Tuesday, 18 January 2011

Cumbrian Beer Geeks

Cumbria has lots of breweries. We've lost count now but we believe it might be up at around 30. It is rumoured that Yorkshire has more, but then there are more people in Yorkshire. Sheffield is in Yorkshire and the city is an excellent beer town. The Sheffield Tap is an excellent beer geek bar that always has some excellent beers.

Cumbria has quite a few very good food places. Some even have rosettes or stars for their food. L'Enclume is one; I've eaten there and it's very poncy and very expensive. I liked it, but there was no beer at all. There is also The Drunken Duck which houses Barngates Brewery. The food and the beer are good, although I've never really known them to do any proper beer and food matching. Generally, the best places for food don't give beer much of a consideration and the best places for beer can be a let down on the food side of things.

Recently there was a very enjoyable CAMRA organised beer dinner in Kendal. A very successful and well attended event. Pete Brown was guest speaker and it brought together 200 or so of the most enthusiastic beer people in the county. The main criterior for the selection of beer was it's LocAle credentials. A brave effort was made to match largely session beers with food, an activity that can only have limited success; I believe that for a good beer and food matching event there is a need for stronger flavours in the beer, this can never be achieved with even the best session beers1.

There are places in that big place right down south, I believe it is known as London, that really do quite a good job of both. My favourite is The White Horse at Parsons Green. There might be better places, but for now it remains the best place I've found that serves really good food and a wide selection of esoteric beers. Some people think it's overpriced and full of la-di-da-toffs, but it's only the crazy imported stuff that is pricey and you can treat the toffs with the contempt they deserve, unless you've already used up all your contempt on the beer tickers.

When it comes to beer geekery there really is very little in Cumbria to satisfy the more adventurous beer explorer. It is getting better, The Swan for instance in Ulverston is quite good, they even sometimes have Hardknott, BrewDog, Stringers and others, when the PubCo is feeling relaxed about stuff. It was the only place in Cumbria that dared have a go with our Queboid on cask. In the very same town there is The Mill, its cask beer is a little tame, if well kept, but they do have the best bottled beer selection I've yet to find in our sparsely populated expansive county.

A few months ago Ann called on a nice pub out near the tourist honey-pot area of Windermere. She reported back that I'd probably like it - and that she had sold them some of our beer. I was lucky enough to be allowed to go there on one of her delivery trips and I was not to be disappointed. Both the food and beer selection is interesting, varied and of a good standard.

Having been to various beer dinners, some better than others, the idea of getting involved with one was becoming something of an ambition. Also, I have been keen to try and promote some of my stronger beers as good food matches. After all, stuff like Infra Red and Queboid are unlikely to do well as a regular session beers, but I do believe that a market can be generated for them as accompaniments for food. Equally, I'm generally keen to see beer promoted more in various foodie establishments, for far too long wine has been seen as the drink to have with food.

The pub mentioned above, the one that now sells our beer, also sells BrewDog beers and some foreign beers from James Clay, is the Masons Arms at Strawberry Bank. I am assured that this pub has been a strong beer pub for many years. Its food is top notch pub food too having recently won Lake District Dining Pub of the Year for 2010/11 awarded by Lancashire Life. The management team: Alex, Adam and Helen have been thinking about beer events and we seem to have found kindred spirits here.

Last night a few of us Cumbrian Beer Geeks met up there with a view to organising a beer and food matching evening. It seems it might well be the inaugural event for a likely Cumbrian Beer Geek Club. It's all very new and we're hopeful that it will bring some variety to the beer world in Cumbria. You see, we don't have anything quite as good as The Sheffield Tap or The White Horse or even The Rake.

Our first event is to be a Contemporary British Beer and Classic British Food dinner. 7 beers have been picked and we are going to match with 7 taster courses of classic British dishes, possibly with our own twist where we feel it is useful for the food.

At the very least the infamous Jeff Pickthall will be there as will Neil Bowness and of course, yours truly. We will be enthusing about the beers and explaining why we have matched them with the particular foods. I am hoping there will also be a new beer launched at the evening and perhaps other little surprises.

This will all happen on Thursday 10th March. The Masons Arms has rooms, so if you live in the North and can't get yourself as far as the deep south where all these things normally happen, get yourself booked in.

1I'd go further and point out that a beer which matches well with food is probably going to be far too much for most drinking sessions. I have got nothing against session beer and most of the beer I drink is of that ilk.

Monday, 10 January 2011

Beer is giving way to wine....

....whisky, vodka and rum.

Perhaps even to martini, shaken, not stirred.

Or champagne, or at least an affordable bubbly grape derived intoxicant; anyone can afford to hire a stretch limo these days if they want to, and anyone who does wants the drink to match that image.

Of course we don't want to believe it. Beer is for the masses. It should be accessible to all. We don't want to believe that the standard of living for the masses is greatly improved on what it was 100 years ago. We don't want to believe that even people who can't afford it still blow their credit card limit on silly status symbol purchases, but the number of numpties who do are becoming an increasing proportion of the population.

Now, of course, beer is for drinking at the pub with mates. There is absolutely no doubt that this is the very best way to drink beer. I drink beer in this mode several times a week. In fact, I probably drink far more beer in this format than is good for me. Sometimes I drink beer that is so dire it just doesn't deserve to be drunk, but when the crack is good, one has to suffer for the sake of one's mates. To be fair, my mates generally suggest moving to another pub in that situation, but then they are beer snobs, both of them.

It is an unfortunate fact that less people are drinking in the traditional pub. I'm no happier about that than the reader might be. More drinking is done at home or in restaurants or wine bars than in years gone by. Although it is a worthy and admirable cause to champion the pub and traditional beer drinking, it remains a fact that it is slowly decreasing. We can ponder why that might be, we can rally to the cause and try to stand in the way of change of use of our favourite pub, but ultimately there is little we can do about the fact.

I remain convinced that one of the contributory factors causing this trend is the ever increasing aspirations of an ever increasing proportion of the population. Most people want a nice car1, a big TV, a nice leather sofa, fitted kitchens and Jacuzzi baths. I've even heard tell that some common people even have bidets, whatever they are; gone are the days of the earth closet at the bottom of the yard.

I'm often told by beery people that we shouldn't try to compete with wine - there lies a path of disaster. Well, wine is competing with beer and I suggest we should lay down our denied inverted snobbery and fight back with our heads held high.


1To the extent that BMW drivers are more likely to drink Carling2 than decent beer these days.

2Yes, I expect to be threatened with being put over a certain Molson Coors Communications Partner's knee, that's why I mentioned the drink, but the threats, sadly, have yet to be realised.

Note: Data for the chart was extracted from the BBPA handbook 2008. Currently there is an error on the chart vertical scale. Should be 1000s hl%. I'll correct later.....

Monday, 3 January 2011

Project Queboid

Some time ago a great brewer inspired me, it's not unusual for a brewer to inspire me, in fact, it's one of the nice things about brewers; we like to egg each other on. A great brewer can only be a great brewer by caring about beer, not just his/her own but about the wider beer world. John Keeling of Fullers is a likeable and well respected brewer. Within the boundaries his bean-counters and marketing suits allow, he engages with the beer world in its entirety and enthusiastically shares knowledge.

Fullers are one of very few breweries that use parti-gyle techniques. It's not difficult for me to see the advantages for a brewer like me who wants to make a range of beers from highly quaffable and approachable session beers through to high ABV flavour-bombs. For a number of reasons low ABV beers have various production efficiency benefits per unit of alcohol compared to higher ABV beers. Parti-gyling enables some of these efficiency benefits to be applied to higher ABV beers too. I immediately understood these benefits from John's enthusiastic explanations.

Although my brewery isn't big, it does have two mash tuns1 and two coppers. I can transfer the first runnings, which may well be in excess of 1100 degrees gravity, into a high gravity copper, and the second runnings into a low gravity copper at perhaps 1050 degrees gravity.

I did this recently, and made two beers; Queboid, a double IPA at OG1080 and Katalyst at OG1038. They are both concepts in development, although I'm happy that they have great potential. Personally I prefer Continuum over Katalyst but I've had feedback from a number of people whose preferences are the other way around. Perhaps Katalyst is more approachable.

Queboid, which was the prime motivation for this particular project, had slightly disappointing hop profile when tasted on racking after primary fermentation. The simple answer to this was to increase the dry hopping rate in cask.

The first cask, served at Dudley beer festival, was good, but could have been better. It had only had about a week in cask and was nowhere near long enough to maximise condition or for the dry hopping to really kick in.

The second cask was put on in The Rake. I think there were mixed reviews on this, but again, it was a few weeks ago now and I think a little longer in cask still would have been great.

The third and final cask, for now, is currently on sale in a quiet Cumbrian pub near here. Sadly, I think its sale will be slow, although the licensee is a master of his cellar craft and considering it's 8% and dry hopped into submission, I suspect with judicious hard pegging the cask might be good for a couple of weeks or more. The beer is a true candidate for that niche real keg market.

I have fretted a little about this little baby. I didn't think the hop utilisation in the copper was sufficient. I was worrying that the finished beer might not quite hit the mark. I was keen to taste the finished result in a pub, through a hand pull, appropriately clear and conditioned.

Meanwhile, we have bottled the remainder of the batch, which had been conditioning in kilderkins on the dry hops, and gave us 330 bottles of this first run. I'm currently waiting for the tadge of priming sugar and re-seeded yeast to add some carbonation before they are released. Oh, and I need to get some labels printed.

But the good news is that the assembled crowd last night, which included the irritatingly hyper-critical Jeff Pickthall2, pronounced it to be a marvellous beer. 6 weeks on dry hops seems to be just about right.

There may well be some improvements to be made; moving a little of the dry hops into bittering for instance will make it a little more balanced in my view. However, the key thing is, you can't rush a really good strong beer.


1It isn't necessary for parti-gyling to have two mash tuns. Indeed, I don't believe Fullers mash differently in their two mash tuns; both run in parallel with the same grist in each.

2I owe a huge amount to this irritation for my ever increasingly tuned palate. I fear one day I might become as irritatingly critical as him, for now I shall remain a novice irritant.

Sunday, 2 January 2011

Growing a Brewery to be viable

The beer market is incredibly sensitive to price. It might well be possible to sell a very limited amount of beer at an increased price, but basically, the vast majority of beer can only command a price that falls within fairly tight limits. The off-sales market seems to show significantly greater variation as a rule, than the on-sales market, but even so, these limits are in my view quite tight. For the purpose of this discussion I'm not intending to criticise that position. It is a fact, and one that has an influence over the economics of businesses that make beer; the breweries.

I guess beer is a bit like bread, they are both made from grain and yeast is an inherently important part of the processes. But they also share other traits on an economic level; bread is a staple food and as such its price has upper limits beyond which demand drops to zero. Of course the same could be said of potatoes, carrots, onions, rice, milk.....

Beer has one great benefit, much the same as bread; it can be made at industrial scales. Massive plants, with massive tanks, in huge buildings can ensure highly efficient processes. This has always put micro-brewers at a disadvantage. We have small brewers beer duty to help us out in that respect. The key reason for the proliferation of micro-brewers is as a result of the small brewery beer duty. Without it a brewery of the size of Hardknott would just not be economically viable.

Actually, as we currently stand, our brewery isn't really viable anyway. To make enough beer to earn an honest living we need to make more beer. We don't actually need to do very much to what we already have, but we still need to make and sell more beer if we are to make any profit. It's all to do with overheads.

Progressive beer duty starts to reduce rapidly when a brewery starts to sell more than 5000hl of beer. That's about 3000 barrels a year or about 230 firkins a week. Putting it into context that's an exclusive VAT turnover for the brewery of around £700k per year. About 24% of the turnover goes out in beer duty - £170k, and an equal or greater amount goes on raw materials. There are then some variable overheads in the form of energy, costs of ownership of the building and plant1, rates, transport and for a brewery of the size indicated there would have to be employees and so a wage bill. To achieve and maintain the level of beer sales there would be essential cost of marketing the products. It is highly likely that net profit would be less than 10% of turnover. Perhaps a £50k per annum profit is reasonably achievable, and is an above average salary, although conversely it is unlikely that a business of this size is owned by a sole individual. By today's standards this is in no way a large business. Indeed, many successful town centre pubs turn over much more and probably make much more profit than a brewery under 5000hl production.

This probably represents a sweet-spot of operating size. Above this there is a steep drop off as Progressive Beer Duty is increased steeply. Below this size overall margins can shrink due to dropping efficiencies of scale and simply because percentage net profit for any brewery is unlikely to increase above the 10% mentioned above. Reduced turnover represents reduced profit.

With the stainless steel I have in my brew house I probably have a maximum achievable turnover of around £100k. At an overall net profit of 10%, the maximum we can reasonably expect to achieve, we might earn £10k a year between us. I don't know about the reader, but I think this is insufficient for a reasonable standard of living in the 21st century. This is dependant on us successfully and efficiently brewing to capacity and selling every last drop. Bearing in mind the fact that any business person is risking financial ruin should it all go very wrong, the fact that actual disposable income available is achieved due to a determined and consistent dedication to the operation rather than just turning up 9 to 5 and doing a bit.

I don't want to appear to be complaining too much; running a business has many rewards beyond financial recompense. Some of us do it because we have tried the working-for-someone-else game and don't get on with the concept. Additionally, brewing beer is extremely rewarding. Positive comments from people who drink my beer almost, and note I say "almost", compensates for the poor rewards that today's modern competitive market creates.

It does baffle me, as a result of the key financial issues above, why there is an inherent misunderstanding of the need for breweries to grow. When I have discussed the BrewDog growth or our own plans for growth there seems to be objection to the plans.

I'm aiming for the 5000hl sweet-spot. Going above that would require world-domination plans of BrewDog proportions. However, at that level there are key problems that could reduce the overall profitability. I want to use more hops. If I increase my hopping rate by 1kg per hl, which is not overall a great increase which may seem a lot to the reader, but is what I need to do to compete with the best breweries, at current prices it would represent an increased cost of £40k per annum at this proposed level of trading. That would eat away at my profitability. The only way to negate this would be to increase production and sales, by quite some quantity, overcome the initial disadvantage of the hump caused by the onset of variable beer duty.

My chart here has a logarithmic scale for production. It makes it easier to show the full range of sizes of brewery from nano to regional breweries. It does however mean that the effect of the variable duty rate across the range 500hl - about 2000hl looks less steep than if shown on a linear scale. Either way it can be seen that any increase of capacity above 500hl is going to be incredibly significant for any expanding brewery.

BrewDog are now in this range. In a recent document, sent to me by James Watt, they state that their prices are going to have to increase to account for this increase of beer duty.
"In 2010 our production increased from 8700 HL to 14500 HL meaning the beer duty we have to pay increased by, for example, £5.50 on a 50L keg of Punk IPA."2
As the company gets bigger the increases of beer duty will become less significant therefore I would expect further economies of scale to cut in and help to counter the effects of the duty. From a business point of view, having broken the 5000hl barrier it makes sense to carry on growing.

When talking about specfic problems with the operation over the last year; things that I've also heard customers complain about, BrewDog state:
"The positive thing is that all of these is caused by the demand for our beers."
Again, more reason to carry on growing their enterprise.

So, I hope the reader might now see why the most successful breweries have to grow.

In fact, if Adnam's have their way, those that don't grow will fall foul of proposed changes to progressive beer duty anyway. However, that particular issue is another blog subject.


1I don't owe any money on the stainless steel I currently own, however, it represents capital tied up. If I had not bought the plant and put money in an ISA instead then I'd earn some interest. We rent the building and so there is a cost there. We are likely to have to borrow money if we are to grow, this will have a cost implication.

2If my readership is as clever as I expect you all are you will realise that BrewDog turnover for that level of brewing doesn't match my earlier figures. At 14500hl, from my model, they should be turning over less than £2m rather than the £3.7m. I expect the main reason for this is that a large volume of their beer is stronger and bottled, both putting an acceptable increased price on the product.

Additionally the company also now has retail outlets, further increasing gross margins.