The economics of Sierra Nevada's new brewery, viz. the proximity-concentration trade-off:
As breweries expand there is always a tension between growing big on one site and capturing the considerable economies of scale and getting close to customers thereby reducing transportation costs. In international economics this is known as the proximity-concentration trade off and some interesting empirical work has been done to understand where the tipping points are. It is interesting, then, to see where that tension resolves itself in craft beer. Sierra Nevada is up to an annual production of around 800,000 barrels, New Belgium is up to about 600,000 barrels annually, but Deschutes is still less than 250,000.I would add that placing a brewery near your customers is important in terms of freshness. And no brewery is more concerned with freshness than Sierra Nevada.
Anecdotally it would appear to make sense for breweries to grow pretty darn big on one site before opening a second. Of course, a big factor is how much you currently sell and expect to sell in the future to east coast customers. Also factoring into the equation is the desire to reduce the carbon footprint of the business. Beer is heavy and bulky and it take a lot of energy to get it from Chico California to New York. But this gives us some idea of where the tipping point is 600,000 to 800,000 barrels a year.
Keg-lined can. I was unaware of this bit of beer history:
It wasn’t until 1933, when President Franklin D. Roosevelt and the 73rd Congress passed a series of laws repealing the Volstead Act, that American Can again took up the cause of canned beer. Working at a rapid pace, its engineers solved the exploding-can problem that September, producing the world’s first beer can. In addition to traditional tin, they reinforced the can with steel, which proved able to hold up to beer’s pressure. Drinkers opened the can with a “church-key” opener, a slice of metal with a sharp bill to punch a hole in the can’s flat top. But with this innovation arose more problems. Designers had to find a way to combat the fact that beer packaged in metal began to taste metallic or tinny. To counteract this, American Can inventors slathered the inside of the cans with brewer’s pitch, made from pine tar. The pitch insulated the can walls from the beer just like the inside of a keg; thus, their cans came to be known as “keglined.”Turns out that didn't last long. Union Carbide's Vinylite to the rescue. And by rescue I mean certain poisoning of the first generation of canned-beer drinkers.
Although he's muscling in on my turf, I love Pete Dunlop's analysis of new brewery growth. (Much as Bill invented the pub crawl, I invented bar charts.)
Now look at how the number of planned breweries keeps creeping up on the number of existing ones. There's a clear trend here. In 2008, planned breweries (207) represented a small fraction of the existing count (1,496). By the end of 2011, the planned number (915) approached half the number of existing breweries (1,949). Wow!To get the full effect, you should click through and see the charts. Fine analysis, Pete.
Below is another way of looking at what's going on. It shows the number of planned breweries at the end of each year against the actual increase in total breweries at the end of the following year. For example, there were 207 new breweries in planning at the end of 2008. A year later, we saw a net increase of just 50. And so on.