Document Type

Working Paper

Date of this Version

4-2013

Abstract

As the market demand for craft brewed beer continues to grow, small brewers are continuing to crop up to meet the demand. With the increasing number of small breweries also comes an increasing number of brewery closings—more than 80 since 2010. While the brewing process fundamentals can be mastered with little technical knowledge, the key to a prosperous brewery is optimizing the use of all resources in the process, especially considering rising energy costs. New brewing operations often have the choice between building their own facility from scratch, or contracting their brewing operations to an established facility. This project recommends a design for a craft brewery (BASH Brewing Co.) producing 13 varieties of beer with a 100,000 bbl/year total production capacity. The recommended design minimizes the use of external utilities by maximizing the heat integration of process streams. Rigorous economic analysis to determine the profitability of the process design was performed. The startup and operations costs for building an independent facility following this design were calculated, and from this a reasonable rate for contract brewing was determined. It was found that the construction of an independent facility would require a total permanent investment of $68MM and have a net present value (NPV) of $26MM with an internal rate of return (IRR) of 20.96% in the present year. To achieve the same returns, it was determined that contract brewing would only be a more economically viable option if the contracted production price is less than $8.72/gallon of beer.

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Date Posted: 25 July 2014