Archive for January 2013

Day 511

January 31, 2013

Forgot about a scheduled test in Sales & Promotion today. It turned out to be one of those tests that requires annoyingly precise answers. “Market share of beer in six-packs rose ____% in 2012.” Whoa. I’d better not forget about the date of the next test or I may be coming back next winter to redo this course.

After the test, more marketing theory. Target demographics. Price points. Attracting the right customers. Alternative marketing. Secondary audiences. Building brands. Brand identity.

In Brewery Management, Mike Arnold brought up the subject of contract brewers. Contract brewers use someone elses’s brewery to make their beer. Should they be allowed to be full members of the Ontario Craft Brewers (OCB)? Currently there is a proposal that a contract brewer could only be a (non-voting) member of the OCB if the beer is brewed at an OCB brewery, and the contract brewer identifies on the label which brewery the beer was brewed at. Needless to say, contract brewers are not very happy with those restrictions.

Mike then brought in two special guests to talk about financing a brewery. First up was Peter Chiodo of Flying Monkeys Brewery to talk about equity financing. This is where you go to your sister and ask her to invest the contents of her RRSP in your brewery in return for a share of the profits (if the brewery ever makes any profits.) You could also ask for an existing building, land, or a lease. (Alas, I do not have a sister who owns a building large enough to house a brewery.)

There is no question that equity is harder to raise than debt. For debt, just visit your nearest bank. For equity, start looking for some people with a lot of money, and learn how to get people excited about your idea.But before you think about taking the easy route and running to the bank for a loan, realize that usually you need have to have some equity to get a loan, since the bank usually wants to secure the loan against assets such as a building, cash or equipment. So even if you decided to get a loan, you may have to find an investor (or two) before visiting the bank.

But be careful! Although investors can’t force you to shut down your brewery, if they become majority owners, they can sell your business to someone else. There are vultures out there with a pot of cash who await opportunities like this. Bad investors will ruin you.

Peter left us with one last thought: Your brewery must grow by at least 15% every year in order to satisfy your investors that they have invested in a vehicle with good cash flow and a good return on investment.

Exeunt Peter Chiodo stage left, enter James McConnell of TD Bank, stage right. James was there to talk about debt financing–in short, asking your bank (or someone else) for a loan.

As always, you can secure the loan by putting up assets that the bank can seize if you are unable to pay back the loan. (Back to Peter Chiodo for a sec: “NEVER use your house as equity!!”) You can also ask for an unsecured loan, but banks tend to look on those a lot more unfavourably (since they have nothing to seize if the loan goes bad). Needless to say, interest rates on unsecured loans are much higher than for secured loans, and the ceiling for an unsecured loan is much lower. (The max for a secured loan at TD is $1.25 million; for an unsecured loan, it’s only $500,000, and you’d better have a good business track record and a blemish-free credit record.)

And then there is the line of credit, which is a kind of floating loan instrument–the bank authorizes you to borrow up to a certain amount whenever you need it, and you are only charged interest from the time you borrow the money to the time you repay it. It is specifically designed to cover the time between when you pay the bill for ingredients and when you recveive money for selling your beer. So if you have to pay for the grain today, but you won;t see a dime from sales of the beer un til March, you can use the line of credit to pay for the grain, then pay interest on the amount you borrowed until your ship finally comes in. It’s a very handy thing for businesses–you don’t have to run to the bank to borrow money everytime a bill for ingredients comes in. Just don’t use it to pay for that trip to the Great American Beer Festival in Denver.

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Day 510

January 30, 2013

In Human Resources, we finally finished off legal background by quickly comparing “equal pay for equal work” with “equal pay for work of equal value”. Both phrases sound similar and both are found in Ontario law, but they mean two different things.

“Equal pay for work of equal value” simply means that jobs within the same company that are substantially the same have to be paid the same. So, for instance, if Person A is getting $400 per week for a particular job, you can’t pay Person B $50 more for doing the same job except that he also has to lock the doors at night before he leaves–the jobs are essentially the same, so they should be paid the same.

On the other hand, “equal pay for work of equal value” compares two jobs at the same company that have nothing in common, like a delivery driver and an administrator. First each job has to be rated or scored on

  • the skill required (mental and physical)
  • effort (both mental and physical)
  • responsibility (that can include being responsible for money, process, equipment and people)
  • working conditions (unusual conditions that vary significantly from say, your home–hazards, long hours on the road, extreme heat or cold, etc.)

Each company will have a different way of scoring, but perhaps at the A2Z Brewing Company, the delivery dude’s position might receive a score of 1 out of 5 for mental skill required (drive truck, deliver beer), 1 out of 5 for physical skill required (know how to lift heavy kegs), 1 out of 5 for mental effort (find way to bar without getting lost), 5 out of 5 for physical effort (lifting a 50-litre keg out of the truck and into the bar), 2 out of 20 for responsibility (0 for money, 0 for process, 2 for equipment–the truck and the kegs– and 0 for people), 1 for working conditions (seasonal conditions) for a total of 11. In comparison, the administrator might receive 3 and 0 for mental & physical skills, 3 and 0 for mental & physical effort, 5 out of 20 for responsibility (1 for petty cash, 3 for office processes, 1 for computer/photocopier, 0 for people), and 0 for working conditions, also for a total of 11. Two very different jobs, but in this company’s view, the two people do work of equal value and get paid the same.

That actually segued nicely into the next segment, job analysis. The cornerstone of job analysis is:

  • the job description: what has to be done
  • the job specification: what skills are needed

Once we know these two things, we can put together a proper job description, and use it to advertise for recruitment, training, performance review, compensation, and promotions. The rest of the class was spent in how to gather information to put together the job description.

In Beer Industry, Jason Fisher got into production planning. Suppose we have a 20-hectolitre brewery with five 20-hL fermentation tanks that makes 3 different beers:

  • Beer A takes 14 days from brewing to packaging, and spends an average of 20 days on the shelf before it is sold for $3 per litre
  • Beer B takes 30 days but is usually sold after only 10 days for $4 per litre
  • Beer C takes 45 days, and is sold after 60 days for $8 per litre

Should we draw up a brewing schedule, and if so, how far in advance? Most brewers don’t have a long-term brewing schedule, which is strange because everything naturally flows from your production schedule: when to order ingredients, when you can package and deliver, if you are meeting your production goals and other metrics, and even how much any down-time costs you and if the loss can somehow be recovered.

How to schedule will depend partially on whether you are looking for maximum sales or maximum production. There are other factors to balance as well. Although it seems like Beer C is our big money maker, in fact we can produce and sell three batches of Beer A in 102 days and make $3 x 3 batches x 2000 litres = $18,000, as opposed to one batch of Beer C in 105 days making $8 x 2,000 litres = $16,000.

“Aha,” you say. “Drop that loser called Beer C and concentrate on Beer A.” Yes, but it’s possible that Beer C–the expensive premium beer–adds value to your brand and actually helps to sell Beer A. And should you add a fourth beer?  Possibly. Customers get bored, there might be a trend you want to cash in on, your employees might want a new challenge, a new type of grain/yeast/hops/packaging has just come on the market, the season has changed, customers are coming in asking if you”re planning something new…

Whether you have one beer or sixteen, production planning will help you to weather the emergencies that happen at every brewery: ingredients don’t arrive or are of inferior quality, the yeast doesn’t ferment, employees call in sick, equipment fails, the city tears the street up outside your brewery. Jason’s rule (hereafter known as Jason’s Law) is that there is a 20% failure rate in any plan, so be prepared. If you have a brewing plan, then you have a structure you can use to figure out Plan B.

How can you solve the emergency? Can you beg or borrow a replacement? Do you know a guy who can McGyver some parts together? Can you throw it in a keg and sell it as a special Belgian one-off? Is there even a way to avoid the emergency? If you make a super-special beer using a weird yeast from a small brewery in Belgium, instead of having to put the brewing process on hold when the yeast doesn’t arrive in time, perhaps you don’t get the other ingredients and move ahead with the production process until the yeast has arrived at the brewery.

And then there is the thing that causes even more brewery failures than when things go wrong: when things go right.

Yes, more breweries have failed from too-rapid uncontrolled over-expansion caused by success. Your brilliant marketing plan worked, and suddenly everyone wants your beer. So you buy five times more equipment, hire five times more employees, and assume you will make and sell five times make more beer. The problems start to crop up. You just bodged the new equipment into your production line to get it working as fast as possible, and now your brewhouse is a hodge-podge of water, steam electrical and glycol lines. Equipment failure is a daily occurrence. You can’t run two pumps at the same time without tripping a breaker. Mistakes are starting to have an effect on production volume because your dozens of new staff haven’t had time to become as well trained as your old staff, and your old staff is spending most of their time training the new staff. Your hops merchant that used to sell you 5 kilos of Amarillo can’t get you 500 kilos so you switch hop varieties and hope no one notices the difference. Meanwhile, you’re not able to supply all the bars with the beer you promised, and some of them have filled the empty tap with another beer. And then an entire batch of beer gets infected and has to be recalled and dumped. Suddenly you have a huge cash crunch because the bill came in for the new equipment and installation plus five time as much grain, but somehow you aren’t making–or selling–five times more beer.

So plan for success as well as failure. Apparently controlling and planning your growth is as important as a production schedule or an emergency plan.

 

 

 

Day 506

January 27, 2013

Since the agenda for the second day of the MBAC conference sounded interesting, I skipped Friday’s classes in order to attend. (Okay, yes, it’s possible I would have skipped classes even if the agenda had sounded dull.)

First up was a Reuben Mattos of Kerry Ingredients to talk about optimising Whirlfloc, a commercial brand of Irish moss (used by brewers in the kettle to aid in clumping up protein, leading to clearer beer.) Since Nate Ferguson had covered the ins and outs of Irish moss fairly exhaustively in last semester’s FCF course, this was mainly review. I did learn that using tablets rather than granules will require 20% more (by weight) because the tablets are comprised of 20% filler required to hold the tablet together. Oh, and never pre-dilute Irish moss in hot water before adding it to the kettle–you’ll end up with a giant blob of indissoluble gel that you’ll have to fish out of the kettle by hand.

Next up was Blaine Clouston of Specific Mechanical Systems, who spoke to us about brewhouse design from the manufacturer’s perspective, and how the design can vary according to the brewer’s needs. For instance, how large a lauter tun would the average 15-barrel brewhouse need? Wet grain’s density is 25 lbs/ft3, and the optimal weight on the lauter tun false floor is 34.82 lbs/ft2. Since the average grist bill uses 55 lbs of grain per barrel, a 15-barrel system will use 825 lbs of grain per batch, so, the area of false floor needed would be 825 lbs/34.82 lbs/ft2 = 23.69 ft2. Using the famous area of a circle, A = πr2, the  lauter tun would be 66 inches (1.68 metres) in diameter. However, that’s the average brewery. What about a craft brewery that is planning to make a lot of higher gravity Belgian wheat ales? Not only would those use a lot more grain per batch–which would result in deeper grain beds in the lauter tun–but the use of wheat also has a tendency to gum up the lauter tun. In this case, the calculations would take into account the need for more grain and thinner grain beds, resulting in a lauter tun with a larger than average diameter.

Or there’s the whirlpool. A whirlpool generally works by removing some of the wort from the vat, then pumping it back into the vat at a tangential angle, forcing the wort in the vessel to start turning around and around like a whirlpool. After a few minutes of rotation, the trüb (excess protein and hops floating in the wort) will pile together in the middle of the vat floor. Apparently a lot of brewers just pump the wort back into the whirlpool at max speed, using the theory that you want to get the wort rotating as fast as possible. However, it turns out that to remove as much trüb as possible, you don’t need the wort to be whirlpooling like a miniature vortex. In fact the wort should re-enter the vessel at a fairly leisurely three metres per second. Huh.

Next was a presentation by Alex Speers and Andrew MacIntosh of Dalhousie University, who had designed an Excel spreadsheet to model and monitor fementations. The problem we have is that we often don’t know something is going wrong with our fermentation until it suddenly stops. Since we don’t know what happened, we don’t have a good idea of how to get fermentation going again. When this spreadsheet is regularly updated with various parameters such as the volume of CO2 being produced, yeast counts, alcohol being produced, specific gravity of the beer, etc., the spreadsheet will model your fermentation and graph the various parameters. Then if your fermentation starts to go haywire, one or more of the lines on the graph will diverge from the Golden Path of Perfect Fermentation. (This will always happen at 2 a.m.–even when you’re using this spreadsheet, you can still expect to get a call from the assistant brewmaster in the middle of the night.)

Lunch was interesting. Several brewers at my table started trading stories about spent grain–the used, wet grain that is left over after brewing. Most sell it or give it to local farmers for cattle or pig feed. However, given increasing municipal concern over excess biochemical oxygen demand (BOD) caused by waste products being washed into the sewer, what else could be diverted from the drain to the spent grain? Someone suggested spent yeast, but there was a lot of shaking of heads–apparently yeast can revivify in the animal’s stomach, start consuming sugars it finds there and then produce CO2. A lot of CO2. And then the cows explode. There are  other hazards as well. One brewer told the story of making a coffee porter, and adding the used coffee beans to the spent grain bin. He forgot to tell the farmer. The farmer’s wife fed the spent grain to the pigs, and went inside. An hour later, out of the corner of her eye, she saw two pig-shaped lightning bolts flash by the kitchen window, circle the house three times, then head for the back forty like they were greyhounds after a rabbit. By request of the farmer, no more coffee beans were added to the spent grain.

Back to presentations. Robert McCaig of the Canadian Malting Barley Technical Centre gave a presentation on the history of the now-defunct Wheat Board, and the shiny equipment his company has for barley and malting research.

A representative of the Canadian Food Inspection Agency (CFIA) gave us the unwelcome news of more government regulation around the importation of food ingredients.

The final presentation, by Ted Wright of Fizz Marketing, was the real eyeopener for me. Ted was there to talk about the power of word of mouth marketing (WOMM). First, the problem: we are subjected to a huge amount of advertising. Counting all the ads on TV, radio (if we still listen to radio), websites and email, we are bombarded with thousands of messages every day. This has two effects: the first is that all those ads become a kind of white noise that our brains learn to ignore, like the hum from a refrigerator that we don’t even notice until it stops. The second effect is that 76% of consumers no longer believe advertisers are telling the truth about products. Instead:

  • 68% of consumers believe their friends tell the truth about products.
  • An astounding 92% of consumers believe that a recommendation from a friend is the best source when looking for ideas about what to buy, and 20% choose brands solely on the recommendation of a friend.

Because of this, word-of-mouth has become an incredibly powerful marketing tool–and best of all, it actually works best when you get out of the way and let it happen. According to Ted, word of mouth gets started by a certain segment of our population he called “influencers”. These are the people who love to try new things, share stories and are intrinsically motivated. (In other words, they like to get swag–not cheap badly-fitting logo t-shirts or a free beer coaster, but good quality, good-fitting, neat, shiny, attractive stuff.) They are attracted to stories that are interesting, relevant and authentic, and pass those on to their friends, who then pass them on to their friends, and so.

To take advantage of this, we have to make sure our marketing is starting these conversations, because if we can, then 40% of the resultant conversations will refer to our brand. So how do we do this?

  1. Identify a leadership group
  2. Find the influencers in the group, and have an interesting story to tell that is relevant to the influencers and their audience.
  3. Give them something to talk about. (Bring them into the brewery, make them CEO for the day, etc.) Just remember that influencers don’t sell, they share, and they don’t share stories they don’t feel are true.
  4. As the story spreads, create the tools to start the movement.
  5. Allow the people to join the movement of their own accord–they approach the movement, not vice versa.
  6. Measure the results.

Okay, this sounds pretty far-fetched, and not anything like the big breweries do with their multi-million dollar ad campaigns. So Ted gave us the case study of Pabst Blue Ribbon (PBR),  a sub-premium (marketing words for “cheap yellow”) beer that was a popular blue collar quaff 50 or 60 years ago. When Pabst approached Fizz Marketing in 2000, PBR was 44th out of 48 beers in terms of profitability,  and off the bottom of the charts in terms of market share. Fizz realized that this had been the working man’s beer 50 years ago, but their kids had rejected it because that’s what kids do. (There’s a whole theory here about each generation refusing to validate their parents’ likes, but instead returning to what their grandparents liked, which is seen as “authentic”.)

Fizz wanted to try word-of-mouth marketing exclusively, with no other advertising at all–no magazine ads, no TV ads. They would celebrate the people who liked the product, and push “authenticity” as the hallmark of both the stories and the beer. They started small–everytime they heard of a lifelong PBR drinker dying in the Seattle area, they sent a memorial letter on PBR letterhead to the person’s favourite bar. They didn’t ask the bar to post it, but that’s what happened. People in the bar (most of them in their 20s) read the letter. It made for a nice story, and autheticated PBR as the beer that an older generation had enjoyed.

Stories started to be told, and people started to approach them. A KISS tribute band composed of “small people” that toured the Midwest asked if PBR would sponsor their tours. Fizz said no, but told the band everytime they played a certain bar in Topeka, they would get a free 6-pack of PBR. Of course, the band gave a big thanks to PBR at the end of every concert–more conversations. Someone making a movie approached them and said the screen writer thought the character–an old Vietnam vet–would look more authentic if he was a PBR drinker. Was that okay? Fizz said, “Sure”, which is how they got Clint Eastwood drinking PBR in Gran Torino without paying a dime. The PBR website featured user-submitted photos.  People were getting PBR tattoos.

Without going into a lot more detail about all the strange things that happened, the results were stunning. By the end of 2006, PBR had risen to #19 in market share in the U.S., and was the #1 sub-premium beer. All of this without a major print or television campaign.

Naturally this “hands off” approach was incomprehensible to a number of older people in the audience. There were even several questions about the lack of beer coasters, which apparently are integral to most beer companies’ marketing plans. (I have to say, I couldn’t tell you what coaster was under my beer five minutes after I left the bar.)

In any case, even if you don’t believe in the power of WOMM, it was valuable food for thought for the small craft brewer with a limited marketing budget.

And then, although the roads had been clear and dry for the entire week, the snow started falling just before the end of the conference–between rush hour and the snow, the 25-minute drive took over two hours. Strangely, exactly the same thing had happened at last year’s conference.

Day 505

January 24, 2013

Even though I wasn’t in the Teaching Brewery today, it wasn’t really a day off. First of all, we have a major assignment, test or presentation in every class next week. However, sometimes schoolwork has to be gently set to one side in order to… brew beer! Yay!

Yes, the brewery that employed me last summer asked me to brew up a batch of beer for a Valentine’s Day party. (I guess they’ve finally forgotten about that jalapeño beer incident.) The 70-litre pilot system that I have used in the past was not available, but luckily, the brewery also has a tiny 20-litre home brewing system, so that is what I used to produce a black pepper black IPA.

Time for all those assignments. No, wait, I’m lying. After cleaning the equipment, I had just enough time to pull on some clean clothes I’d brought with me before heading to the Master Brewers of Canada (MBAC) Annual Technical Conference. The afternoon sessions featured a panel of brewers who have moved or upgraded their breweries, and some of the problems they ran into. The best advice seemed to be: “It will cost three times as much as budgeted and take four times as long as expected.”

We also heard from Chris Robertson, Director of the Beer & Spirits Division at the Liquor Control Board of Ontario (LCBO). Since  the LCBO has been a prime focus in several business classes this semester, hearing him talk about beer sales was very interesting. He seemed to take a lot less time than some of our instructors–he covered the entire procurement and ordering process in less than 15 minutes.

There was also a social evening, which was a great opportunity to meet people from some of the largest and smallest players in the field. I talked with a design engineer from Molson Coors (Canada), the owner of a small 15-hL brewhouse in southern Ontario, a hops salesman, a PR person for the Ontario Craft Brewers’ Association, and a brewhouse design consultant. The brewhouse consultant had the best comment of the night: “I have to take some time off from my job to work on my business.”

Day 504

January 23, 2013

Brands. That was our focus in Sales & Promotions today. A brand is not the same as a product–a product is something you produce, a brand is a particular image that is attached to the product. For instance, Starbucks makes coffee, but you probably think of the  green mermaid rather than coffee when I say Starbucks.

“Starbucks.”

See?

Branding is the way to sell more product, but remember, the brand will become the face of the company and vice versa. If the company garners bad publicity unrelated to the brand, the brand will still suffer (and sales will fall). If the brand garners bad publicity (a recall, for instance), your company image will be tarnished.

We also covered some marketing theory, but I have to say that although I am very interested in the creative process in marketing, I find the dry theory, the mnemonics and “marketing talk”–the 4 Ps, SIVA, TDPH, etc.–to be deadly dull.

On to Brewery Management. To warm up, we talked about “stealth breweries”–brands or products produced by the big companies but made to look like craft beers. For instance, Rickard’s Red first appeared in the Canadian marketplace 30 years ago, apparently brewed by the Capilano Brewing Company. Except there was no such company. It wasn’t until several years later that Molson owned up to being the brewer, having developed it at their Vancouver brewery (in the Capilano area) under the watchful eye of brewmaster Gord Rickard. Of course, with a falling market share, it make sense that large brewers are going to try to capture some of the burgeoning craft beer market by making “craft-like” products.

One way to do that is just to make it and pretend you didn’t make it. Hence Rickard’s Red.

Another way is to simply buy out a craft brewery and add their profits to your bottom line. So Molson bought Creemore Springs, and Sleeman bought Okanagan Springs (B.C.), Unibroue (Quebec) and Upper Canada (Ontario).

A third way is to build a small brewery, and hope people don’t notice it belongs to you. So you may not be aware that Molson owns Six Pints, Labatt owns Shock Top and Moosehead owns Hop City.

So are stealth craft breweries good or bad for the craft brewing industry? On the one hand, they are competition, and any one of the parent companies has far deeper wallets than all the craft breweries in Ontario combined. On the other hand, more choice can’t be as bad thing in terms of consumer education.

What do craft brewers think of The Beer Store, the retail beer store that is owned by the Big Three (Molson, Labatt and Sleeman)? On the good side, TBS has an extremely efficient low-cost distribution system. You will definitely get paid. And the focus is on beer and only beer–you don’t have customers coming into TBS undecided between beer or a vodka cooler. On the minus side, it costs a lot of money to get a single SKU of your beer into The Beer Store, then more money for another SKU, then even more money for another SKU. Bring lots and lots of money. Also, since the Big Three own the stores, they will naturally promote their own products. Yours–not so much. Their beers will be on the main aisle highlighted with bright signs and flashing arrows. Yours will be piled in a quiet corner, where it will lie forgotten and unsold. Then when the beer reaches its best before date, The Beer Store will tell you to come and pick up your stale beer–and ask for a refund for the unsold beer. Demographics are not friendly to craft brewers either. The Beer Store customers tend to be older, and generally have already decided what beer they are going to buy before they enter the store–usually the same beer they’ve been drinking for the past thirty years.

So, it’s back to the LCBO. Mike Arnold, who has been dealing with the LCBO for thirty years, led us through their pricing structure.

First, you decide on a retail price. (Take some time here–due to the law of equal prices, what you decide on will be the retail price for this product right across the province: in all LCBOs, Beer Stores, and even in your own brewery retail store.) So let’s say you’re selling a 500 mL bomber of IPA for $8.95. (This includes both a 13% Harmonized Sales Tax and a 10-cent deposit on the bottle.)

To calculate the wholesale price (the money you get to keep),the LCBO first has to

  • deduct the deposit. ($8.95 – 0.10 = $8.85)
  • calculate the HST, round it to the nearest cent and deduct it ($8.85 – 1.0182 1.02 = $7.83) This is the “basic price”– the price you would charge for the beer in your retail store before adding the HST and deposit.

However, you’re not selling the beer in your store, it’s the LCBO, and they have a few more deductions to make.

  • Basic fee of $0.2236/litre = (-$0.1118) for 500 mL
  • Volume levy of $0.176/litre = (-$0.088)
  • Environmental fee on containers that will not be re-used = $0 (Let’s assume you are using a reusable container, have  a bottle cleaner and intend to clean and reuse the bottles.)
  • In-store fee of $0.606/litre = (-$0.303)

The total fees are $0.5028 per bottle, meaning the wholesale price (basic price minus total fees) will be

$7.83 – 0.5028 = $7.3291 = $7.33

Therefore, for each bomber of IPA you sell at $8.95, you will receive $7.33–or a few cents less if you don’t intend to wash and reuse the bottle and therefore get dinged with the environmental fee.

This is pretty straightforward, except for one very strange rule. When the LCBO calculates the price for, say, 100 of these bombers, they don’t just take the basic price, multiply it by 100, add the HST and deposit, like any other transaction involving any other product in the province.  (That is, $7.83 per bottle x 100 bottles + 13% HST + $0.10 deposit per bottle = $894.79)

No, they use the rounded off HST total as calculated above on each separate bomber in the transaction:

(($7.83 + $1.02) x 100) +($0.10 deposit x 100) = $895.00.

In other words, they are taking in 21 cents more than expected on 100 bombers.

What’s more, you also have to do the same thing in your brewery store. If some dude walks in and buys 9 bombers of your IPA, you can’t just have your cash register add 13% HST and bottle deposit to the transaction. No, you have to adjust the cash register so that it calculates the HST on each separate bomber of IPA, rounds off the HST to the nearest cent, then adds the deposit and totals up the entire transaction. D’ohh! And you thought owning a brewery was easy…

Day 503

January 22, 2013

And we’re into the last 100 days of this adventure. (Actually, it turns out that due to a change in the length of the semesters this year, the program is now only 588 days long, so we entered the last hundred days a couple of weeks ago. However, it seems a bit late in the game to change the title of this blog, so it will remain “600 Days to Brewmastery”. But I digress…)

In Human Resources, it was more legal background on employment in Canada, with a final look at the Human Rights Act and its effect on workplace harassment, reasonable accomodation, age, and whistle-blowers. We did a quick scan of the Labour Relations Act–not too many craft breweries are unionized, so little call to delve too deeply there–and then on to the Employment Standards Act of Ontario (ESA), which guarantees minimum wages, vacation time, statutory holidays, compassionate leave, equal pay for work of equal value, and maternal or parental leave.

Next, health & safety legislation. There are actually three separate acts covering industry, construction and mining. Brewing falls under the industry guidelines, where responsibility for health and safety is shared by the employer, who must provide a safe work environment, the supervisor, who must ensure workers comply with safety regulations, and the worker, who must follow safety procedures. Saftey committees, right of refusal to do unsafe work, ministry oversight, and so on.

On to Beer Industry with Jason Fisher. Today was all about metrics–the measure by which the various types of breweries calculate their success. That is, what defines how well a particular brewery, brew-pub or contract brewer is doing?

For the craft brewery, key metrics include number of days of production per week, month or year, the volume produced, beer wasted during the production process, brewing efficiency and sales. (The last one can be broken down into sales per licensee, sales per style or brand of beer, sales per type of container–bottle, can, or keg–sales within a geographical area, and the seasonality of sales–traditionally lower in the winter and higher in the summer.) The most telling metrics for a craft brewery are probably straight volume  and yearly growth. How much beer did I brew this year? How much of an increase is that over last year?

For the brewpub, it’s probably bums in the seats: what is my average daily turnover of customers, and on average, how much money do they spend? For instance, if you get an average of 150 customers per day and they spend an average of $25, that’s $3750 per day or $1.3 million per year.

For the contract brewer, it’s sales accounts: how many bars and restaurants are you selling product to, and what kind of growth in sales accounts does that represent over the past six months or year?

For ultra-large regional or national breweries, lowering costs is a much more efficient way to drive profits–reducing the cost of your ingredients by 5% is much easier than finding 5% in new sales accounts. (Of course, craft brewers have a thing or two to say about breweries that use cheaper ingredients and barley-replacement adjuncts in order to raise profits.)

But alas, it is time for me to increase the bottom line of some brewery by (at least) one glass of beer…

 

 

Day 499

January 19, 2013

In Creative Writing, we quickly reviewed the essential elements of fiction–setting, characterization, theme, etc. We’ll go over each of these in detail in future classes.

Human Resources covered with some of the legalities of employment under the Ontario Human Rights Acts.

Judging and Evaluation reviewed material about designing sensory panel rooms.

Weekend.

 


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