A Sober Perspective on Hard Cider: Does this emerging ... · Does the emerging industry offer...
Transcript of A Sober Perspective on Hard Cider: Does this emerging ... · Does the emerging industry offer...
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Hard Cider: Does the emerging industry offer profitable new opportunities for apple growers?
Presentation for the Iowa Fruit and Vegetable Growers Conference January 29, 2016 Matt Raboin • University of Wisconsin – Center for Integrated
Agricultural Systems (CIAS) Outreach Specialist • Brix Cider Company Founder and Co-Owner
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1. Brief history of the cider industry
2. Current cider industry trends
3. Intro to cider styles 4. The economics of cider 5. Opportunities for
growers
What’s on tap for this presentation?
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Some often quoted cider history: John Adams drank a tankard of cider every day, saying of his habit, “It seems to do me good.”
Thomas Jefferson devoted much of his orchard at Monticello to cider apples, calling his Taliaferro cultivar “the best cider apple existing.”
William Henry Harrison got elected on the “log cabin and hard cider” platform
In the middle of the 18th century, the average Massachusetts resident was consuming 35 gallons of cider a year
Characters like Johnny Appleseed brought apples (and cider) westward
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Key Factors in the Fall of Cider
• The Temperance Movement • The decline of the self-
sustaining farm • Increased availability of
other safe beverages • German immigrants
producing beer • Industrialization and
urbanization economically favoring beer production
• Prohibition putting the nails in the coffin, and even after prohibition, home cider-making remaining illegal for decades
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0
50
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150
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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Cider Revenue 2005 - 2014 (in millions of dollars)
A Cider Renaissance?
Source of data: www.ibisworld.com
• A five year annual growth rate of 50.6%
• Projected 13.9% growth through 2019
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Who’s Buying Cider?
34
• A young market (nearly half under age 35)
• Approximately 50:50 split between men and women
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A Sobering Note
• The cider industry is dominated by a small number of major players who often purchase juice concentrate from major apple growing areas and foreign markets to make their products (meaning limited benefit for Midwest apple growers)
Notes: MillerCoors owns Crispin and Smith and Forge; Anheuser-Busch InBev owns Stella Cidre, Johnny Appleseed Cider, and Michelob Ultra Cider; C&C Group owns Woodchuck; and Boston Beer Company owns Angry Orchard
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The Bigger Opportunity for US Growers: Craft and Artisanal Cider
• Local and regional craft cideries are sprouting up all across the country
• Some of the bigger companies are developing more artisanal brands and products that feature locally and regionally grown apples
• Of 105 respondents in a 2014 survey of cider makers, all of them projected increased cider production in the coming year*
*Source: Miles, Carol and Greg Peck. 2013 and 2014 CiderCon Survey Results of Cider Producers and Cider Apple Growers
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Cider Makers in the Midwest
Source: Cydermarket.com
Michigan = 56 Wisconsin = 16 Minnesota = 14 Ohio = 11 Indiana = 10 Illinois = 6 Missouri = 6 Iowa = 4
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More Reasons to be Excited about “Craft” Cider
• Taps promising markets (e.g. markets for local and sustainable beverages)
• Has a story of local roots that can compete with wine and beer
• Agritourism potential to support rural economies • The focus on quality can command price
premiums
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What Defines “Craft” Cider?
Made with specialty cider apple varieties, marketed like
wine, usually local or regional
Often made with eating apple
seconds or dual purpose apple
varieties, usually local or regional
Made with concentrate, sweeteners,
“natural” flavors, mass-produced, like
apple soda
“Mainstream” Ciders “Hybrid” Ciders “Craft” Ciders
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Beyond the Spectrum: Cider Styles
New World Cider English Cider French Cider Spanish Cider Ice Cider Applewine Cider with other fruit Cider with herbs or spices Hopped ciders Perry For more information see cider style guidelines: http://www.bjcp.org/docs/2015_Guidelines_Cider.pdf
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What makes a good cider apple? Brix – (Or specific gravity / sugar content) determines the potential alcohol percent of the cider. High brix is desirable, and many eating apples are too low. Acidity - Balanced acidity is desired, often from blending low and high acid varieties. Tannins – Tannins provide desirable bitterness and astringency that fills a cider out. Tannin levels are very low in eating apples and are sought after by cider makers. Mouthfeel – A full bodied cider, not too watery, not too syrupy, is generally desired. Unique Flavors and Aromas – Flavors and aromas in finished ciders can be subtle, but it is nice when an apple adds something beyond the basics. Appearance – Generally clear cider is desired over cloudy, and juices can range from light straw to deep gold or even shades of pink and red.
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(Oversimplified) Economics of Growing Cider Apples
Apples Price Notes Specialty cider apples (based on a Vermont survey)*
$20/bushel Small sample size
Eating apples for cider (based on the same Vermont survey)*
$5/bushel Small sample size
Specialty cider apples in Wisconsin (based on discussions with Wisconsin growers and cider makers)
$20-$25/bushel Small sample size
Average price for fresh market apples in the US (based on 2012 Census of Agriculture, which had a record high price)
$15/bushel This will vary considerably by region, apple variety, and other factors.
Typical “Pick Your Own” markets (rough estimate)
$40/bushel Requires more marketing effort
Typical urban farmers markets (rough estimate)
$80/bushel Requires considerably more marketing effort
*Survey Source: Becot et al. 2014. http://www.uvm.edu/~fruit/treefruit/tf_cider/BecotWLCider033015.pdf
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Establishing a Cider Orchard: Feasibility Studies
Sources: Farris, Jarrad, Greg Peck, Alson Smith, and Gordon Groover. 2013. “Assessing the Economic Feasibility of Growing Specialized Apple Cultivars for Sale to Commercial Hard Cider Producers.” Virginia Cooperative Extension. Publication AREC-46P. Galinato, S. 2014. “Cost Estimation of Establishing a Cider Apple Orchard in Western Washington.” Washington State University Extension Fact Sheet FS141E. Matson Consulting in coordination with the Virginia Foundation for Agriculture, Innovation, and Rural Sustainability. 2012. “Feasibility Study for a Small Farm Cidery in Nelson County Virginia.”
General Findings: • A specialty cider apple orchard can
be profitable
Advantages: • Cider apples don’t need to look
good, which can reduce input costs
Risks: • Uncertainty of the production
dynamics and disease resistance of cider apple varieties
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Adding Value with Cider
2 gallons of apple juice
Let’s assume that the apples cost
$10/bushel to grow
At $5/gallon for fresh juice, a grower barely
covers costs
At $10/bottle, we have increased the value by
a factor of 10*
*Of course making and marketing cider comes with additional costs that we will consider in the next slide
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Cost of apples (at $10.00/bushel) = $1.00
Cost of packaging (bottle, label, box) = $1.00
Payments on building/equipment = $1.25
Paid labor costs for cider production = $0.50
Self distribution costs = $1.50
Marketing costs = $0.75
Retailers margin = $3.00
Profit? = $1.00
A Hypothetical Example of Gross Margins on a $10 bottle of cider
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Answering the question posed in the title of this presentation… Does the emerging cider industry offer profitable new opportunities for apple growers?
YES! But… • Don’t expect to capture much of the value of mainstream ciders • There are risks and uncertainties related to craft cider
production • Each business will have to calculate its own margins and
consider its interests as well as its competitive advantages/disadvantages