Building a Successful Nanobrewery

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® BUILDING A SUCCESSFUL NANOBREWERY Photo courtesy of Shutterstock.com of courtesy Photo Please note all file contents are Copyright © 2021 Battenkill Communications, Inc. All Rights Reserved. This file is for the buyer’s personal use only. It’s unlawful to share or distribute this file to others in any way including e-mailing it, posting it online, or sharing printed copies with others. OPENING A NANOBREWERY TIPS FROM THE PROS BY DAWSON RASPUPZZI

BREWER: NICOLE CARRIER THROWBACK BREWERY NORTH HAMPTON, NEW HAMPSHIRE fter homebrewing for a decade, Annette Lee, Head Brewer and Co-Founder of Throwback Brew- A ery got her certificate in brewing from Siebel Institute while also doing an internship at Smuttynose Brewing in Hampton, New Hampshire. After that, she convinced me that with her apti- tude for brewing and problem solving, Photo courtesy of Depositphotos.com of courtesy Photo and my background in marketing and One of the major advantages of being a small brewery is the freedom to explore various styles, business and my love of spreadsheets ingredients, and specialty recipes across the spectrum in the world of beer that we should open a brewery. It didn’t includes how to pour consistent fills, I was sick of my corporate job and take too much convincing. dealing with minimizing dissolved oxy- wanted to do something I enjoyed ev- We decided to start with a 3-barrel gen, labeling on wet bottles, and even eryday, which is how I decided to open a (93-gallon/350 L) system that Annette choosing packaging equipment. Then nanobrewery. We started with a 2-barrel fabricated together from used tanks there are new concerns like best prac- system. I wanted to create a system and with the help of a local welder. We tices around cleaning and maintaining business that my wife and I could man- made that decision for several reasons. that equipment. There are also safety age on our own. We had been to enough First of all, we wanted to bootstrap our concerns that homebrewers might not nanobreweries around the country and business ourselves, so spending judi- think about. Instead of a pot on the our own state to know that this concept ciously was always top of mind. Second, stove and pretty safe sanitization chem- can work, despite what many people we wanted to test the market’s appetite icals, you have hundreds of gallons of who have been in the industry for a long for our beers and our story. Finally, not boiling wort, dangerous chemicals cir- time may say. to say that we had low expectations, culating in tanks much bigger than you, There was definitely a learning but we certainly didn’t expect to sell and high pressure along with a dozen curve, and I’ll honestly say that we were as much beer as we did! We were ex- other concerns. lucky to overcome it. You can never tremely and very pleasantly surprised as My last pieces of advice to anyone have enough working capital when you to how customers and our community looking to open their own nanobrew- are starting up. Factor in many, many supported us. ery is to get some professional brewing months of working expenses. There The biggest differences we found experience under your belt, even if it will always be something to buy that going from homebrewing to profes- is just volunteering one day a week at will make your brewery better/more sional brewing were around yeast, pack- a brewery where you are watching the productive. It’s important you have the aging, and safety. How the yeast acts in brewing process, helping to dig out the cash in the bank to not worry about the 5-, 100-, and 500-gallons (19-, 380-, and mash tun, or bottling. Also, remember day-to-day expenses and being able to 1900-L) is very different. It’s not a direct that opening a brewery is much more focus on putting your cash flow to work scale up, and the same goes for pretty than just making great beer. Make sure for you right away. I’ve also learned that much all ingredients. When we were you spend a significant amount of time I would not want to work this type of homebrewing, we would re-use yeast, on your brand — what do you stand for, brewery model if we were distributing. but if you’ve never done that before, what makes you different, why should We are lucky to have enough business then you would need to learn about customers want to buy from you? Be in our taproom that we don’t need to yeast management practices such as prepared for when the press calls. Fi- explore the distributing business. harvesting, tracking, and cell counting. nally, invest some time in social media. Anyone considering opening a brew- I could spend hours talking about pack- We’ve found that that is a very easy and ery needs to understand the amount of aging! There is quite a difference from cost-effective way to connect with our work and time it takes. I think a lot of brewing a batch of beer and filling up customers. people do back of the envelope estima- your pony keg or gravity feeding into . tions, thinking “I’ll brew two batches a bottles for personal consumption versus BREWER: SAM HARRIMAN week, and be open for this many hours, packaging beer for distribution. Part of SISYPHUS BREWING and everything will be great.” People the learning curve around packaging MINNEAPOLIS, MINNESOTA seem to overlook that each batch not

1 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved only needs to be brewed, but put into BREWER: JOHN ADKISSON stantly changing lineup, only making a a brite tank or kegs, and carbonated, IRON JOHN’S BREWING few beers more than once per year. We then you have to clean those tanks, TUCSON, ARIZONA were trying to appeal to that part of the order ingredients, maintain the books/ We have a 2-barrel system yielding market always in search of something paperwork. I was all-in from the start, 62-gallon (235-L) finished batches. It new. By the end of our second year, we and working 80- to 100-hour weeks for is fabricated from commercial soup had also introduced ten standard beers well over the first two years. kettles for our mash tun and hot li- to meet expectations of the more tradi- There are advantages to being small quor tank with 100-gallon (380-L) boil tional market elements. Now we pace — one being that it lets us constantly kettles and 80-gallon (300-L) stainless our production to maintain the ten change and rotate up our beers. We steel conical fermenters. My partner standards and release up to 40 different don’t have the same tap list from week and I had a goal of keeping our startup specialty beers, including our Belgian, With the advantage of hindsight, I’d have made it a priority to start with twice the capital we did so marketing and staffing needs wouldn’t be squeezed so tight the first three years. to week, and that was one of my goals costs to a minimum while still being cask-aged, and sour series. for the place when we opened. I like able to produce enough product to be a With the advantage of hindsight, walking into a place I haven’t been to in viable business. In all my years of teach- I’d have made it a priority to start a week or two and finding new things ing brewing, I have always said that the with twice the capital we did so mar- to try. I think a lot of people appreciate ingredients don’t care how much you keting and staffing needs wouldn’t be that. spent on the equipment. Good brewing squeezed so tight the first three years. Hopefully we will sell 500ish barrels is based on process control, regardless Holding back on merchandising and of beer this year, and then keep doing of your budget. marketing slows down growth and that year after year until I’m ready to We initially took advantage of our while guerilla techniques can help, mar- retire. small batch size by producing a con- keting is a beast that must be fed.

nanobrewery is generally de- subsidize a hobby and the profit goals ery before ever considering beer distri- fined as a brewery with a brew- are quite different. Whatever the objec- bution. Period. And even then, the sales house up to 5 barrels in size (1 tive, the business performance should revenue may not be worth pursuing. A barrel or beer barrel is equal to be compared to the plan. 31 gallons/117 L), and these smaller- 4. STAY TRUE TO YOUR scale businesses offer many opportu- 2. FOCUS ON HIGH-MARGIN BUSINESS MISSION nities to brew, market, and share your BEER SALES Nanobreweries are way too small great beers with your local community. Successful boutique businesses main- to be everything to every beer con- Although the craft beer market may feel tain market focus on high-margin sales sumer. Know who you want to be in bloated, nanos fit the hyper-local niche, and purposefully avoid distractions the market, let your patrons know your require less capital and space to launch from the macro-market because the identity, and stick to it. All breweries than other brewery business models, temptation to satisfy all consumers can are guaranteed to be asked to brew and, unlike packaging breweries, do not kill the ideal niche business. This type beers that are not a good fit with the battle for tap handles and shelf space. of focus requires dedication and abso- brewery. Examples may include mango Here are some tips to consider if the lute confidence in the business plan, wheat brewed in a Michigan brewery idea of opening a nanobrewery has and it is a philosophy that is fitting with dedicated to fruit beers using locally crossed your mind. the nanobrewery. Small batch beers are farmed crops, a cask-conditioned ale in expensive to brew, a nanobrewery has a a brewery specializing in funky Belgian 1. BEGIN WITH A PLAN limited number of sales opportunities, styles, or a nitro-stout in a brewery that All businesses require a plan, and nano- and each of those sales need to gener- only produces bottle-conditioned and breweries are no different. A good plan ate a healthy margin for the business. keg-conditioned ales. When this hap- will clearly define the vision, mission, Don’t be wooed by higher volume, lower pens, you must be prepared to clearly, objectives, strategies, and action plans margin sales. unequivocally, and calmly say “no of a new business. Although most busi- The easiest way to stay focused on thanks,” and remain true to your path. ness plans are written to raise money high margin beer sales is to brew beers Your core customers will respect the from potential investors, you should that can demand a higher price. Most business for staying true to its mission. consider your own needs when penning beer consumers are simply unwilling the plan. Use it like a map to help the to pay premium beer prices for ordinary 5. CREATE A BRAND business stay on course, and reference beer. Does this mean that nanobrewer- IDENTITY THAT FITS it periodically. ies cannot serve a golden-colored, reg- YOUR BREWERY Plans patterned from boilerplate ular strength, Pilsner? Of course not, it The look and feel of your brand can be templates are oftentimes boring and just means that the Pilsner cannot be as important as the quality of your beer generally uninformative. One-page ordinary. Despite the obvious nature of for the first-time visitor. Many small business plans are a popular alternative this advice, it is surprisingly difficult to businesses downplay the importance of because they can be meaningful, con- always follow after your business doors brand identity, and many small brewers cise, and are easier to write than longer have been opened. take the position that great beer speaks versions. Format aside, two important for itself. The look and feel of a brand sections of a nanobrewery plan are the 3. RUN FROM THE ALLURING helps establish impressions about a Vision and Mission sections. EGO BOOST THAT CAN COME brewery and its beers before the con- A clear and meaningful focus helps a Local bars and restaurants love special sumer tastes that first drop. And posi- business stay centered. If the vision is to beers from small, local breweries, and tive first impressions help to reinforce brew exceptional German-style lagers it can be a huge ego boost when these the quality of great products. Converse- to serve in a locale with a strong Ger- businesses want to feature your beer ly, a weak brand identity can negatively man heritage, you may want to rethink on one of their taps. Seeing your tap in influence an otherwise great beer. If that kumquat cream ale recipe you have another venue feels great, but does it this sounds like psychological mumbo- been tweaking. Don’t like the way this make good business sense? Not usually. jumbo, consider your own consumer be- restriction feels? Change your plan. But When beer is sold through distribution havior and how you respond to various make the major changes before open- channels, even with self-distribution, beers simply based on brand identity. ing. A business that constantly changes the sales margin is eroded because the Since few nanobreweries start out directions can confuse its consumers. consumer is typically unwilling to pay selling beer in bottles or cans, the You also need to plan for prof- more for your beer simply because it is brand investment is typically limited its. While most new businesses are being sold in another venue. The suc- to the company name, the look of the launched to turn a profit, some nano- cessful nanobrewery should sell every name if it is separate from the company breweries are conceived as a way to possible drop of beer in their own brew- logo, company logo, and a way to com-

3 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved municate what beers are being offered. the glass of beer in front of you are and quickly realized the need for a big- Decorative chalkboards are a popu- likely parts of your recollection. And this ger kit. Sounds simple, but if the facil- lar and effective method used to an- place is cool! Make your nanobrewery a ity was not designed with expansion in nounce the beer selection in a taproom. cool place that folks remember, and re- mind, expanding may not be a viable Although these often look great, they turn to for more great memories. option. And there are many examples require talent and skill to maintain. If of “nanos” with 7–10 BBL brewhouses the nano team does not include artistic 8. DON’T FORGET ABOUT matched with 1,000-square-foot tap- talent, consider other vehicles for your THE FOOD rooms that simply brew batches that beer list. A good designer can develop But nanobreweries are all about the are a misfit with their sales volume. all of these materials and get the busi- beer! Seriously, who really needs food? Beer is best when fresh, so large batch ness off to a strong start with a rock- Like it or not, tap rooms need a food sizes coupled with a large selection re- solid identity. Not in the budget? Con- program because a good chunk of the sults in old beer. sider bartering for future purchases in beer drinking population wants some- Setting the number of taps is an- your taproom. thing to eat with their beer. Matching other challenge. The trend these days is the food program with the look and to maximize selection, but this must be 6. LOCATION, LOCATION, feel of the tap room is a great place balanced with batch size and projected LOCATION to start. If the focus is on a wide ar- sales volume. Sometimes less is more in Anyone who has ever considered open- ray of beer styles that show off your tap rooms with good turn-over because ing a retail business has heard this brewing skills, consider working with a limited selection helps ensure fresh expression. The exciting thing about local food producers to offer tasty beer, keeps your consumers excited brewery taprooms is that there are no bites that do not require cooking, about future beers, and makes for rea- clear rules about what works. Since and do not take the focus away from sonable batch sizes. Want 20 beers on nanobreweries are small, the popula- your brews. tap all year? Be prepared to brew 2-3 tion surrounding the nanobrewery can Think locally made sausages, chees- batches per week. also be relatively small. Residential es, breads, pickles, fruits, and mustards Sour-beer programs require a place neighborhoods with the right zoning for an A+ ploughman’s platter/brotzeit for barrel storage, step or decoction have become a very popular place to board. Or team up with local food trucks mashing requires specialized equip- establish a nano, and these businesses if you have the space for a food truck ment, whole hops require a hop back, provide something that has disappeared during key business hours. If these sim- and malt mills may require explosion- from many residential districts over the ple food options don’t fit your vision, proof rooms. Defining what your brew- years. Light industrial complexes are having your own kitchen may be the ery can and cannot do is a critical part another popular location, and if located best route for your concept. But adding of the design process. And your DIY in an area with congested commutes at that kitchen just turned your business skills may influence your equipment the end of the workday, the tap room into a restaurant and immediately in- purchasing decisions. Equipment selec- may swell with employees from neigh- creased your staffing requirements and tion will probably represent your single boring businesses who want to wait be- operational complexity. largest investment, so you may want to fore embarking on the commute home. Most brewers who own and operate consider working with a consultant to Think outside of the box when consid- a brewery-restaurant employ at least guide this process. ering your location. one brewer. If your dream is to sell the beer you brew in your own taproom, 10. SKETCH OUT AN 7. DEVELOP A STYLISTIC think long and hard about building a ORGANIZATIONAL CHART THEME kitchen. And think even harder about Your nanobrewery dream may include Let’s face it, there are many tap rooms adding tables to your taproom. shedding baggage from the corporate around the country that lack original- business world, but some things must ity. Some have a total lack of décor and 9. PUT ON YOUR not be ignored. An organization chart, feel sterile when partially full, and oth- ENGINEERING HAT even if you simply sketch one out on ers have a formulaic feel that gives the Designing the brewery is what brew- a bar napkin, is extremely important feeling of déjà vu. Without question, the ers are really keen about doing. The to even the smallest of businesses. An most memorable taprooms have origi- best designs begin from the end and organizational chart matches job titles nal stylistic themes. The nano brand is work backwards to the front. Some of and names with the daily tasks asso- largely based on the taproom, so make the things you need to know to begin ciated with business operations, and it special and consider all of the sensory designing include: The number of beers helps shape the team. One of the more inputs that your guests receive. Color, served at any one time, preferred serv- important responsibilities in a brewery artwork, music, glassware, cleanliness, ing method, annual sales volume, beer is preparing and paying taxes. Keep in information about the brewery team, varieties, process philosophy, raw mate- mind that a major part of U.S. brewery and how you interact with your guests rial types, and your DIY skills. legislation was crafted to prevent folks all fit into style and help define the tap- The question about volume is criti- like Al Capone from ever again running room. cal because it drives brewhouse sizing. breweries! Close your eyes and think of a mem- There are plenty of nanos that began orable bar. Sights, smells, sounds, and with a brewhouse that was too small

RECIPE DESIGN ETHOS BY MICHAEL TONSMEIRE

here are different considerations number of leftover hop bags cluttering another for dry hopping as both timing when designing a recipe for a the freezer . . . a lesson I could stand to and temperature determine which aro- craft brewery compared to a home learn. If you do have older hops, then matics survive into the finished beer. T brewery. I’m not talking about ad- using them in the boil (rather than dry See my article “Hop Oil Analysis and justing for mash efficiency or hop utiliza- hopping) is preferred. Blending,” BYO December 2015. tion, two things every brewer should do As a homebrewer brewing 11-gallon Even if all hop varieties remain regardless of scale. This article describes (42-L) batches, I often use one-third or available from the same farms, aroma techniques that craft brewers use to half a sack of base malt, and specialty could change thanks to annual weather make brewing easier, and their results malts in pound increments (or half differences or harvest timing. This vari- consistent year-to-year! Only some of pound if needed). For hops I’ll buy by ability can again be dampened by a these techniques have potential value the pound, using up last year’s leftovers larger blend of hops. For craft brewers for homebrewers, while others only have for hot-side additions while the freshest this variability is further mitigated by value when planning to scale a recipe for hops are reserved for dry hopping. traveling to Yakima, Hallertau, or Nel- commercial production. Over the years son for hop selection. The goal is not I’ve collected advice while consulting, BLENDS OF HOPS necessarily to pick the “best” lots, but collaborating, and drinking with a wide My preference is to use a simple ratio rather the ones that provide continuity variety of brewers, the lessons included of two hops for aroma (1:1 or 2:1). This of flavor. here reflect what I’ve put into practice simplistic approach represents the As a homebrewer, I’d rather brew now that I’m brewing professionally. sweet spot for me in terms of adding the best batch I can today . . . and not nuance to the hop character without worry about making that identical beer ROUNDING TO creating a muddled-generic “green” again. I’ll buy Citra®, Galaxy, and Nel- PACKAGE SIZE hoppiness. This approach works for son Sauvin when I can find them, and Most homebrewers write grain bills many craft brewers as well, in addition create something unique with other with nice round percentages – 85% single-hopped beers have even gained varieties when I can’t. This approach pale malt, 10% Munich, and 5% crystal traction as one-off or rotating releases. has become more common for NEIPA- 20. Commercial brewers are lazy (in a However, if a craft brewer is designing focused breweries that do heavy can- good way), so it makes sense to use an a year-round flagship IPA, best practice sales on premises; they simply won’t entire 50- or 55-lb. (22- or 25-kg) sack is to include three or more aroma vari- brew a particular IPA if the relevant of malt even if the resulting recipe fea- eties. This allows the brewery to swap hops are not available. tures 9.4% or 11.3% Munich malt. A de- out one variety for another if scarcity, viation of a couple percentage points agronomics, or demand causes supply CONSISTENT INGREDIENTS is unlikely to create a noticeable fla- issues. Although hop contracts help One of my favorite aspects of home- vor difference in the finished beer. The minimize shortfalls, swapping varieties brewing beer compared to other fermen- exception is dark grains, which due to can address uncontrollable issues that tations I’ve tried (e.g., sourdough bread, their intensity need more precision. In endanger the viability of a recipe, es- kombucha, and ginger beer) is that I only those cases ideally a half-sack can be pecially helpful for relatively new hop have to brew when I’m in the mood. I used. If the beer comes in lower than varieties. don’t have to “feed” brewer’s yeast on a the target gravity on the first iteration, When a substitution is required, it weekly basis. Craft brewers don’t always the next will get an extra bag of base is easier to get away with replacing a have this luxury. A commercial pitch of malt (rather than a little more of all the quarter of the hops in a beer than it is to liquid yeast costs hundreds of dollars, a malts). replace half or all. While using a hop-oil not-insignificant percentage of the total Similarly, many craft brewers try to calculator (my Sapwood Cellars’ partner price-tag. On a commercial scale, quick- avoid saving open packages of aroma Scott Janish has a nice one here: http:// repitching is also essential because large hops for extended periods. Ideally, an scottjanish.com/hop-oils-calculator/) to volumes of yeast slurry generate heat, 11-, 22-, or 44-lb. (5-, 10-, 20-kg) box mimic the oils of the replaced variety is leading to quicker reduction in cell vi- is added as a single addition, or across a great start, confirming pilot batches ability. As a result, most craft breweries multiple additions on a given brew day. are required as small oil fractions can have one or at most two house yeast This is good advice for homebrewers alter the perceived aroma of the beer. strains that they use to ferment their core as well — unless you have a vacuum It may be that for a given hop, one vari- beers. Thanks to their low price-point sealer. This approach also avoids a large ety is better as a hot-side substitute and and high shelf-stability, dried yeast is an

5 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved appealing option for breweries without a are also using a limited selection of less ter. Maybe this is just my bias talking, schedule that allows harvesting. expensive high-oil hops for whirlpool but when French Saison made its way Homebrewers derive important ben- additions (Columbus, Chinook, Nug- stateside, it somehow got American- efits from learning about a strain from get, Bravo etc.), dry hopping with more ized and became more aggressive in repeated brews, but starting out I’d expensive varieties to add the unique terms of traditional (or stereotypical) value variety to discover a few favorites character. Belgian fermentation character. for focus. Still, there can be pleasant surprises with minimalism. JC Tetreault CARE ABOUT SOURCE As a result, many brewers have a from Trillium Brewing (Boston/Canton, When I talk to other professional brew- preference for one lab’s strain com- Massachusetts) mentioned that at first ers about ingredients, they usually pared to others. I’d take Wyeast 1728 he used an English yeast in his IPAs be- specify which maltster, yeast lab, or hop (Scottish Ale) over White Labs WLP028 cause he had selected it for the porter. provider they prefer or are referring to. (Edinburgh Scottish Ale) for example as The results were delicious, unexpect- Despite the names, Briess roasted it is more cold-tolerant, which seems edly hazy, and people loved the subtle barley (~300 °L) isn’t a substitute or to allow it to finish cleaner. There are addition of yeast character to the hoppi- even a similar product to Muntons some strains that are especially fin- ness, so he rolled with it. A limited color roasted barley (~500 °L). Their flavor icky, like Conan, for which I’ve had vary palette sometimes produces the most and color contributions are completely wildly in flavor and attenuation- be beautiful and unique paintings! different, so you need to be aware of tween pitches from East Coast Yeast, When a craft brewer orders a special which you are using. You’d be better off The Yeast Bay, Omega, GigaYeast, etc. yeast strain, they’ll often string a few with Briess black barley or even black Likely depending on which “generation” batches together with increasing grav- malt if you needed to substitute for they harvested for their original stock. ity and bitterness. For example: Hefe- Muntons because the color and flavor Don’t think of brewing ingredients weizen, to hoppy wheat, to weizenbock. contributions are more similar than the as a commodity. There are real dif- This pattern works well for homebrew- names suggest. Similar story for various ferences in the same products from ers as well, and supports more brewing °L-designated caramel/crystal malts, different sources! with less time making starters. Another and base malts. At the very least, start option that we are experimenting with asking your homebrew supplier who the LESSONS LEARNED at Sapwood Cellars is blending dried maltster is when you buy from the bulk It is great to see more breweries acting yeast strains for added variety, and at a bins if it isn’t listed. Note the specific like homebrewers. Brewing a Citra®- price-point that doesn’t require repitch- products in your recipe so you can rec- heavy DIPA when they can get Citra®, ing (see Ziparillo recipe on page 97). reate it. and one loaded with Mosaic® when Mo- The parallel for grain is that, as There are concordance charts show- saic® is more plentiful or better quality. breweries grow, they often add a silo of ing which commercially available yeast Ten years ago, seemingly every brewery their base malt of choice. This is usu- strains are from the same source. By had four core-beers, four seasonals, and ally a compromise that suits all of the the very nature of yeast as a lifeform it a handful or special releases. Now more beers well enough. Our first few test changes. Even if the two labs have done are starting and staying with a model of batches for Modern Times (San Diego, a perfect job preventing genetic drift in just producing delicious beer without as California) Black House coffee stout their stock, they may have taken their much repetition! used Maris Otter as the base. I was samples at different times and the cul- Homebrewers aren’t small-scale surprised how much depth and rich- ture at the brewery may have shifted in craft breweries, just as craft breweries ness the beer lost when we switched to the interim. Jeffrey Stuffings from Jester aren’t scaled up homebrewers. While North American standard 2-row malt to King (Austin, Texas) related the differ- there are lessons and techniques that suit the hoppy beers. Luckily once the ences between tasting the yeast charac- can be applied in both directions, there production brewers took over they re- ter of their original Le Petit Prince with are others that only make sense at stored that lost depth by adding biscuit only French saison (it now also includes each scale. As a homebrewer, don’t get and pale chocolate. indigenous wild cultures) compared to a hung up on a percent on the grain bill Many breweries use a single hop for version brewed at Brasserie Thiriez with or a few IBUs on the hop schedule. The bittering all of their beers. This allows their house strain (the original French human palate isn’t nearly as precise as for a consistent and predictable amount saison): we’d like to think. As a homebrewer you of IBUs. CO2 hop extract has become don’t have to worry much about consis- popular as well, see “Hop Extracts” in [W]hen I drink Le Petit Princesse from tency, you can strive to brew the best the July/August 2018 issue of BYO. As Thiriez . . . I get strong bitterness, firm beer each batch! a brewery expands it may grow big malt character, plenty of green bottle enough to get an entire hop lot pellet- “Euro-skunk,” and a little interesting ized . . . but not big enough to get sev- spice character from fermentation in eral. You may notice growing breweries the background. When we made Le have a year or two where they seem Petit Prince with pure culture French to use one hop variety in most of their Saison yeast, we got much stronger beers for this reason. More breweries fruit, spice, bubble gum, estery charac-

beer fermenter is any vessel used by brewers to hold wort during fermentation. Fermenters may A or may not have cooling attach- ments, inlet/outlet valves, insulation, covers, pressure ratings, cleaning devic- es, temperature probes, and wheels. And fermenters are made from a variety of materials including plastic, glass, stainless steel, wood, carbon steel, and con- crete. Put all of these variables into a matrix and the number of permutations is vast. Nanobrewers, or those commercial brewing operations brewing less than 5 barrels (BBL) (155 gallons/587 liters/5.9 hl) per batch, have many options when it comes to fermenter selection because their small batches can be contained in a wide variety of easy-to- obtain vessels. This column will cover what is typically accomplished during fermentation and aging in a fermentation system, examples of fermentation systems used by commercial brewers, and strategies available to nanobreweries.

WHAT IS A FERMENTATION SYSTEM? A fermentation system is the total process used by brewers to house and control the process of fermentation and

maturation, and sometimes includes MoreBeer.com of courtesy Photo conditioning. The first stage of this process is the actual fermentation step. can be used by brewers to help size re- increases tanks generally become taller. During this stage, carbon dioxide, ethyl frigeration equipment. Cylindrical fermenters usually have an alcohol and heat are produced, the fer- Small beer fermenters, such as aspect ratio (liquid height divided by menting liquid usually foams, and there 5-gallon carboys, are often air cooled vessel diameter) ranging from about 1:1 is an increase in yeast cell density. The and rely on the transfer of heat from the to 3:1, and sometimes as tall and skinny removal of heat is important because surface of the fermenting beer to the as 5:1. With this change in geometry fermentation temperature directly af- environment. This method of fermen- comes a change in where the area is fects beer flavor by its influence on tation works best when the surface to located. The open fermenters at Anchor, the biochemical pathways that gener- volume ratio is large. The famous, and for example, have approximately 63% of ate esters, higher alcohols, aldehydes, often photographed, open lager fermen- the total surface area exposed directly organic acids, and other flavor active ters at the Anchor Brewing Company in to the atmosphere, compared to only compounds. San Francisco, California have no cool- 16% in a cylindrical fermenter with a As a practical note, yeast produce ing jackets or coils, and are examples of 1:1 aspect ratio and 90˚ conical bottom. about 280 BTU/pound of extract fer- larger fermenters of this type (each ves- This means that cylindrical fermenters, mented (per ASHRAE Handbook). This sel contains approximately 100 BBLs of even open versions exposed to a cool means that 3 BBLs of beer fermenting beer). atmosphere, have a very large surface at the rapid pace of 4 °Plato/day, pro- The problem with shallow fermen- area in contact with the tank wall. Since duces 8,812 BTUs/day. This heat load ters is space, so as fermenter volume tanks are made from materials that

7 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved The term cellar is used to describe the space where beer tanks are located. have relatively low thermal conductivi- fermenters with so-called foam cham- sign had a flat, sloped bottom. Dished ties, more wall area translates to more bers. Open fermenters can be skimmed bottom tanks can also be used for uni- heat retention. The take away message during fermentation, and this practice is tanks. Breweries of all sizes use this fer- is that cylindrical fermenters need to still used by some brewers using these mentation method for the production be cooled. traditional vessels. The purpose of skim- of all sorts of beers. But breweries with Shallow fermenters, both open and ming is the removal of cold trub and older equipment continue using their closed, can be air cooled if the fermen- very bitter hop resins, sometimes called other systems. tation “cellar” is cool; this choice will al- braun hefe (brown yeast) or brandt hefe Prior to the spread of the unitank, ways result in fermentations that show (burnt yeast), that rises to the surface of brewers used specialized tanks for each a rise and fall in temperature as the rate fermenting beer. Skimming systems can major step of the brewing process, in- of fermentation changes. However, most also be used to top-crop some ale yeast cluding some brewhouse functions that fermenters are equipped with cooling strains. have largely been replaced by the whirl- jackets or coils used to actively remove Most fermenters these days are pool. If we could travel back in time 150 the heat of fermentation from the ves- closed, so these systems must have a years and walk through a typical lager sel using chilled water or glycol. One vent to allow carbon dioxide to escape brewery (I am referencing lager practic- advantage of coiling coils, especially in during fermentation. This same vent es because lager breweries were princi- repurposed vessels, is that they can be can be used to bring carbon dioxide pally responsible for the global spread relatively inexpensive. But coils are not into the vessel when the beer is trans- of beer and for most of the accompa- easy to clean and they require consider- ferred out at the end of the process. nying technological developments) able length to provide much area. Most Closed fermenters should be rated for we would probably see a hop strainer, tanks equipped with cooling jackets are pressure. This is a serious safety consid- a coolship to pre-cool wort from the designed to be quickly cooled (crash eration and the pressure rating of a tank brewhouse, and a falling film chiller or cooled) following fermentation. Crash should not be exceeded; period. If the “Baudelot cooler” to further chill wort cooling requires about 10 times more fermenter pressure rating is sufficiently going into the fermentation cellar. Many cooling capacity than maintaining tem- high, natural carbonation can easily be brewers of this time also used cold wort perature during fermentation. performed by attaching a special pres- settling tanks and/or flotation tanks for Tanks equipped with cooling jackets sure relief valve called a spunding or trub removal, dedicated fermentation or coils will sweat when water from the bunging valve to the vent line. vessels for fermentation, and lagering air condenses on cool tank surfaces, es- While open fermenters are usually tanks for clarification and condition- pecially exterior heat transfer surfaces, cleaned by hand, closed fermenters, ing. With the advent of pressure rated, so it is typical to insulate and clad tanks especially stainless steel tanks, are glass-lined steel tanks, and later stain- with stainless steel. This is especially equipped with spray balls to permit so- less steel tanks, brewers could com- common when the fermentation cellar called clean-in-place, or CIP, cleaning. pletely finish the aging and condition- lacks environmental conditioning. Al- CIP balls are typically attached to the ing (also known as carbonation) portion though a nicety, insulation and cladding tank with a line running down the side of the process in a single lagering tank. adds cost to tanks and is not required. of the vessel to make hose attachment The ale tradition was similar in The term cellar is used to describe easy. Cleaning solution can be added to many aspects where fermentation was the space where beer tanks are located. the vessel and recirculated through the conducted in fermentation vessels and In the days before commercial refrig- spray ball using a properly-sized pro- conditioning occurred in the cask. Cask eration, cellars were a literal descrip- cess pump. conditioning is not too different from tion of underground rooms. Breweries lagering in that clarification, carbon- continue to use terms like fermentation, FERMENTATION SYSTEMS ation, and flavor maturation all occur lagering, aging, conditioning, and pack- USED IN COMMERCIAL in the same vessel. The main difference age release cellars to designate parts BREWING between cask ales and traditional la- of a brewery. A brewery’s cellarman (or The unitank fermenter (also known as gers is that lagers were racked out of cellarperson) is the person who over- the cylindroconical tank, CCT, cylindro- the lagering tank into the barrel after sees the fermentation process, from ac- conical vessel, and CCV) has become the aging was complete. tive fermentation through conditioning, de facto standard for most breweries transfers, packaging, cleaning, and up- around the world over the last 40 years. NANOBREWING STRATEGIES keep of the cellar. The unitank system combines the func- Nanobreweries have the size advantage The fermenting system may include tions of fermentation, beer maturation, of really being able to choose from a some method of skimming. Many tradi- carbonation (sometimes), crash cool- wide variety of fermentation strategies tional fermentation systems were self- ing, and yeast collection into a single to accomplish the goals of fermentation skimming, and examples include York- vessel. Although the modern CCT has while also keeping with the DIY tradi- shire Squares, Burton Unions, and lager a cone bottom, the original unitank de- tion of homebrewing. Like larger craft

8 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved breweries, many nanobrewers use CCTs kegs tilted so that clear beer can easily cold. CCTs have cones that are pretty because these vessels are very handy be racked out of the aging keg into an- handy for both fermentation and matu- and readily available on the small other keg or bottle for serving. ration, but the cones are not absolutely equipment market. The nice thing about all of these required. But if you want to build a cellar that methods is that transfers are not much My dream cellar is one where fer- is more akin to old school brewery de- different from homebrewing. Small menters are designed to maintain tem- sign, options abound. Simple fermen- pumps, gas pressure, gravity and rack- perature (remember small tanks do not ters can be fashioned from food-grade ing canes can all be used to transfer require cooling jackets if the air tem- plastic containers, stainless steel drums, beer from one tank to another, and short perature is sufficiently cool), keep the and stainless steel portable tanks (IBC hoses with relatively low cost connec- beer from over-foaming, and equipped or intermediate bulk containers). All tion types, like beer nuts, can be used with a cone to make yeast harvest- of these vessels have flat bottoms, so for transfer operations. Things change ing easier. After fermentation, beer is yeast harvesting can be a challenge if as the batch size approaches 10 barrels transferred to mobile, pressure-rated there is not a low-point outlet. But har- (11.7 hectoliters) where sanitary process tanks where flavor maturation, carbon- vesting and re-using yeast is a general pumps and beer hoses with tri-clamp or ation, and gravity clarification occurs. challenge with low-volume production the threaded DIN (Deutsche Industrial The tanks are mobile because I want to and many nanobrewers prefer using liq- Norm) connections are more commonly mature and carbonate at fermentation uid and/or dried yeast strains that are used. Although similar to operate, these temperatures, and clarify/chill stabilize not re-used. These vessels can be used tools are more expensive. at cold temperatures. This is where the with or without cooling jackets or coil portable part is important. depending on the cellar design. Open MY DREAM CELLAR This means that my dream cellar is vessels are easily equipped with remov- CONFIGURATION an appropriately sized walk-in cooler able coil systems that resemble immer- I spent 20 years working for a stainless with a portion or portions controlled to sion wort coolers, and also can easily be steel fabrication company and worked fermentation temperature(s) and anoth- covered with a simple lid to keep dust on a wide range of brewing tank proj- er portion that is held at about 32 °F (0 and debris out of the vessel. If you build ects for brewers small and large. It be- °C). The whole unit is cooled in the cold your own cooling coils, make sure to use came apparent to me early on that CCTs section and the fermentation cellar(s) stainless steel tubing instead of copper, are under-utilized for every step of the is cooled by a fan that thermostatically as copper can impart a metallic flavor brewing process. The real benefits of blows cold air into the cellar with the to beer and can also lead to oxidation if these relatively expensive vessels is return air flowing through a controlled exposed for too long (copper is fine for the reduced cost associated with fill- louver that closes when the fan does wort cooling though). ing, emptying, and cleaning, and lower not run. All tanks are optimized for their Whether using a CCT or repurposed risk of contamination and oxidation specific duty, and the total tank cost is vessel with cooling coil, the nanobrew- that comes with multiple tank transfers. reduced. Since there are lots of used er can locate these fermenters in any These benefits are significant to- com walk-in coolers that can be purchased clean, tidy environment without having mercial brewers and explain the popu- for a pretty low price, the additional cost to worry much about the environmental larity of CCTs. However, artisan brewers of the cellar is offset by the reduction in temperature. If the fermenters are not can certainly mitigate the microbiologi- tanks cost. This idea is just an example equipped with cooling provisions, the cal and oxidation risks that come with of how nanobrewing fermentation solu- smaller fermenters can be placed in a multiple transfers by using good brew- tions can be customized to satisfy brew- controlled environment, such as a walking practices and paying attention to ing philosophy, brewing dreams, and in cooler. And these small vessels can details. brewing budgets. Think big and brew easily be moved using wheel kits, pal- So why are CCTs under-utilized dur- small! lets and pallet jacks, and hand trucks. ing use? For starters, they require a Brewers not using CCTs or some relatively large headspace when used CLOSING THOUGHTS other type of unitank usually rack their for fermenters because of their skinnier Fermentation cellars are the most ex- beer into another vessel for a variety of aspect ratios (foam sticks to surfaces, so pensive part of most brewing opera- purposes including maturation, carbon- tall tanks require more extra volume in tions and have a profound influence ation, or priming for transfer to bottle comparison to shallow fermenters). But on how wort is transformed into beer. or keg. If flavor maturation occurs in the when the CCT is being used as a fer- The practical brewer needs to consider fermenter, a single secondary vessel may menter it has a pressure rating that is the things that will or may occur in the be sufficient for packaging preparation. usually not required, more cooling sur- cellar in order to design a cellar that For brewers who filter their beers, this face area than needed, and insulation is efficient, practical, flexible, and cost- vessel is often referred to as a bright and outer cladding that is unnecessary. effective. All good designs begin by list- beer tank (BBT) and can typically be Now look at the CCT after the beer ing the functional requirements of the turned around in a couple of days. De- has been chilled. It has excess volume system and choosing equipment that pending on the batch size, kegs can be that is no longer occupied with beer satisfies these demands, rather than used for maturation vessels, and can be foam, and has way more cooling surface modifying the brewing process around stored on a wooden rack that keeps the than required to simply keep the beer avoidable equipment limitations.

anobreweries tend to be opened or cold water tank to store water prior sure the heaters are properly sized and by brewers transitioning from to wort cooling, and a hot water tank to installed to permit acid de-scaling; this homebrewing as a hobby to brew- store hot water generated from the wort means that you need to have stainless Ning as a profession. While this cooling process. This system just makes water lines before and after the heater is still the trend with most new craft sense, and it’s how things are done. because acid cleaning will corrode cop- breweries, there are more large compa- One of the convenient things that can per water pipes. nies and investment groups investing be done to a system like this is to treat Now that we have eliminated the hot in the general business of craft brew- the water going into the ambient/cold water tank, the water used to cool our ing. Somehow I don’t envision corporate water tank so that the brewing water Cookie Monster Pastry Stout wort does buyouts and consolidation of business- is consistent. Consistent water used to not need to be compatible with that es in the future of nanobrewing. Right cool wort, leads to consistent water in Brutally Dry Pilsner that is scheduled or wrong, this is my view, and along with the hot water tank, and that leads to the as the next brew. My suggestion here is this view are some thoughts about what perfect water for brewing! Right? Per- to uncuff yourself from worrying about I would do if I were to have a nanobrew- haps it is right if all of the beers brewed the next brew when it comes to water. ery. Oh, to retire and open a nanobrew- benefits from the same water. Need Take advantage of the small size of the ery to serve just a small handful of beer something different, simply add brew- brewery and treat water as a specialty loving friends, that would be cool! The ing salts and this problem is solved. ingredient. Eliminating the “traditional” following article is about brewing, so if But does a small brewery really ben- type of hot water will really help in this you are hoping for a great short story efit from storing hot water after wort pursuit. It also reduces equipment cost about great beer, famous musicians cooling? Let’s assume that a 3 hL nano- and saves space. stopping by for unannounced jams, and brewery produces 360 liters of hot wa- crazy food truck creations, this is not ter when wort is cooled; this is a good BASE MALT ≠ BLANK CANVAS your story! ratio that produces a nice balance of I have heard other brewers describe So here is the basic premise of my water that can be totally used in the base malt as a blank canvas for so many thinking. Most breweries these days are next brew. If the water is heated from years that I sometimes forget how wrong striving for efficiency in every facet of 20 ˚C to 80 ˚C (70 °F to 175 °F) during that analogy really is. There are so many the business, because brewing is busi- wort cooling, this system captures 90 exceptional beers brewed from limited ness. And the US beer scene has arguably megajoules of energy, which equates to grist bills that clearly demonstrate the been the world’s most vibrant for the about $3 (USD) based on the average fallacy with this argument. What is true, better part of 30 years. Along the way, price of electricity in the US ($0.12/kilo- however, is that changing base malts we have seen massive improvements in watt-hour). The hot water is now stored can indeed have a very profound effect the technology of brewing, yet, some of in a hot water tank and used in the next on beer flavor, yet many larger brewer- these tremendous advances potentially, brew. What’s not to love about this? ies only use one, sometimes two, be- and quite unintentionally, dampen beer The water generated from wort cause of the cost and logistics required diversity. A nanobrewery should differ- cooling needs to stay hot, so hot water to use multiple base malts. And because entiate itself from other breweries be- tanks are well-insulated and equipped malt stored in silos represents a huge cause without a point of real difference, with heaters to offset heat loss to the cost savings for breweries brewing a nano may just be a smaller version of environment. That hot water just re- enough beer to justify the investment another brewery doing the same thing. quired investment in equipment and en- in equipment and inventory cost, there So here are my views on how ingredi- ergy to prevent it from cooling. You can is a real motivation to choose a base ents can help lend beer diversity. Oh, complete the financial analysis of this malt that can be used for most beers. and a note about diversity; the modern problem or simply take my word that Nanobrewers, by definition, do not use brewery needs to be bilingual, so I will hot water recovery in a nanobrewery is enough malt to make this an option, and use the metric system for units in this not a great investment if the goal is to should not restrict themselves to only a article without conversions! save energy. I am not suggesting that few base malts. water should be wasted; the hot water Experimenting with base malts is IT’S THE WATER! from wort cooling can be recovered and fun because there are so many options. Water tanks are great for water and en- used for cleaning or other uses, but the If a brewery decided to brew rotat- ergy storage in larger breweries. Go to energy value is minimal. A much better ing helles lagers with different pilsner any brewery brewing more than about fit for many nanos with limited space malts from around the globe, several 1,000 hectoliters (852 barrels) annu- in the brewery is the use of instant hot years of experiments could be brewed. ally, and you will likely see an ambient water heaters. If you go this route, make Add ale malts, more highly kilned lager

10 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved malts, like Vienna and Munich, and heri- (HVG) group). strains from yeast suppliers all around tage varietals to the mix and a brewer So where are some good places to the globe. For the majority of the read- could make a career specializing in look for hops? Hop growers, coopera- ers of BYO in the US, we have liquid yeast this type of brewing. Larger breweries tives, and merchants sell hops in two labs in all major regions of the country, simply cannot resist the temptation to basic ways; through hop contracts and as well as diverse and high-quality op- settle on a base malt or two and to seek on the “spot market.” The spot market tions for dried yeast. The bottom line is other malt colors and flavors from spe- is where brewers without contracts that there is no reason for a brewery to cialty malts. Take advantage of being go looking for hops, and most hop feel restricted by the lack of selection small! merchants these days have spot hops when it comes to yeast. And the nice Consumers love stories, and great posted on a website. If you live near thing about nanobrewing is that buy- base malts often have great stories. Tell hop growers, the spot market may be ing enough yeast to pitch a full batch the story of the barley field, the climate the hop farm. Another place to shop for of wort is not going to break the bank. of that field, and ultimately how your hops is through the Lupulin Exchange It is also easy to use your old homebrew beer flavor is influenced by these- en website. This exchange allows brewers, kettle to make a starter from DME and vironmental factors. Also tell the story hop growers, hop merchants, and oth- grow up a homebrew pitch. The 10-fold of the maltster; who converted that ers who want to buy and/or sell hops multiplier is a good rule of thumb; di- great barley into the malt used for your to make connections. The Lupulin Ex- vide your batch size by 10 and that is brews? Those are all very real connec- change was started in 2014 by John your propagation volume. tions that consumers enjoy having with Bryce, Shane Kunkle, Jesse Pappas, and A couple of things that I would hold their products, so explain the source of Darren Kopp and is a great contribution off doing in a nanobrewery are grow- your base malts to get people interest- to the commercial brewing world. ing yeast from slants, feeling the need ed in tasting your special beers. Although Lupulin Exchange is an to harvest and re-pitch yeast, and using awesome trading space, some breweries bugs that are capable of causing prob- HOP LIKE A CHEF don’t want to mess around with selling lems. These suggestions deserve a bit of The cool chefs with their own TV shows boxes of hops to other breweries when a defense, so here goes. Growing yeast are often seen shopping for food be- shipping is required, but are happy to from slants is serious work, and there is fore cooking. They don their Crocs and sell excess inventory, usually as a result plenty of work to go around when brew- smocks, go to the market, choose what of over-contracting, to local brewers ing with a limited staff; the payback is is fresh and available, and get down who will pick up the hops. Brewers don’t simply missing and there are bigger is- to business. In contrast, many brewers normally have issues becoming friends sues that deserve full attention without make decisions about hops well before with fellow brewers, and there are many running your own yeast lab. As far as brewing, sometimes years, because of times when having brewer friends just harvesting and re-pitching, it is best to the relationship between brewer and makes good sense. Searching for hops harvest yeast within a few days follow- hop farmer. Few hop farmers are real on the open market is a great example. ing the end of primary fermentation and keen on planting hop varieties that may So be nice to your neighbor, you may to re-use as soon as possible to prevent not sell, so hop contracting is the way benefit too! loss in vitality and viability. If you only that most brewers secure their hops for use a couple of strains and brew fre- the future. THE INVISIBLE ARMY quently, this may be an option. And now While hop contracts are good You got it; the last section of this focus onto funky bugs; don’t bring these into for both brewer and hop farmer, the on ingredients is about the invisible your brewery unless you really know thought of having to choose what hop troops that convert wort to beer. Just what you are doing. This includes Brett- variety you will want to use next year like a brewery could choose to riff on anomyces, lactic acid bacteria, diastatic or the year after is daunting for nano- base malts, a brewery could easily do and lactic acid yeast strains. There is brewers who are more interested in go- the same thing with yeast strains. And nothing wild and spontaneous about ing with the flow than building a rigid if the strains are different enough, the how to operate a brewery that brings brand portfolio. Add to the equation same wort could be used for dozens of wildfire into the cellar. the relatively small amount of hops re- different beers that may be fun to ro- So those are some of my thoughts quired for the typical nanobrew batch, tate through a handle or two. Although about exploring beer through ingredi- and hop contracting becomes even less throwing caution to the wind is a rela- ents in a nanobrewery. I did not cover attractive. So hop like a chef and de- tively low risk proposition when experi- ingredients outside of malt, hops, water, sign your beers around what hops you menting with water, malt, and hops, it is and yeast/bacteria, and there is a whole can find in the market. One of -the re not so with yeast and bacteria. Indeed, world of beer that includes fruit, spices, ally great things about modern hop pro- brewers using new equipment and sell- nuts, etc., so there is no real limit to cessing is shelf life; pelletized hops that ing beer for the first time are best ad- this exploration. The commonality with are properly processed, packaged, and vised to take a conservative approach these ideas is experimentation, embrac- stored have the ability to retain their with yeast and bacteria until the kinks ing small batch size, wandering from brewing value (bitterness and aroma) are worked out of a new system. technological advances that may curtail for several years (up to 5 years based on The great thing about brewing to- creativity, and to tell stories. research by the German Hop Growers day is the excellent selection of yeast

11 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved NANO MARKETING MARKETING AND BRANDING BY CAMERON JOHNSON t’s 1995. An obsessive, quirky homebrewer approaches his state’s Sen- ate armed with a passionately-pro- I duced product and a dream to open Delaware’s first brewpub. Like many who have tripped, jumped, or leaped with reckless abandon into the world of craft beer, Sam Calagione quickly di- verged from his degreed track focusing on fiction writing upon his exposure to great beer, commencing a romance of Shakespearean proportions (minus the tragedy).1 From the beginning, Dogfish Head set itself apart with everything from its tagline to its products, embrac- ing some inherent quirkiness and a masterful way with words, Calagione’s beer quickly became a household name. While the story of Dogfish Head is one many are familiar with, the lessons we can glean from the brand, and similar Shutterstock.com of courtesy Photo entities in the market, are somewhat Calagione makes sure to tie them back laugh? Do they challenge you? Do they more obscure, but nonetheless inspir- to the brand image thereby bolstering share the same values that you care ing. its fandom and legitimizing its claims.2 about? Good branding is genuine. Good Unfortunately, marketing your brew- Indeed, he is quoted in reference to marketing shares that trait, but includes ery is often seen as a “necessary evil” his Miles Davis-inspired beer release elements of “call and response.” You’re — an uninspiring necessity of keep- (which he listened to while writing the trying to get your customers to think ing your name out there and on your company’s business plan), “I wanted about something, or to share their opin- customers’ minds. Brewers are largely Dogfish Head to be a maniacally inven- ion, or to remember you. Good market- creative types who like to have their tive and creative brewery, analog beer ing is like good beer — it sticks with you. hands involved in making, rather than for the digital age.”3 One of the most helpful marketing recording or promoting. But I would In many ways, branding is like the tools that has stuck with me over the encourage my fellow brewers to con- artistic expression of the business plan years is the Craft Beer Branding Guide, an sider marketing as simply another tool — the delayed accompaniment to the incredibly detailed and endlessly use- of the trade, alongside the mash paddle mission statement. You have a specific ful reference, created by the awesome and carbonation stone. Marketing is an goal or message you are trying to com- folks at CODO Design, a branding and opportunity to share your unique story municate, and that message should be web design company out of Indianapo- with your customers. In this respect, at the foundation of what your compa- lis, Indiana. This guide begins with one you can think of your daily social media ny stands for. Your brand is an ongoing of the most often-cited metrics of our postings much like you would consider manifesto about what is important to tumultuous industry: In the past year a beer festival — share things that in- you, and what your company represents. in the U.S. alone, we saw an average terest and intrigue, and make people Be honest. Yes, you must of course tai- of about three new breweries opening remember you by. Dogfish Head has lor the message to your audience and every day.4 Let’s let that sink in a bit — mastered this component of market- understand your market and your place that’s at least 12 brand new, never being their brand, adorning themselves within it, but the public can spot BS a fore seen beers available (albeit, most with everything from an “Intergalactic mile away. Take a moment and consider likely in a highly localized market) every Bocce Tournament” to limited-release the brands that you follow or admire day. That’s a lot of proverbial noise to product packages with Miles Davis. At the most, be they breweries or other- compete against in an already crowded first glance these elements may seem wise. Why are those brands worthy of arena. But CODO outlines a succinct, yet like silly promotional games, however your valuable time? Do they make you detailed, plan of attack for defining and

12 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved planning strategy, this should be an it- erative process. Ask yourself why there isn’t another brewery in this quadrant. Do the customers in your area simply not desire these “new school” styles? Or perhaps they simply don’t know about them? This might indicate that customers in your area prefer to drink at regular bars or in their own homes, rather than at a brewery-taproom. Maybe your nano should be looking to sell kegs to get on tap lists at these bars. Asking yourself these questions leads to creating other matrices for comparison of two variables. The more of these you develop, the better informed you will be about your local market, your competi- tion, and how you can best fit in. Communicate the brand: Your defending your space within the larger venture in a small city that already has brand’s essence is the culmination of market. According to them, effectively a few other breweries and you want to who you are, what you offer, and why branding your brewery is the culmina- ensure that you stand out. Like most of people should care. It is communicated tion of four main building blocks: Defin- us, you probably love just about every through your brand’s personality, and ing your brand’s core values, positioning beer style (as long as it’s well-made), but reinforced by your communications. your brand, communicating your brand’s maybe you’re deeply fond of milkshake CODO first suggests considering your essence, and establishing your brand IPAs and pastry stouts. After a survey of brewery as a person. How do they be- identity system. Let’s distill their con- your area, you find that the majority of have? What activities do they enjoy? cepts down for the nanobrewer-to-be. the other local taprooms are producing What music do they like? What’s their Brand values: They’re the intrinsic beers within a more classic range of favorite book? Are they irreverent or and immutable principles at the heart styles (e.g. amber, blonde, porter, pale). serious? Outdoorsy or metropolitan? of your company. In this respect, nano- You also know that you want to be a It’s completely alright to be an odd mix breweries are uniquely situated to pro- small company (at least to begin with), of traits, but your personality must re- vide for, and appeal to, a hyper-local as it allows you to start with a limited inforce your brand’s core values. The market, meaning that your values are amount of capital, a lower amount of second step is telling — letting your au- more than a set of perfunctory bullet risk, and ability to control quality. As I’m dience know who you are and why they points in a business plan. Instead, these sure you’re a rabid and dutiful reader of should care about you and your prod- values are how you relate to your direct BYO, being a nano operation means that ucts. Your voice is how you communi- consumers, and what those individuals you’re focused on low-volume, high- cate your brand’s values. As with brew- will come to associate with your brew- margin sales, so you’re focusing on in- ing, voice consistency is key. In addition, ery. The general public may not always house sales . . . getting people in your you need to know your audience, and mirror your beliefs, but they will most door. Let our y-axis represent our “Style” have a plan to keep them engaged with certainly note when you fail to adhere data set, with one extreme being ex- your message. You’ll hear constantly re- to them, or if they are insincere. clusively producing classic beer styles, iterated the importance of firmly estab- Brand positioning: In order to iden- and the other being new school styles, lishing your essence and values before tify and sell to your market, you need while our x-axis, representing “Taproom tackling the typical fun pieces that we to first define who you will cater to and Focus” spans between local draw versus all tend to grasp at, like a name, logo, or what kind of brewery you are. This is regional draw. You develop a list of your core beers. So in order to create a sus- reinforced through almost every busi- local competitors, collecting data for tainable and profitable business, your ness decision you make, from taproom these two sets (styles and focus), and brewery’s personality needs to stand design and ambiance to your beer style plot them on your matrix. You can then out in the crowd. selections and pricing. see what you are up against in the mar- Brand identity system: Once every- CODO suggests the use of a ma- ket. This may also be a great visual to thing else is established, we finally get trix composed of two axes, represent- bring to potential investors. Exploring to the components that are used sin- ing opposite extremes of two values, some similar markets from other cities gularly, or combined, to create a visual seemingly related or not. They created in your region may be a great exercise representation of your brand essence. It their own matrix, but for our purposes, as well. With any luck you’ll find your includes a main logo, a secondary logo we borrowed their concept, tweaking it love of new-school styles matched with (a modified version, or versions, of your slightly . . . something you can do to fit a desire for a local taproom lands in a main logo for other formats or medi- your purposes. fairly empty quadrant. ums), your color palette, and typography. Let’s say you’re opening your new Now, as with any good business Here again, CODO warns against focus-

13 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved ing too much on this visual or tactile visuals, when you publish content, and For another, it’s striking imagery. component of your brand before devel- the voice that the content speaks in. It’s Putting time and effort into consistent- oping your values and position in the important to put out quality content at ly looking different than everyone else market. “A lot of companies make the the rate it can be consumed best. That can lend a distinct advantage. I feel like mistake of aligning their personality can mean different things for different Wayfinder Beer does this very well. The with what they believe their audience platforms. A Facebook post, for instance, short animations and graphics of their wants . . . It’s far better to build off of can continue to reach and engage peo- can label, along with witty, in-your-face your core values and messaging to de- ple for 5–8 hours. An Instagram image captions, have combined to make some fine a set of true, authentic, and own- can continue for 1–2 days. Meanwhile, strikingly beautiful magic. able brand personality traits.”5 most tweets exist for a mere 30–60 To conclude, and in an effort to pro- minutes. All in all, it takes a plan to be REFERENCES vide a more contextualized point of consistent. Consistency doesn’t happen 1 https://www.americanexpress.com/ view in these pieces, I like to end my by shooting from the hip. That’s how you en-us/business/trends-and-insights/ articles with a Q&A session, enlisting shoot your eye out. articles/sam-calagione-dogfish-head- the aid of others in the industry to shed craft-brewed-ales/ some hands-on experience for the topic Q: What are some alternative/inven- 2 https://www.stephenzoeller.com/ at hand. In my November 2019 column tive ways that you have seen marketing building-authentic-brand-dogfish- “Nanobrewery Models: Exploring three work for a brewery brand (e.g. generat- head/ business plans,” I leaned on Sam Hol- ing revenue, building customer base, 3 https://www.dogfish.com/brewery/ loway for his business expertise. This expanding market reach, etc.)? beer/bitches-brew time, I turn to my friend Michael Pero- A: It’s a noisy world out there. A brew- 4 https://fortune.com/2019/08/06/new- zzo, Founder of ZZepellin, a creative ery needs to stand out to be heard and craft-breweries-2019-data/ agency supporting brands like Grains of there are a number of ways to do that. 5 https://craftbeerbrandingguide.com/ Wrath, Pelican Brewing, and others. For one brand, it may be a sweepstakes defining-brewerys-brand-personality/ to garner attention. Pelican Brewing Q: With social media playing such a Company is a great example of this large role in any brand’s image, what is strategy. You can win a 2-night trip to your main advice for engaging with cus- the beach just for following their Face- tomers on these platforms? book page, and 210,000+ people have A: Consistency is key. Consistency in done exactly that. Photo courtesy of Michael Tonsmeire/Sapwood Cellars Tonsmeire/Sapwood Michael of courtesy Photo

t’s 1995. An obsessive, quirky home- ence to his Davis-inspired beer release agency supporting brands like Grains of brewer approaches his state’s Sen- (which he listened to while writing the Wrath (Camas, Washington), and Pelican ate armed with a passionately-pro- company’s business plan), “I wanted Brewing (Pacific City, Oregon), among I duced product and a dream to open Dogfish Head to be a maniacally inven- others. Delaware’s first brewpub. Like many tive and creative brewery, analog beer who have tripped, jumped, or leaped for the digital age.”1 Q: With social media playing such a with reckless abandon into the world Unfortunately, marketing your brew- large role in any brand’s image, what is of craft beer, Sam Calagione quickly di- ery is often seen as a necessary evil — an your main advice for engaging with cus- verged from his degreed track focusing uninspiring necessity of keeping your tomers on these platforms? on fiction writing upon his exposure to name embedded in your customer’s A: Consistency is key. Consistency in great beer, commencing a romance of minds. visuals, when you publish content, and Shakespearean proportions (minus the In many ways, branding is like the the voice that the content speaks, all tragedy). From the beginning, Dogfish artistic expression of the business plan of which matters. It’s important to put Head set itself apart with everything — the delayed accompaniment to the out quality content at the rate it can be from its tagline to its products, embrac- mission statement. You have a specific consumed best. That can mean different ing some inherent quirkiness and a goal or message you are trying to com- things for different platforms. A Face- masterful way with words, Calagione’s municate, and that message should be book post, for instance, can continue to beer quickly became a household name. at the foundation of what your compa- reach and engage people for 5–8 hours. While the story of Dogfish Head is one ny stands for. Your brand is an ongoing An Instagram image can continue for many are familiar with, the lessons we manifesto about what is important to 1–2 days. Meanwhile, most tweets exist can glean from the brand, and similar you, and what your company represents. for a mere 30–60 minutes. All in all, it entities in the market, are somewhat Be honest. Yes, you must of course tai- takes a plan to be consistent. Consisten- more obscure, but nonetheless inspir- lor the message to your audience and cy doesn’t happen by shooting from the ing. understand your market and your place hip. That’s how you shoot your eye out. Unfortunately, marketing your brew- within it, but the public can spot BS a ery is often seen as a necessary evil mile away. Q: Aside from promoting your brand, — an uninspiring necessity of keeping Take a moment and consider the what are some alternative/inventive your name embedded in your custom- brands that you follow or admire the ways that you have seen marketing er’s minds. Brewers are largely creative most, be they breweries or otherwise. really work for a brewery brand (e.g., types who like to have their hands in- Why are those brands worthy of your generating revenue, building customer volved in making, rather than recording valuable time? Do they make you base, expanding market reach, etc.)? or promoting. But I would encourage my laugh? Do they challenge you? Do you A: It’s a noisy world out there. A brew- fellow brewers to consider marketing as they share the same values that you ery needs to stand out to be heard and simply another tool of the trade, along- care about? Good branding is genuine. there are a number of ways to do that. side the mash paddle and carb stone. Good marketing shares that trait, but in- For one brand, it may be a sweepstakes Marketing is an opportunity to share cludes elements of “call and response.” to garner attention. Pelican Brewing your unique story with your customers. You’re trying to get your customers to Company is a great example of this In this respect, you can think of your think about something or to share their strategy. You can win a 2-night trip to daily social media postings much like opinion or to remember you. Good mar- the beach just for following their Face- you would consider a beer festival — keting is like good beer — it sticks with book page, and 210,000+ people have share things that interest and intrigue you. done exactly that. and make people remember you. Dog- In an effort to provide a more con- For another, it’s striking imagery. fish Head has mastered this - compo textualized point of view in these piec- Putting time and effort into consistent- nent of marketing their brand, adorning es, I’m enlisting the aid of professionals ly looking different than everyone else themselves with everything from an “In- (all far more successful than I) to shed can lend a distinct advantage. I feel like tergalactic Bocce Tournament” to limit- some industry-tested light on the topic Wayfinder Beer (Portland, Oregon) does ed-release product packages with Miles at hand. In my November issue piece this very well. The short animations and Davis. While these elements may, at “Nanobrewery Models: Exploring three graphics of their can label, along with first glance, seem like silly promotion- business plans,” I leaned on Sam Hollo- witty, in-your-face captions, have com- al games, Calagione makes sure to tie way, Founder and President of Crafting bined to make some strikingly beautiful them back to the brand image, thereby a Strategy, for his business expertise. magic. bolstering its fandom and legitimizing This time, I turn to my friend Michael its claims. Indeed, he is quoted in refer- Perozzo, Founder of ZZepellin, a creative Q: What is/are your favorite beer brands

15 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved to follow? What is it about their market- and flies in the face of our corporate REFERENCES: ing that keeps you coming back for new beer overlords. Hilarious stuff. https://www.dogfish.com/brewery/ content? Brothers Cascadia Brewing in Van- beer/bitches-brew A: I mentioned Pelican and Wayfinder couver, Washington is a great example https://www.americanexpress.com/ already. I really enjoy Cerebral Brewing of a brewery using video storytelling. en-us/business/trends-and-insights/ in Denver, Colorado. They have great Their videos are well done and ooz- articles/sam-calagione-dogfish-head- image quality and their beer releases ing with personality whether they’re craft-brewed-ales/ are often quite long and very detailed. tongue-in-cheek or very serious. Either https://www.stephenzoeller.com/build- It plays very well with their lab/library/ way, there’s attention to quality and ing-authentic-brand-dogfish-head/ book nerd vibe. Normally brevity is bet- they’re very watchable. ter, but they’ve made me want to read Other brands (that I don’t personally their longer format. work with) who have been very consis- Cloudburst Brewing in Seattle, tent, and therefore successful, include Washington is a super fun follow. Their Pfriem Family Brewers (Hood River, Or- brand says, “we don’t care.” It’s in stark egon), Left Hand Brewing (Longmont, contrast to their beer — which they Colorado), Fort George Brewery (Astoria, obviously care very much about. Their Oregon) and Reuben’s Brews (Seattle, marketing pokes fun at marketing itself Washington). Photo courtesy of Pagosa Brewing Co. Brewing Pagosa of courtesy Photo 16 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved NANO FINANCIALS CRUNCHING THE COGS BY AUDRA GAIZIUNAS

hen I was hired by Dogfish factored in? Why are you using average packaging via mobile canner. Other in- Head a decade ago, one of the cost when the most expensive style will direct costs would include insurance on first trips I took was a research be your flagship? Where are your credit the brewery equipment, our lease on W vacation to the Pacific North- card processing fees? Time and time the production space, and management west to immerse myself in and learn again full cost has been misunderstood oversight. as much as I could about the business as another startup would venture forth Each cost can be categorized as behind craft beer. I had very few beery undercapitalized. Small-scale brewers fixed or variable and direct or indirect, numbers peers back then, and most need to understand how to cost not so start your analysis by labeling each worked for breweries the size of New only our beers, but our entire operation of your costs by those two categories, Belgium, Sierra, and Allagash. I recog- as well. Let’s start with the type of costs then grouping those categories togeth- nized the importance of learning from that fold into each batch we create. er. This exercise will help you determine smaller-scale operations, to under- which costs you can and can’t control stand their growth patterns and costing TYPES OF COSTS as you launch and grow your operation. methodologies, but I needed to build Within our operation we have fixed So how does one calculate full cost a database in order to map those pat- costs and variable costs. Fixed costs do per batch of beer produced? Create a terns. Over a period of a week I visited not change with our level of production, spreadsheet with tabs for each of your 26 breweries and brewpubs, and the re- while variable costs do. Some examples recipes. In these tabs you will capture sults of my findings were astounding. At of fixed costs would include our month- your direct costs: Direct materials and that point, 25 of the 26 didn’t know how ly lease of our space, liability insurance, direct labor. Then add a tab to capture to cost out one run of their beer. Very few and our head brewer’s salary (unless he/ your total indirect costs, which we num- to none were implementing any cost ac- she is paid hourly). Variable costs would bers nerds call overhead. Overhead is counting practices, and most were using include our raw materials (malt, hops, an accounting term that refers to all averages as estimates. Estimates at best. adjuncts), carbonation, and packaging. ongoing brewery expenses not includ- The cash was rolling in, and each was Some costs are a mix of fixed and vari- ing or related to direct labor, direct ma- generating enough sales to pay all the able, such as certain utilities, where you terials, or third-party expenses that are bills and payroll, so that was viewed as are charged a fixed monthly account fee billed directly to customers. A brewery good enough. Being an accountant, this and a separate usage fee per kilowatt, must pay overhead on an ongoing basis, was a challenging mindset for me to ac- gallon, etc. regardless of whether it is producing a cept. It was also quite eye-opening and All our costs can also be labeled as high or low amount of barrelage. It is provided me the inspiration to eventu- direct or indirect. Direct costs can be important not just for budgeting pur- ally launch my own consultancy focused traced back to each batch of beer pro- poses but for determining how much a on small-scale operations. duced, such as raw materials, which are brewery must charge for its products or Over the past decade I’ve had many traced by pounds per batch produced services to make a profit. conversations with aspiring brewers as or the head brewer’s salary, which are Overhead expenses can be fixed, they’ve explored the financial and emo- traced by hours spent brewing each meaning they are the same from month tional feasibility of running a nanobrew- batch. Indirect costs cannot be easily to month, or variable, meaning they in- ery. “Could one support oneself and/or traced back to each batch of beer pro- crease or decrease depending on the his or her family with a 1-BBL or 3-BBL duced; thus, they are allocated based brewery’s production level. For example, operation in 1,500 square foot (140 sq. on a certain level of activity. In most our rent payment may be fixed while m) space?” “Could that 1-BBL brewery cases in brewing, that activity is number shipping and mailing may be variable. grow into a 7-BBL or 10-BBL operation of gallons produced and include such Overhead expenses can also be semi- pretty easily with unique branding and costs as carbon dioxide, which is used variable, meaning that the brewery in- quirky styles? Others have done it in the in many processes within the brewery, curs some portion of the expense no past, so could I?” These brewers would from carbonating our beer within our matter what, and some portion depends hand me their numbers, and I’d poke fermentation vessels (FVs) to moving on the level of production activity. Over- holes through their assumptions. Where beer through the lines in the taproom head can be general, referred to as com- are the production and taproom losses and through our canning line while pany overhead, meaning that it applies

17 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved to the brewery’s operations as a whole. Say that our sales price per case is projections. What if you don’t know your A brewery can allocate overhead to a $20. Rent is $100. Utilities total $50. cost per style with any great degree of specific project or department as well Barley and hops cost $3 per case. Pack- precision? Then determine your most (production versus sales or administra- aging runs $2 per case and hourly labor expensive style and apply that cost to tive). Your overhead costs can be bro- runs $1 per case. your entire model. In this example, the ken down annually, quarterly, or even First, what’s fixed versus variable? IPA will cost you the most between monthly, but most start with quarterly Our fixed costs include rent and utilities those four (just the hops alone), so ap- to ensure they can keep up with ad- ($150 total). Our variable costs include ply your IPA cost to your entire financial justments. From the nano perspective, our raw materials, hourly labor, and model. The point here is that using a overhead costs will include marketing, packaging ($6 total). Let’s now solve for plain average versus weighted average depreciation on production equipment, x. when modeling numbers for the craft insurance, and utilities. Estimate the beer industry is a dangerous beast. On amount of beer you will produce over $20(x) - $6.00(x) - $150 = 0 a nano scale you set yourself up for a defined time period (quarterly, annu- $14x - $150 = 0 challenges in cash flow management ally, etc.) in gallons, then divide your $150 = $14x and production planning that may be- total overhead costs by number of gal- x = 10.7 or 11 cases (round up to come too difficult to surmount early on. lons you’re producing to determine your nearest whole case) The more accurately you calculate your overhead rate per gallon of beer. gross margin, the better your chances of Our operation would have to sell 11 charting a financially feasible course for DEVELOPING A PRICE POINT cases to break even. your nano’s future. Once you understand the full cost to One final point to address here is produce each beer, assign a price to THE IMPORTANCE OF COGS excise taxes. Excise taxes are a cost of each batch to ensure you’re making an What is COGS anyway? COGS is cost of sale versus a cost of production. You do adequate margin. Most nanobreweries goods sold, or the accumulated total of not incur excise tax until the finished operate using a taproom-focused mod- all costs used to create a product (in beer is removed for consumption or el to maximize profitability, so the ves- our case: Beer), which has been sold. sale. Therefore, it is not included as part sel sold is a 16 oz. pint (473 mL). Each We match the time period we recognize of a cost of production, but rather as a gallon consists of 128 oz., or 8 pints, or revenue for the beer we have sold with part of sales, general, and administra- 3.8 L, but I’ve completed enough re- the cost it took to produce those goods tive costs. search to understand that only 65–75% in the same period. For example, say we of sellable liquid is actually realized as brewed a beer in May and then sold it FINAL THOUGHTS revenue. The rest is lost due to foam- in pints in June. During the month of Startup breweries, especially nanos, ing, taplines, and comps. Therefore, as- May, the beer is sitting in our inventory tend to spend too little time planning sume each gallon (3.8 L) translates into on our balance sheet. When we sell the for the business side of their operation. roughly 6 sellable pints (96 oz. or 2.8 L). beer in June, we move that cost from the The equipment costs significantly less Multiply your pint price by 6 to arrive at balance sheet to the income statement compared to a 15-BBL brewhouse with total revenue. Subtract your per gallon as cost of goods sold to match up with distribution aspirations, so the barrier to (3.8 L) cost from that revenue and make the sales we have recognized for that entry is quite low. Couple that with aspirations of pint sales profitability, and sure that number is positive. If it isn’t, same beer. It is only in using this match- all of a sudden we are led by romantic revisit your pricing and cost structure ing principle that we can understand aspirations of a lifestyle business ver- until it is. our true profit. sus pragmatic thinking. Make sure you Another way to look at cost is by When evaluating your total cost of spend enough time planning for all calculating your breakeven point. The goods sold (COGS), I highly recommend your anticipated fixed and variable ex- breakeven point is the level of sales using a weighted average cost of goods penses, understanding the relationship where your profit is zero. The breakeven for your pro forma modeling versus a between the two and calculate your formula is sales minus variable cost mi- plain (mean) average. In other words, breakeven range before diving right nus fixed cost. You multiply your sales estimate how much sales you anticipate in with your TTB application. Remem- per unit by units sold. You also multiply per style, and assign that same percent- ber that hope is not a strategy. A well- the variable cost per unit by the same age of cost. For example, let’s say you crafted understanding of your COGS is a units sold. The sales level that makes plan on four flagship styles: An IPA, a much better place to start. the formula equal to zero is the break- Pilsner, a Berliner, and a stout. You ex- even point. Illustrated, the breakeven pect your sales to be 40% IPA, 25% Pil- formula looks like this: sner, 20% Berliner, and 15% stout (for a total of 100%). Looking at your recipe P(x) – VC(x) – FC = 0. costs, apply 40% to your IPA cost, 25% FC = fixed cost to your Pilsner cost, 20% to your Ber- P = price per unit liner cost, and 15% to your stout cost, VC = variable cost per unit then add those four up. The total will x = units be your weighted average cost of goods. Use that weighted average for your cost

hen nanobrewers create business plans and subsequently open, their tendency is to W focus almost exclusively on their income statement. What are our revenue streams? What are our recipe costs? What will it take to keep the lights on in our little establishment? While these are certainly important questions, many business owners seem to miss asking the questions pertaining to the other two financial statements: The balance sheet and the cash flow. What is our monthly debt payment? Should we order a specific quantity of grain based on a price break? If our local accounts can order on credit, what are our payment terms? When should we order our next set of fermenters? These questions are just as critical (if not more) for our brewery’s survival. One of the most common misconceptions I witness when working with Shutterstock.com of Image courtesy breweries is the confusion that exists cause he neglected to include such key ation. I taught him the fundamentals of between the income statement and figures as interest expense and credit each of the three major financial state- cash flow statement. Often these two card processing fees from his point- ments, and the budget was built tying statements are viewed as one and the of-sale. When I analyzed the number all three together. We could discuss same, when they are not. Profitable of barrels he was brewing and sub- the point in time he’d be able to af- breweries can fail to adequately man- sequently selling over the past three ford additional fermenters based on his age their cash flow and close. Likewise, years, then projected forward for the own internally generated earnings and breweries showing losses but mindful next five years, the worth of this busi- at what point it made financial sense of cash flow management can pivot and ness was dramatically different than to add his first and second employees. succeed. I can walk through the list of what he had calculated it to be. It was Two years later, he’s still clicking down brewery closures from 2019 and 2020 worth significantly less. “But I’m show- that path with the cash flow statement (prior to COVID-19) and state with a ing a profit; it’s worth at least three driving his major business decisions. high degree of certainty poor cash flow times that!” he insisted. His entire focus The cash flow statement serves as a management as the top culprit respon- was on the income statement. I showed bridge between the balance sheet and sible for the demise of those entities. him the cash flow statement and ex- the income statement — it ties them I was working with a California cli- plained how the high debt payments together. The first section of the cash ent who wanted to buy out a nano that eroded his cash position to the point flow statement is cash flow from -op had been open for about three years. he couldn’t pay his day-to-day opera- erations, which includes transactions He asked that I run a valuation on their tional costs; therefore, had to take on from all operational business activi- financial position to ensure the -ask more debt. His nano was catapulting ties. The cash flows from operations ing price was reasonable. The seller down a loan-fueled spiral it wouldn’t section begins with net income, then insisted his operation was worth more, be able to climb out. I walked him reconciles all noncash items (such as as he had shown a profit every year and through his balance sheet. At this point depreciation, amortization, and interest had adequate cash in the bank. He truly he had a higher degree of debt than expense) to cash items involving op- believed his operation was successful. his assets were worth; his equity posi- erational activities. So, in other words, Yet upon closer inspection, I discovered tion was negative. There wasn’t enough it is the brewery’s net income, but in a he kept taking out additional debt to growth in his sales for the asking price cash version. This section reports cash pay his bills, so the cash in his bank ac- he wanted. The buyer and seller ended flows and outflows that stem directly count was there not from his own in- up working out an agreement, and once from a brewery’s main business activi- ternally generated earnings, but rather the buyer took ownership of the equip- ties, which include buying and selling by loans. He was showing a profit be- ment we created a budget for his oper- inventory and experiences, as well as

19 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved One of the most common misconceptions I witness when working with breweries is the confusion that exists between the income statement and cash flow statement. paying employees (if there are any ceive cash until up to 15 days later. The ate to pay for those costs to stay open. other than the owner) their salaries. brewery earns a profit on the income • Focus on generating working capital. This investing section for a brewery statement and incurs excise taxes the Working capital is the cash you need typically includes cash spent on prop- month the beer was removed for sale, to meet the obligations of your day-to- erty and equipment required. It also but the brewery may bring in more or day operations. On your balance sheet, includes the sale of any property or less cash than the sales or income fig- it is calculated as current assets minus equipment. ures, and it may not line up with the current liabilities. The excess you have The financing section measures same month the sale was recognized. left is working capital. The cash you cash flow between the brewery and its Revenue and expenses may be incurred generate from your own operations owners and its creditors and includes in one month, but the payment for or comes with no stipulations nor inter- such items as debt payments on long- receipt of cash may be another month, est expense; thus working capital is term notes, dividend payments, owner so the key to wading through and mas- the cheapest way to grow your nano. draws, and SBA loan proceeds. tering the cash inflows and outflows to Building your cash reserves will also The cash flow statement is believed offer clarity to your brewery’s opera- help keep you nimble. to be the most intuitive of all the finan- tions is understanding and controlling • Manage your inventory, accounts re- cial statements because it follows the the timing of those inflows and -out ceivable, and accounts payable. One cash made by the nano in three main flows. of the most effective ways to master ways — through operations, investment, Here are some other best practices the timing of inflows and outflows are and financing. The sum of these three for cash flow management over the through these operational channels. segments is called net cash flow. short term? Analyze these amounts on your bal- Most breweries use accrual ac- • Understand your fixed overhead. What ance sheet at least quarterly. Collect counting, which means the company’s are your expected monthly cash out- funds owed you as quickly as possible. income statement is not the same as flows despite any level of production, Delay paying invoices until they are the company’s cash position. Let’s say a whether 0 BBLs or 200 BBLs? Which due. Review inventory balances, look- brewery delivers beer to a local restau- bills will you have to pay? Items such ing for slow-moving products, out- rant on payment terms of net 15 (pay- as a lease, insurance, music licensing dated hops or grain, or amounts that ment is due in 15 days time). In other fees (if you have music in the taproom), creep up over time. Oftentimes we find words, the brewery is extending credit Quickbooks Online subscription, and Easter eggs of cash bumps here. to the restaurant for 15 days. Even debt payments are a few examples. Let’s take a look at faux brewing though the brewery recognizes that Know your fixed overhead because it company that I’ve name ABC Brewing sale as revenue at the time the beer tells you how much cash (and more that is bleeding money (Chart 1 below). is delivered, the brewery may not re- specifically, profit) you have to gener- Before investigating their accounts

Chart 1: A doomed brewery.

20 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved receivable, accounts payable, and inventory balances, ABC Brewing appears it will run out of cash three months from now. By taking the effort to call their customers to collect amounts due to the nano and changing payment terms from 15 days to cash-on-delivery, ABC Brewing brings some additional cash in the door. They also delay paying some of their invoices and set notifications to pay others the day they are due. This buys ABC Brewing some additional time to work through their loss slump (see Chart 2). Now they aren’t fore- casted to run out of cash until month 6. And finally, ABC Brewing sells some of their older malt to local homebrewers and brews a few collabs using ingredients that are slow moving or no longer part of their normal recipes. They also offer a bundled sale for some of their bottled barleywines to get them out the door. Now look at their cash flow. They’ve bought themselves an additional 3 months to get profitable and figure out a plan of action. By Chart 2: Still cash poor, but an improved financial situation for ABC Brewing. understanding their cash flow statement and the levers they have to push, ABC Brewing is on its way to a sustain- able position (see Chart 3). The operations section of the cash flow should be our primary area of focus for short term planning and decision making. The investing and financing sections are where we look over the longer term. In the next part of this series we will explore best practices to take over the long term and witness where it leads ABC Brewing. We will also explore cash flow financial ratios, creating a financial contingency plan, and delve into diversification of resources to ensure survival. Until then, cheers!

Chart 3: Now ABC Brewing has balanced their cash flow statement.

n my previous column, “Cash Flow Management I,” we learned that the cash flow statement serves as a I bridge between the balance sheet and the income statement. We also learned best practices to follow over the short term as they relate to the operating section of the cash flow statement. We then followed a fictional brewery as they focused their attention on short- term planning while optimizing their accounts receivable, accounts payable, and inventory. In this column we turn our attention to the investing and financing sections of the cash flow statement. These are our areas of focus over the longer term. The cash flow from our investing activities involves the purchase and sale of fixed assets; assets whose useful lives extend past one fiscal year. It is through this section we plan the Shutterstock.com of courtesy Photo Managing and properly assessing your cash flow in both the short term and long term are critical to purchases of additional fermentation keep your brewery in a profitable place and growing in a healthy manner. capacity, upgrade to a more robust canning solution, or sell that hand bottler surement of a nano’s ability to produce beer. Overhead includes such items as we’re no longer using. enough cash to cover its debt payments. your monthly lease payment, utilities, The cash flow from ourfinancing ac- To calculate it, divide the net operating dues and subscriptions, and insurance. tivities is where we find our payments income (obtained from your income state- Sum your overhead costs for a par- for our long-term loans, our dividends ment) by the annual debt, both principal ticular time period (I suggest annually or profit-sharing payouts, and any sort of and interest (obtained from the financing first, then quarterly as you refine your short-term line of credit borrowing we section of your cash flow). If that figure is operating model), then choose your may need. It is important to note that 1.25 or higher, the banker will then move activity driver as the divisor. I typically repayment of debt is not reflected on forward with their analysis. However, it recommend using barrels or gallons the income statement, but rather on the doesn’t matter how rosy your projections produced. That pool of costs divided cash flow statement and balance sheet. look if that figure is less than 1. That’s by gallons (or hectoliters) produced Therefore, it can be easily missed when been a hard stop for most this past year. will give you an overhead rate per one is creating a budget to plan for pur- Therefore, calculate your debt coverage gallon (or hectoliter). Once you have chases of new assets over the upcoming ratio and spend some time improving it that overhead rate, use that to help year or having a valuation completed as before approaching a bank if that figure with your future cash flow forecast- a part of selling shares of the business. isn’t where you expected it to be. ing needs. If you plan to produce 150 When I took several nanobrewer- We explored some best practices for more barrels of beer over the course of ies’ financials to the bank to help them cash flow management over the short 2021, and your overhead rate is $3.42 apply for a bridge loan this past summer term in my previous article. Now let’s per gallon (x 31 = $106.02 per barrel), of COVID-19 while waiting for Economic look at some best practices for cash flow be sure to plan for 150 x $106.02 = Injury Disaster Loan or Payroll Protection management over the long term, the ac- $15,903 more in cash outflow, whether Plan funds to roll in, I noted the banker’s tions we can take to positively impact in brand building and overall market- first area of focus for viability was the the investing and financing sections of ing or an increase with indirect labor nano’s current debt state. Before looking our cash flow statement: to help support the additional produc- at any sort of projections or planned use 1. Align overhead spend with future de- tion. While lease rate, insurance rate, of funds, as reflected within the income mand. Overhead costs are the ongoing and dues may not increase by any ma- statement, the banker calculated the na- costs of running your nano that ex- terial amount, failing to account for the no’s debt service coverage ratio. This ratio, clude direct materials (hops, malt, ad- support it takes to sell that additional also known as the debt coverage ratio, juncts) and direct labor (both brewing beer, especially when we may not have is a critical benchmark used in the mea- and packaging) to create each batch of a dedicated sales staff, is often a pitfall

22 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved nanos experience that puts them in a capacity versus expanding the tap- than we would spend on that initial deficient cash flow position. room space, analyze the certainty of capital outlay. 2. Review contracts. Take some time to the return you will receive from addi- 5. Minimize pricing erosion. Price erosion periodically review all your contracts, tional cash inflows over a defined -pe occurs when you lower your price, and as often vendors will build in small riod of time (say 3–5 years; with how thereby, the perceived value of your increases over time once they feel rapidly our industry evolves, I rarely product, for the sake of increasing they have earned your loyalty through assign a life cycle of any initiative volume sold. While it may be tempt- the perception of a high switching greater than 5 years). If we purchase ing to permanently lower your pint cost. This equates to small amounts of additional tanks, let’s look at the con- price from $6 to $5 with the hope cash per transaction, but could add up tribution margin received from each of selling more beer, usually the in- significantly over time. Look at hops additional pint sold or keg filled each crease in volume sold doesn’t make contracts, mobile canning contract, year over a period of the next three up for that loss in price realization. It your merchant services fees contract years. If we choose to invest in addi- is often more challenging to increase tied to your point-of-sale, and even tional taproom space, let’s look at con- that price later down the road without your solid waste removal contract. tribution margin received from each some degree of pushback versus keep- Price erosion occurs when you lower your price, and thereby, the perceived value of your product, for the sake of increasing volume sold.

Ensure the service being provided additional seat we haven’t been able ing your price on the higher end out is aligned with your future needs in to serve in the past that now we’ll be of the gate and steady. If your beers such a way you can begin recogniz- able to serve over the next three years. are good, the consumer will pay for ing efficiencies of scale. In some cases It’s not sufficient to simply look at ad- it. Don’t undervalue the work you’ve you will have to pay more per trans- ditional revenue we expect to receive; put in and the results you’ve achieved action based on the total volume of we must understand the margin per for the sake of potentially wrangling transactions incurred, so be prepared unit brought in as it relates to our cash a few more dollars. Keep your pricing to pay or ditch that contract. flow. We can then take things a step in line with the brand value you’d like 3. Eliminate, automate, and consolidate. further by weighting each outcome by your consumer to perceive. Review your processes regularly to probability. For example, if we can’t Aside from these best practices, re- eliminate unnecessary steps. How keep up with demand of our beers and member to use divisional accounting to many of your tasks truly need to be are constantly running out, we can track profitability by each arm of busi- done? Do they have to be done in attach a certainty of 85–100% when ness of the nano, periodically review and the same way that you’ve always analyzing the contribution margin we revise your chart of accounts to ensure it done them? Automate your systems expect to receive from that additional still lines up with your business model’s as much as possible to minimize the tank. It’s extremely likely we will sell success metrics, review your point-of- potential for human error, and consol- all the additional beer we produce. sale entry (or mapping from your point- idate your data repositories for accu- On the other hand, if we live in a rural of-sale to your financial management racy and efficiency. Can your inventory town and want to expand our taproom, system if they are integrated) as it re- management system integrate with we may be trying to cater to too small lates to the accounts in the master chart your financial management system? a demographic to create an impactful of accounts, and embrace a holistic view Can your point of sale integrate with change on our cash flow by invest- of the enterprise when it comes to deci- your financial management system? ing in a larger space. In that case, we sions affecting your cash flow. Working more won’t necessarily co- could attach a 40–65% certainty when When we control the peaks and val- incide with more results; it does you analyzing the contribution margin we leys of our short-term cash flow, we have no good to be efficient in tasks that expect to receive from each additional a longer line of sight and can plan our are not effective. Never automate seat we’d be able to fill by adding new expansion and owner distributions with something that can be eliminated, seats. If the contribution margin is the greater confidence. and never delegate something that same from each, we’d choose the one can be automated. The more efficient with the higher degree of certainty. If you become, the more cash you’ll save the amount of incremental cash we over the longer term. expect to receive is relatively small, we 4. Evaluate all capital projects and pur- can use the net present value (NPV) chases from the cash flow perspective function in Excel to calculate total versus the income statement. When cash inflow expected over a three-year faced with making an either/or deci- time period and compare it to project sion based on limited funds, such as cost to ensure we don’t generate less purchasing additional fermentation cash over that three-year time period

ver the past decade I’ve worked with several dozen nano start- ups, and often the beginnings O may sound familiar: Homebrew- er who’s been in their corporate career “too long” or almost-but-not-quite-ready to retire, financially secure, feeling the lure of self-employment calling. They’re ready to inject their savings into their startup, and they’d like to move quickly. The problem with moving quickly, however, is the lack of time put in to think strategically about the brewery’s purpose, goals, and intentions. Who are you? What is your business model? How will you define success? What role will you play in the local economy and how? Without appropriate planning to answer questions like these, you end up devising workaround solutions, whether with brewhouse standard operating procedures (SOPs), financial reporting, or long-term goal setting. Reactionary thinking results in haphazard actions that ultimately cost the nano valuable resources, including time and profits.

With a nano’s size, one small seem- Depositphotos.com of Image courtesy ingly innocuous action can throw the operation into a cash deficient position. into local distribution? ings via our personal Schedule C? So how do we step back and plan ap- • What will that distribution strategy • What will our annual production propriately by thinking more openly, big look like, and how do we set or de- goal in barrelage be over the up- picture about our operation? I’d like to fine those goals? coming 3¬5 years? introduce a strategic framework for ev- • If we choose draft-only distribution, • How do those goals translate into ery aspect of the planning process, and it how do we want to define success sales dollars and growth percent- applies to every facet of operations. This based on tap handle acquisition ver- ages year-over-year? framework follows a cyclical, circular sus retention? • What are our goals in terms of net flow in four phases:Define, design, imple- • What will our distribution footprint income and retained earnings? ment, and understand. Let’s look at each look like? • How many months of working capi- phase in greater detail. • Will we be packaging our beer, in tal will we target when it comes to bottles, crowlers, or cans? our cash account? STAGE ONE: DEFINE • How many interactions via social • At what point (month, year) will All planning, whether with financial media or e-newsletter will we post we as the owner be paid (this management, marketing, or production daily, weekly, monthly? is important), and how much? begins at this first stage. It is during this • Who will respond to the public’s What is our pricing structure? stage we define who we are, our goals, comments, and how quickly? and most importantly, our success metrics. • How often will we release new From the production perspective, we So let’s take a look. label art? should be asking: From the marketing perspective, we should be asking: From the financial perspective, we • How will we measure and control should be asking: our losses and brewhouse efficiency • Are we going to be a local lifestyle year-over-year? brand selling 100% over the bar, or • Are we going to set ourselves up • At which point(s) of production will do we want to eventually launch with an LLC or simply report earn- we measure losses: From brewhouse

24 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved to brite tank to package, or simply develop the stages of our label design day. We design our brew log to capture from brewhouse to package? process and choose to use a particular as much of this information as possible • How will we measure losses in the communication channel such as Slack or while also creating the least amount of taproom? project management tool such as Asana additional work to complete the monthly • How quickly do we plan to cycle to hold people accountable and on track. excise tax returns and the quarterly TTB through our fermentation tanks? (It’s okay to use a white board or Post-It Brewers Report of Operations. We design • How will we measure our keg turns notes as a temporary solution, but these our daily journal entry from our point- in order to ensure we have enough methods leave no paper or digital trail. of-sale that tells us the exact amount of The environment you create must be comfortable, memorable, and reflect what your brand is about.

cooperage? They tend to disappear. If it’s just you sales tax we owe the state at month-end. As we define our operational strat- and you alone responsible for 100% of Examples of filings that need to oc- egy by answering these questions, we the operation, things could quickly break cur monthly include federal and state want to be sure we are setting specific, down.) We decide to respond to all ques- withholding and federal and state un- measurable, realistic benchmarks bound tions and comments on social media employment for all your employees (if by time. For example, in year 1, we could within 24 hours. any), state excise tax reporting, and state say we plan to produce 225 barrels at From the financial management side sales and use tax reporting. Examples no more than a 15% loss through the it is during this stage that we create our of filings that need to occur quarterly brewhouse and 10% loss through the chart of accounts (COA) and ensure we include the Federal TTB Brewers Report taproom. We will sell 100% of our beer have captured all our revenue streams, of Operations, federal excise tax report- through the taproom in order to prove each related cost of goods stream, and ing, and state unemployment and con- our concept and build our cash reserves all our sales, general, and administrative tribution report. Examples of filings that the most quickly. We will release new categories. Assistance from an accoun- need to occur annually include the Fed- beers every Thursday and communicate tant may be something to consider. As eral 940/941, the W-2 and 1098 (for all via post through all social media chan- attaining a 76% profit margin per pint is your contractors filing 1099 status) and nels Wednesday evenings at 7p.m. EST. our goal in the earlier example, we must the brewery’s state personal property We will make no less than 76% profit make sure we design our accounting and detail. Most of this reporting averages margin (net sales less cost of goods point-of-sale systems to readily present 3–5 hours per month with appropriately sold) per pint in order to buy a crowler that information. As we are going to be designed systems or 6–8 hours without machine and an additional fermenter in measuring brewhouse efficiency and loss appropriately designed systems. month 6 of year 2. through packaging to keg, we must make As we walk through all our defined A best practice is to set your long- sure we have variance accounts included success metrics, it is during the design term goals first, then build shorter-term in cost of goods portion of our chart of phase that we develop our systems that goals based off that long-term vision. accounts to capture those losses. For a will tell us consistently at any defined What is your end game? What do you COA template, I can share one as an ex- time interval whether or not we are want to accomplish with your nano? ample. You can find that chart at https:// meeting those success metrics. Then revisit those goals, both long- and byo.com/wp-content/uploads/COA-Tem short-term on a regular basis; at the very plate_Audra-Gaiziunas.xlsx STAGE THREE: IMPLEMENT least, annually. From the operational and produc- Once we have designed our systems tion side, we design process flow by and feel they are well-matched with STAGE TWO: DESIGN department and between departments. our success metrics, we implement them By taking the time to plan the big pic- Production versus non-production sides to ensure our systems provide us the ture in specific and measurable terms of the business apply to every nanobrew- information we are seeking. This is the (such as in the example above), this will ery and are two distinct departments. equivalent of a beta test run to see what allow us to design our systems and pro- We design the process for receiving in- information sticks versus drops out, what cesses to complement our strategy. It is ventory. We design our protocol for the creates bottlenecks and frustration ver- here where we use the success metrics clean-in-place (CIP) and sanitation cycle. sus ease, and what simply doesn’t work as we have defined earlier in our framework We set the last day of the month as the intended, despite best efforts put forth. It in order to design our financial manage- day we take physical inventory counts is during this stage creativity with data ment systems, inventory management and adjust the books to actual numbers. collection plays a part, especially with systems, and our SOPs. We design our process in tracking keg such actions as brewhouse mishaps and From the marketing side, we design turns without sophisticated technology. causes, key cycle times, and packaging our language and tone we will use in our We choose Tuesday morning as our ad- losses. You may also realize that tracking posts to ensure they stay on brand. We ministrative paperwork and bill paying information in spreadsheets based on

25 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved Photo by Christian Lavender by Photo your model is too laborious and prone to will all come together for compliance it will become, but just like any sport, you error; therefore, you decide to purchase reporting. You keep those processes you can’t expect to master it the first time inventory management software instead. designed that work and go back to the you attempt it. Ideally, the implement phase takes design phase for those that didn’t for replace well before you’re open to the visions and a new round of testing. This public to give you time to redefine and is your time to reflect on what works for redesign until your processes match up your brewery and where improvements to your success metrics and compliance can be made in all business aspects. requirements. Be sure to develop and Finally, consolidate all the feedback design a communication strategy with and metrics involved throughout this all outside parties, even if you’re just strategic planning process into an an- a nanobrewery of one. You’ll be much nual plan, a budget. It is here we lay better prepared should emergencies out sales goals: Mix by brand and pack- happen. Once you’re open to the pub- age type and volume, marketing spend, lic, periodically review your processes production losses and variances, and to make sure they’re still relevant. With general/administrative overhead for the our industry being so rapidly evolving year ahead. It shows us how much profit and entrenched in constantly changing we’ll be able to roll back into retained legislation, you want to ensure you’re earnings and gives us valuable insight keeping on track with those changes, into our cash flows to help us decide adapting as quickly as possible, and not on whether we want to take out a fu- wasting needless effort and resources ture loan, or whether we’re investing too on a process or metric that no longer fits much cash in our inventory. This plan be- your model. comes our roadmap holding us accountable to our goals, and it also forces us to STAGE FOUR: UNDERSTAND revisit our self-defined success metrics As you continue to analyze the data on a regular basis. We may not get that you’re receiving from the implement annual plan right the first time, but it’s phase, you understand what worked and more about the process than the result. what didn’t, which metrics of success Be forgiving. Be flexible. The more often you can track, and how the information you go through this process, the stronger

ow many of you want to start a lab, but have no idea where to start? You begin to look into it, H but there are so many different aspects of a lab you get overwhelmed and put the project on the back burner. Starting a quality control program may feel like a very daunting task, but it doesn’t have to be. I’ll walk you through the initial steps to get you started. This article is not going to cover specific equipment needed, or how to run tests, but it will walk you through what you need to think about to start planning your quality control program. Every brewery is different and for some breweries this may include a designated lab, for others it might not. Regard- less of experience or budget, everyone can, and should, implement a quality program in their brewery. By the end of this article I want everyone to feel empowered to take the next steps in starting their own lab or quality program. It’s perfectly okay to start small, in fact, that’s one of the best ways to start. I’ll even cover what to do

with no budget. Todd Amy Photo by Here’s a little recap on why you should start a quality control program. what your quality program will look like someone just to do quality? Will that First off, having a good quality program and where you’re going to start. As you be full-time, part-time? If you only need is going to help you ensure the con- work through this you’ll see that most of a few hours a week, maybe it’s best to sistency of your product, you’ll be able these are interconnected. Every brewery outsource some testing to start. Don’t to identify inefficiencies, improve your is different and everyone will start out at forget to think about time commit- process control, and it’s going to reduce whatever point is best for their brewery. ments and associated labor costs. wasted product and wasted time. It’s Why — I like to start with why. Why What — This is a two-part section. also going to instill a sense of pride and do you want a quality program in the What is your budget? And what is go- ownership in you and your employees. first place? Do you already have an is- ing to go in your lab? This is a really big The hardest part of starting a qual- sue you want to address? Maybe you’re one. Ultimately your budget will deter- ity program is just starting in the first looking to avoid off-flavors, or maybe mine what’s in your lab. You’ll want an place. improve your brewhouse efficiency, or initial budget, a yearly budget for new the consistency of your product. Maybe equipment, as well as a monthly budget PLANNING STAGE then you want to focus on packaging for consumable lab supplies and chemi- Your very first task should be to plan out and micro as you enter new markets. cals. This will help determine what’s in the logistics of your quality program. Having a solid why is going to help you your lab and what you’re testing for. To help break it down into manageable focus and find the best place to start for Don’t forget labor costs when you chunks, I like to start by thinking about your brewery. decide what you’re testing for. Again, who, what, when, where, and why. These Who — Who is going to run the lab? you might want to outsource some tests are all going to ultimately determine Just you? Your brewer? Are you hiring if you can’t afford equipment or addi-

27 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved tional employees right now. $30–$40 with added expense. come these with a little patience and added to the cost of a batch of beer You may want to start by focusing planning. might make a lot more sense than thou- on only one of these categories, like Time — One of the biggest hurdles to sands of dollars in lab equipment at sensory, then as you expand your quality overcome when setting up your quality this time. Your why will help determine program you can add another category. program is time. Most of us are already what’s in your lab as well. Some may decide to do a little of each. trying to cram too many things into one When — I say start your program Sensory — A sensory panel will help day, and adding something new may right away! It’s easier to slowly add tasks you identify off-flavors or troubleshoot sound impossible. Everyone is going to as you grow than to play catch up if you problems in the brewhouse. Making handle this differently but some sug- start growing too fast. Even something sure your beers are true to brand and gestions are to start by taking 10–15 small, like starting with cell counts, is taste how they are supposed to taste minutes each day to start planning out way better than nothing. You don’t want is another key part of a sensory panel. your quality program. If you work better to put this on the back burner and never A beer may hit all its desired specifica- by having a solid chunk of time, sched-

A quality program can save money indirectly, and some of the biggest savings are when you prevent bad beer from going out in the market place.

get to it. Start planning for your future tions but still not taste how you want ule two hours one week to work on it. too. When are you going to start testing it to. Schedule it as a meeting, even if it’s just IBUs or dissolved oxygen (DO)? Just as Chemistry — Tracking values such as you, and commit to it. Go through your you plan for your brewery’s growth, plan gravity, pH, IBUs, color, FAN (free amino who, what, why one category at a time. out the lab’s growth. nitrogen), alcohol, haze, etc. can help Once you start, you might find yourself When are you going to have time to us ensure everything is going accord- making time to work on this. If you can’t work in the lab? This will affect what ing to plan. Tracking this data can also make time for quality, how are you go- tests you are able to do. If you don’t alert you when something isn’t going ing to ensure you keep making great have time personally, do you need to according to plan. The quicker you no- tasting, high-quality beers? hire someone? tice something isn’t right, or trending Money — Money is another big hur- Where — Where is your lab going towards out of spec, the quicker you dle for most breweries, especially small to be? When you’re first starting out, a can look into the root cause and fix the ones and start-ups. A quality program countertop with room for cell count- problem before too many other batches can save money indirectly, and some ing, pH and gravity readings, and some are affected. of the biggest savings are when you storage space is all you really need to Micro — We like to think we’re in prevent bad beer from going out in the get started. Make sure you keep future control of the brewing process, but ul- marketplace. It can be very hard to cal- growth in mind. 10–15,000 barrels timately it’s all those little yeast cells, culate these theoretical savings and it (bbls) and you’ll want a separate space. (and bacteria in some cases, whether may feel like you’re just spending mon- Maybe a 10 x 12 ft. space. At 30,000 intentional or not) that are making the ey and not getting anything in return. bbls you might want double that. Don’t final beer. We want to do everything we How do you measure increased quality forget space for employees, computer can to make sure our yeast are happy and consistency to sales? It can be hard stations, sinks, hoods, eye wash stations, and healthy. We also need to make sure to show the correlation. Think about and lots and lots of outlets. The bigger there are no unwanted wild yeast or how much will it cost you to dump a you get, the bigger the lab you’ll need. bacteria lurking around our brewery try- batch of beer? This is a cost you are Once you answer these questions ing to take over. potentially avoiding by implementing a you can look into some specific tests Packaging — You spend all this time quality control program. How much will and areas of focus for a quality program. making the perfect beer and it can be bad reviews cost you? instantly ruined if not packaged proper- Time is money and being able to

QUALITY CONTROL ly. Dissolved oxygen and CO2 testing are react quickly, or having the peace of CATEGORIES critical measurements here. Checklists mind that everything is performing as Next I like to break a quality control are a great way to assure date codes are intended, can save you a lot of hassle plan down into four basic categories — legible and correct, labels are straight, and headaches. Yes, actually making the sensory, chemistry, micro, and packag- and boxes are sealed. beer is important, but if you’re constant- ing. I want to mention safety here too ly rushing and aren’t taking the time to as you should always be thinking about MAJOR HURDLES be proactive about quality, you’ll find safety in your brewery. Each of these As you start planning out your qual- yourself reacting to something later on categories are going to have their own ity program, you’re most likely going to that will take even more time to handle. safety concern, some of which will come face some hurdles. You can easily over- Failure to Plan — The best way to

28 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved implement your quality control plan is can be learned and you don’t need a tion when you’re brewing. Implement to draft it out and actually plan it. Go science background to start a lab. Re- checklists so you don’t forget anything. slow and add things as you grow, do member, there was once a day when you While you’re making all the free im- what works for you. Go back to your didn’t know how to brew either. provements, start saving! Come up with business plan, or if you haven’t started Budget — What if you have no bud- an exact budget of what you want to a brewery yet, make sure you have a get? Just because you don’t have a have in your lab. Utilize the acronym section on quality control and how and budget for quality improvements now, SMART for your goals: Specific, mea- when you’re going to grow your lab. doesn’t mean you can’t get started. You surable, achievable, relevant, and time- What will your lab look like at 5,000, should still go through the process of based. You’re much more likely to follow 15,000, 50,000 BBL? But even if you thinking about why, who, what, when, through with a goal of: “Save $500 in don’t plan to grow capacity-wise, what and where to come up with a list of the next six months to spend on a mi- would your lab look like in 1 year or 3 things you want to start implement- croscope, hemocytometer, scale, glass- years as your brewery matures? ing in your quality program. Without ware, and pipettes so I can perform cell When you have a plan in place it’s any expenses, you can make sure your counts and produce cleaner, more con- much easier to focus on it and work to- hydrometers are calibrated. Check out sistent beers” than if you had a vague wards that goal. You may be tempted the ASBC video on how to do this. Plot goal of “save some money for a lab this to invest in growth and more space or out your daily gravity readings during year.” If your budget is too small to af- brewing equipment, but always keep fermentation. Different batches of the ford any testing equipment right now quality in mind and you’ll last longer same beer should follow a consistent but you have a long list of data points than your competitors who grow too curve. Any improvements you can make you want to collect, use a 3rd-party lab quickly but can’t keep up with quality. there? Plot out pH as well and make to supplement your own in-house qual- Check out the American Society sure you’re recording final pH values on ity program. of Brewing Chemists (ASBC) guide to all your beers. If you want repeat customers and starting lab. This is a great resource Start a sensory program. Start by continuous growth, you need a quality with information on what type of lab tasting your beers and ingredients. program in place. Be proactive about equipment you should have at different Come up with descriptions and expect- your quality, not reactive. With over stages of growth. ed intensity levels for hop aroma, malt 7,000 breweries in the US, craft-beer Fear — Some people are scared of sweetness, body, etc. Use Googleforms consumers can choose to be very picky. what they might find. Ignorance is bliss, to keep track. Once you have a bigger If the beers they purchase from your right? The thing is, you want to find is- budget to work with, purchase some brewery are inconsistent, they can go sues, because then you have the oppor- off-flavor training kits. elsewhere. Don’t just tell your custom- tunity to fix them and make better beer! Write out Standard Operating Proce- ers you care about quality, show them. Some people are also hesitant to start dures (SOP) to make sure all your brew- Want to set up your own quality pro- a lab or quality program because they ing steps are being performed the same gram? I’ve provided a planning & start- don’t have a science background. Yes, it’s way every time. Make sure you’re col- ing worksheet found on the next page. helpful, but it’s not necessary. Anything lecting useful and actionable informa-

29 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved QUALITY PROGRAM BY AMY TODD WORKSHEET Content courtesy of Zymology Labs, LLC [email protected] 802-735-2277

WHY DO YOU WANT TO START A QUALITY PROGRAM?

WHO WILL RUN YOUR QUALITY PROGRAM?

WHEN DO YOU WANT TO START A QUALITY PROGRAM?

WHERE WILL YOUR LAB BE?

WHAT IS YOUR QUALITY BUDGET?

WHAT WILL BE IN YOUR LAB?

WHAT ARE THREE STEPS YOU CAN TAKE THIS MONTH TO START OR IMPROVE YOUR QUALITY PROGRAM?

30 Best of Brew Your Own Magazine - Building a Nanobrewery © Battenkill Communications, Inc. All Rights Reserved TOP 5 WAYS TO A BY AMY TODD QUALITY PROGRAM tarting a quality program can Performing cell counts and adjusting the perfect time to focus on quality. Start be overwhelming. There are so the amount of yeast you use based on with these simple steps and you’ll make many different directions you results is one of the best things you can a huge impact on the quality and consis- S can go in, and then there’s the do to improve the quality and consistency of your beers. training and cost of equipment. It’s hard tency of your beers. When you don’t add enough opening a brewery, let alone enough yeast, they get stressed out and setting up a lab. Luckily, getting started overworked. This can lead to off flavors doesn’t have to be expensive or compli- and inconsistent fermentations. Adding cated. Here are the top five things a nano too much yeast can also lead to off fla- brewer can do to get started with quality vors and affect your fermentation rates. control and quality assurance. 3. SENSORY 1. ORGANIZE PAPERWORK Start a sensory panel. Get everyone in- AND USE BATCH CODES volved and start by tasting and smelling Start by organizing all your paper- your beers along with ingredients. Get work. Write everything down on your some off flavor spiking kits and train on batch records, use brewing software or off flavors. Come up with true to brand Googledocs to keep everything together. descriptions for all of your beers. A sen- Write down mash temperature, pH, grav- sory panel will help with off flavor iden- ity readings, when you added what and tification, trouble shooting in the brew- how much. If you deviate from your plan house and making sure your beers taste for whatever reason, write down what how they’re supposed to. actually happened and why you made the change. Make notes when you try 4. pH AND GRAVITY something new. Troubleshooting will be TRACKING easier if all this information is organized Make sure your hydrometers are cali- and easy to read. brated and make a graph of your daily Include the lot numbers of all your gravity readings. Every batch should fol- ingredients. If your supplier issues a low a consistent fermentation curve for recall you’ll want to know what batch that beer. This can be the first step in those ingredients went into. Have a identifying a process that could be im- unique batch ID for each of your beers. proved. See how fermentation compares Make sure you include a date code and to last time you made that beer, and if batch number on your packages, includ- you need to make changes next time to ing kegs. If you need to do a recall you make it more consistent. won’t have to recall everything, just the While you’re taking gravity readings, one batch. take a pH reading as well. The pH should also follow a consistent curve through- 2. CELL COUNTS out fermentation. A lower than normal Cell counting and viability testing is one pH can be an indicator of a problem in of the best things you can do to improve the brewery. the consistency and quality of your beers. You can get everything you need for cell 5. OUTSIDE TESTING counting for under $500. To count cells Get the ABV, color, IBUs, final and starting make a 1:100 dilution of your yeast slur- gravity tested at least once by an outside ry and put a drop on a hemocytometer; a lab so you know where your beer actu- specially designed slide with a chamber ally falls compared to your calculations and counting grid. You then count how and gravity readings. Recheck on a quar- many cells are on your slide and calcu- terly or yearly basis to make sure you’re late how many yeast cells are in 1mL of brewing consistently. The more data you yeast slurry. You can then calculate how have, the easier it is to look for trends. much yeast you need to pitch into your main batch based on volume, type of Whether you’re just starting out or beer and starting gravity. have been in the game for years, now is