of good elements are aimed at and a minimum of the detrimental ones. Now, there are also many other compounds that have a lesser effect on the beer process, but which seem to be neglected by the big brewers, but might still be important to taste. Specifically peat which, through various organic compounds, impart a flavour in the beer. It might be subtle and it might even be detrimental, but it is still going to be there. My beer is brewed from peaty water. Interestingly, my second favourite brewery in Cumbria, after mine that is, Barngates, also uses peaty water. So make of that what you will.

Scale

Size doesn't matter eh? Well, in my humble opinion it does. Many other brewing professionals also think so. Also geometry matters to; short and fat or long and thin, I'm talking about vessels before your mind starts wandering. Square or cylindrical, vertical or horizontal all have an effect on the way beer reacts.

Square fermenters are rarely used these days. A very well respected brewer installed cylindrical vessels some years ago with the idea of brewing lager. They already had square vessels for the ale products. The lager didn't work out, presumably because Coors can make it cheaper, so they started making ale in the cylindrical fermenters. CAMRA started giving them more awards for the stuff made in the new tanks so they replaced all the old square fermenters with cylindrical ones.

There, that at least should please Cookie. I can already hear him with his reply. "If it's better to use cylindrical then just get all your beer contract brewed with a brewer who uses them." Well, actually, mine are cylindrical, actually. But my point is that the shape of the plant effects the end result. Better or worse may well be subjective anyway, the point is it is different.

If you take an elephant up in a Hercules to 10,000 feet and drop it out, you would find that the elephant would make a significant mess on the ground. A large crater perhaps but certainly massive amounts of elephant meat would be spread about for some distance. If you did the same thing with a mouse it would very likely survive and run off to find some cheese. It might however get distracted by the prospect of a feast of elephant meat and die some time later of chronic obesity. It did however survive the fall due to it's significantly larger surface area compared to it's mass.

Brewing vessels are the same and by that I don't mean small ones don't die if you drop them out of an aeroplane, how could they? they are not alive. What I am indicating is that the fluid in a vessel behaves differently depending on the size of the vessel as a result of different surface areas to volume ratios. The very same brewer mentioned above also commented to me regarding aroma hops that in his big copper they respond differently. If I remember rightly he actually seemed to suggest that microbreweries manage to keep the volatiles better due to the way the boil turbulence works. In any case, hops contain many different compounds and they all behave in very different ways. Transferring a recipe from one brewery to another does not produce the same end product, necessarily.

Economies

Lets suppose all of the above is complete rubbish. Suppose we can duplicate a craft beer on a big industrial plant and it will be exactly the same and so benefit from economies of scale. Great, it can happen and I do hope to some extent this is true. I seem to now be confirmed as a BrewDog share holder so Punk IPA is likely to be made on a bigger plant. So, we'll see. My foolhardy actions of allowing James and Martin to rob me of my money will only see some return for me if they can indeed scale up their beer and manage greater throughput so managing economies of scale, making lots of dosh and making me flush with cash.

That is all well and good but the market for that product will have to increase. More capacity to manufacture has to be mirrored with demand for the product. With BrewDog and for that matter any other expanding brewery, will they compromise flavour to make something more appealing to the masses? How long till somebody says? "Punk IPA, it's OK, but too harsh, couldn't drink a gallon" a few tasting panels later and then we're on the slippery slope to blandness so as to appeal to the masses. The beer will then have dropped out of the beer geek market and be no better then something that Morissy Fox might have once upon a time had a hand in. Of course, it'll never happen to BrewDog, not while I'm a share holder.

Contract brewers will brew with whole cone hops if you insist, I expect. Many prefer to use pellets. Hop pellets are where the hop flower is ground and extruded into hard resinous lumps. In the boil they release flavours and aromas similar to whole cone hops. They are however not the same. During the pelletisation process the lupin glands, which is where the best flavours are stored, are damaged. The amount of damage is dependant on the type of pellet. The more damage that occurs the more the flavours are changed. As you would expect the more processed the pellet the more economic benefit there is. The bigger the brewery, the more likely there is to be economies driving the production and therefore more processing done.

Very often limitation in the hopping used by big breweries are corrected with "hop products" which can very nearly replicate the real thing. Only real nerdy beer geeks would be able to tell the difference. Nerdy beer geeks are a very small part of the beer market so who cares?

Refinement

Once economies of scale are being considered some form of customer satisfaction verses cost analysis will be engaged. Does method A produce as good a result for the majority of the customer base as method B? If so then the least costly method is used. Is the least costly method fit for purpose? If so then use the least cost method. If not then work up until the cheapest fit for purpose method is found.

So?

We now have millions of gallons of some amber liquid being produced. Let's, for the sake of argument, call this liquid C₄R₁IN₆; 6 million barrels a year can't be wrong.

No, they can't, but it isn't Hardknott beer. But then I very much doubt my beer would ever have a market as big as 6 million barrels a year. I'll try not to lose any sleep over it.

I'm not suggesting that mass produced beer is somehow inferior to mine. Indeed, my beer does have its consistency issues from time to time, but then so does Nuits St Georges 1er Crus, every batch has its special attributes and I love it for that. I hate French wine because I can't demand £42 for not much more than a pint, so I'm currently drinking my own idiosyncratic beverage as I try to finish this post.