Three Action Items to Improve Your Brewery’s Bottom Line

Having data on your business is essential to support growth, but once you’re tracking this data on a regular basis, how do you apply it most effectively to reap the greatest benefits to your bottom line?

Three key areas to focus on include inventory tracking and measuring batch yields, tuning in your cost of goods sold, and consolidating quality data to review and catch out of spec items.

Improving Operational Efficiency by Tracking Batch Yields

Throughout manufacturing, a great deal of time is spent analyzing raw material costs from a purchasing perspective, but little time is solely focused on batch yields. A yield increase of one percent can be equivalent to a five-to-10 percent (or more) reduction in raw material costs. When a brewery focuses on yield by batch, or by recipe, it is then able to identify below-normal yields.

Ninkasi Brewing co-founder Nikos Ridge recently referenced his company’s focus on yield in regard to the brewery’s continuous improvement initiative. “When you are 100,000 barrels, a one or two percent [increase in] yield through the year is pretty valuable as an improvement, and that’s doable.”

What may seem like a small percentage can lead to a significant reduction in raw material cost and brewery overhead. Batch yield is a great starting point to identify a problem. From there, you can work with R&D and production to analyze contributing factors and discuss changes in process on how this can be improved.

Start this process by targeting a recipe with significant volume. Review those yields over the past six months. Is there a trend? Do certain batches deviate from your targeted output? Is there a common factor that may be contributing to a particularly high or low output?

Highlight Accurate Margins with a True Cost of Goods Sold

A typical month-end process involves taking a physical inventory, factoring in the purchases for the month, and subtracting last month’s value of inventory. If you want a cost per unit, you factor in the production for that period. While this process gets you to a cost of production value, it does little to identify how much it costs the brewery to brew a single style of beer.
Breweries with a centralized brewery management system have the ability to analyze ingredient usage as well as applied labor and overhead. They can cost out each barrel of wort on a brew-by-brew basis. This process continues through fermentation and into packaging.
The result provides an easy view of the costs of grain, water, yeast, hops, packaging, labor and applied overhead to every case or keg of beer. When there are significant variances, managers can review the operations and identify what varied from the plan. This can be done in real time and before the problem gets out of control.
This information helps the accountant at the brewery, but it also aids the sales team. Knowing how the true cost of goods sold (COGS) can affect a selling price for a specific style of beer also helps brewery owners understand margins. Having a complete picture of the cost incurred, in reference to the retail price throughout your product mix, helps influence how brews should be positioned in your product matrix.

Automate Batch Review with Incorporated Quality Data

Quality is one of the most organically grown departments in a brewery. When it comes to testing and tracking quality data, many breweries do it differently. For this reason, quality data can often times remain separated from the general operations. This separation creates redundant data and an overall lag in communication and data validation. By centralizing and connecting quality to the rest of your production and back-of-house operations, you gain a more complete picture into the brewing process.

Empower your team to measure variations in brews, calculating results as they happen — or are reported — and measure them against your company or customer standards with targeted high/lows such as pH, gravity, or general progress in fermentation. Options to create alerts for ‘out of spec’ results can be implemented to streamline any corrective action needed. By sharing this data across production, it becomes that much easier to identify correlated factors or cause and effect elements.

Making sure that your data is structured to take action can be a daunting task. Focusing on any of these three areas is a great place to start where you can then see a measurable impact on your brewery’s bottom line.

Having a brewery management system can help streamline these actions by first tracking your production with the structure that makes sense for your operations. The reason your data structure in a system is so important is that the data needs to be easily accessible in an intuitive manner to support the questions raised by your production analyses.

VicinityBrew software and implementation specialists focus on these key areas when providing direction and support for clients throughout the brewing industry.

Contact our team to learn more.