Whenever you sit down to review your financials a thought often comes to mind…how are we doing compared to other breweries? Are we as efficient as everyone else? Is anyone else making any money? Those answers are tough to come by….most craft breweries are privately owned, so we can not go to the stock market to see how our industry is doing. There is the BA benchmark study (more on that in a later post). So we need to rely on any benchmarking data that we can get our hands on.
Luckily, the Colorado accounting firm of EKS&H publishes an annual craft brewing benchmarking study. EKS&H counts many of the larger Colorado breweries as clients, so it is important to view this study through those glasses.
The report begins with a 2016 industry environment commentary. Anyone who has heard Dr. Bart Watson’s talk at CBC would be up-to-date on the industry. The real information is in the 2017 financial review section. The study showed that breweries under 20,000BBLs sales grew much higher than the larger regional breweries. Average profit margin was 5.4% before income taxes and 4.5% after income taxes.
There are a series of operational ratios that I found to be very interesting. For example, the average number of distributors per state was an average of 2.44. That was down from 2.97 in the 2014 survey. Sales in your home state continue to be of primary importance as 73% of these breweries sales occurred in their home state. That is an increase from 69-70%. This proves that local beer will always sell better than regional beer.
Cans continue to grow in importance. In fact, cans out sold bottles (44% keg, 28% in cans, and 24% in bottles). This is due to perception changes as well as the fact that smaller breweries are aggressively moving in to cans. Cans are less expensive to use and far less expensive to ship than glass bottles. In my practice, I’ve seen the trend only accelerate in 2018.
Make sure that you review the financial review section of the study. There are a lot of interesting ratios that you can use in your brewery, such as:
Net revenue per bbl $362
Gross margin on beer sales 42%
Selling expenses as a percent of revenue 18%
Operating expenses as a percent of revenue 34%
This is your break-even number. When you make enough gross profit to cover your fixed expenses, you are considered to be break-even.
DEBT to EBITDA 8.7
If any of those terms are strange to you or you don’t know how to calculate these numbers, contact my office for a free consultation. Knowledge is power, especially when it comes to your books.