Tuesday, January 20, 2009

Beeronomics: In Hard Times, Doing it Yourself

It has been years since I brewed my own beer, but recently my son asked me the question I have been waiting a long time to hear: "how do you make beer?" "Well son," says I, "I'll show you." So off we set to FH Steinbart to load up on supplies.

[I had in mind something modeled on Ninkasi's Total Domination, which without a doubt is the best beer brewed in Oregon and possibly the country. On this I am sure there will be no debate. And by the way has Ninkasi, in a short time, become the best Oregon brewery? I think it might. Kudos to Jamie Floyd.]

Anyway Steinbarts on Saturday was absolutely crammed with people buying supplies. Unfortunately I was after Centennial, Cascade and Chinook hops to make a classic 'Three C' IPA but the Chinooks were gone. Thoughts of substituting Willamette, Newport and Zeus were also dashed, so I decided to pitch a curveball: up the hops (to compensate for the lost alpha acids) and use Mt. Ranier instead. I'll let you know how it turns out. But the point is that this economic naturalist started to wonder whether, as incomes get strained, people start to make their won rather than buy it in the bottle. Does it make sense to do this in tight economic times? 

Let's do some back-0f-the-envelope calculations. To get all the ingredients for my beer, plus a few sacks for the grain and hops but basically nothing else (including bottles and caps) I spent about $65. Blame the hops which are not only scarce but expensive. I had some leftover ingredients and I have all the other equipment from before so we will consider it a sunk cost and ignore it. So let's say $60 for the ingredients. From this I make a five gallon batch and I will probably yield about 4.5 gallons after ditching the sediment - maybe less because I dry-hopped - and then some spillage due to inevitable personal blundering, so let's say 4 gallons at the end or about 7 six-packs or 23 22oz bottles.  

A six pack of good beer is about $7-$8 in my local supermarket.  So the retail cost of this beer is about $50.  If I manage something sublime perhaps I can compare to Total Domination which costs about $3.30 for a 22oz bottle, so my beer would retail for about $75.  

On a broad scale then, the cost of the ingredients are about equivalent to the retail price of the finished product.  Include the opportunity cost of my time, the certainty that my beer will fall far short of Ninkasi's and the extremely high probability that I will have managed to acquire an unwelcome bacteria that gives my beer an off flavor, and it seems clear that brewing your own is NOT a way to save money.  

The crowd at Steinbarts could still be an indication of a bad economy: many people with unwanted time on their hands might turn to brewing which is a nice hobby and also has the appealing aspect of providing a large amount of alcohol at the end.  

This calculation is, by the way, why I have largely stopped brewing: for about as much money as brewing my own I can get super-fantastic beer in many varieties and I don't have to wait for it. 


Dylan said...

I am also a sometimes homebrewer and since I work in finance, I have done this exact same analysis in regards to the savings of homebrewing. My conclusion was the same as yours: You almost always don't save money homebrewing. I use extract and even use Chinook hops only (higher acidity means I can use less and save money) and I usually get about 45 bottles in a batch. My bill is usually $40 for ingredients and I add on $5 for caps, cleanser, heat to boil, water, etc..

I find that buying microbrew at a cheap grocery store like Winco is the best bet. I can get my favorite beer - Ebenezer Ale - for about $6.50 a six-pack and I don't have to spend hours in the process.

However, homebrewed cider is a slam-dunk on cost savings. If you can buy juice for about $4 a gallon, the yeast is about $2 and with the $5 overhead, the cost is $27 for 45 bottles of cider, which is normally well over $1 a bottle in the store.

I only homebrew now to make something that I can't find easily in a store, like my latest batch - Vanilla Porter. Then the cost and effort is worth it.

HC said...

We'll have to go to the Ninkasi brewery when you come down to Eugene in a few months. I'd be happy to buy a round.

Dann Cutter said...

To add a wrinkle to this calculation, factor the relatively low cost of creating a 'kegerator' in house nowadays.

With that, not only can you dramatically cut the costs of each serving, but can grab those divine offerings in their more natural draft form. 'Course, you have to drink more, but a few friends seems to address this nicely. You also give up the easy 'beer of the day' but if you pickup a staple, this can offset the odd now and again purchase of something else.

Rough calculations, ignoring time savings spent at the store etc, gives me a six pack at roughly $4.50 for even some of the nicer micros. Also, no bottles and much less recycling. Now there is some initial setup cost, but with reasonable depreciation (5 yr) and gas costs, I put that only at about a dime per poured beverage (variably heavily on usage - I mean, if you only get one keg ever...)

Now, this spring I am setting up a second tap to take advantage of some of the nice 1/6 barrels coming out of the smaller breweries, as well as springing for the more exotic pouring taps to minimize head loss. This will certainly add more to the final accounting - but not appreciably so. I would say I am comfortably under $5 for sixpack, and for draft quality beer, which does have its advantages.

The downside is it does tend to lock you into a brand of brew for what can seem a long time if no one helps. One of my first kegs was Widberry, of which I am a huge fan, but the time that keg was done, so was my fandom.

So, $2 to $3 for convenience and time. Not a bad savings. You do however tend to drink more beer. However, breweries tend to treat you with a different level of respect when ordering a keg - and many a time, they throw in freebies of very hard to get offerings to entice further sales.

And nothing is a cool as pouring your guests a draft brew.

Patrick Emerson said...

Dann, I am afraid I am not a volume drinker which is another part of the calculation I didn't mention: once done, I have lots of beer and I don't drink that much. If not terribly good, I am not sure generous gifts to friends will be seen as terribly generous. I prefer having a beer or two in pubs when I can - I enjoy the social aspect.

Sonny, you are on!

Dann Cutter said...

There is a definite advantage of the social aspect to pubs I just admit. We don't have many other than Rogue on the coast, and alas, after a while, $5 pints are just too much too bear. That being said, I am in DC right now, and long for a $5 pint of decent brew. Lots of good brew here, all VERY spendy. And Irish pubs here have something against the Rueben... though some of the obscure Irish brews are worth the $8.

Dylan said...

That's a great idea going the kegorator route. Buying a keg at the brewery insures high quality beer and you get a nice price per beer. Of course there's the electricity for the extra fridge, but other than that, the cost is pretty dang good.

The best bet is to get a used kegerator (in good condition) off craigslist or something.

Jeff Alworth said...

There are a few caveats to your numbers--and a few ways to brew beer more cheaply.

The beer you brewed (I have some insight about the recipe) was expensive. It used three varieties of hops and had a high grain bill. Beer in the US isn't priced according to ingredients--you pay as much for a Deschutes IPA as you do Mirror Pond. Yet for you to brew Mirror Pond would have saved $20 or more. Just worth noting.

If a person wished to brew cheaply, she could learn to brew all-grain recipes, saving substantially on malt. With a little time and foresight, one can also grow her own hops (in Oregon, anyway), saving more money yet again. As you collect more tools and learn more shortcuts, your costs go down, too.

With planning, a homebrewer could be making Total Domination-like IPAs for probably under $30--four bucks a sixer. Not bad.