Quality vs. Price:

Craft Malt's Impact on a Distiller's

Cost of Goods

Craft Malt Conference 2018

Donald Snyder

Donald@whiskeyresources.com

Goals

• Understand the breakdown of the costs that go into a craft spirit bottle.

• How to show a distiller that an investment in a higher-quality malt will

improve the product without a significant overall % increase in their Cost of

Goods Sold, while improving their story.

Background

• Buffalo Trace Distillery

• MGPI of Indiana

• Started Whiskey Resources in 2013

• Launched Whiskey Systems

• Distillery Production Tracking and Inventory Mgmt software

• TTB Reporting and Compliance

• Simplifies Distillery Cost Accounting

• Help over 300 Craft Distilleries in the US

Distillery Cost Accounting 101

http://distilling.com/publications/distiller-magazine/

Distilled Spirits Cost Breakdown

Lots of math…

Grain Assumptions

• National Pale 2 Row Malted Barley

• Estimate $0.60/pound (or $30/50 lb

bag)

• Specialty Local Craft Malt

• Estimate $1.20/lb (or $60/50 lb

bushel)

• A 100% Price Increase

• Corn

• Est $0.37/lb (or $18/50 lb bag)

• Rye

• Est $0.46/lb (or $23/50 lb bag)

Making Bourbon

Example Bourbon Mash Bill:

• 500 gallons of fermentation

• Need ~1,050 pounds of grain

• Get to 8% ABV Beer (or 16 Proof)

• 500 gal x 16 PF = 80 Potential Proof Gallons before Cuts

• Yield ~66 Proof Gallons after Heads and Tail Cuts

• 53 gal bbl filled with 125 Proof

Making Bourbon

• 70% Corn = 750 lbs ($275)

• 25% Rye = 250 lbs ($115)

• 5% Malted Barley = 50 lbs

• National Malt: ($30)

• Craft Malt: ($60)

• Yeast + Enzymes = ($50)

• New 53 Gallon Barrel = ($250)

• Total $/Barrel:

• W/ National Malt: $720/barrel

• $30 Malt = 4% of cost

• W/ Local Craft Malt: $750

• $60 Craft Malt = 8% of Cost

Making Bourbon

• Labor

• Head Distiller: $20/hr x 8 hours = $160

• Assistant Distiller: $15/hr x 6 hours = $90

• Total Labor: $250/barrel

• Utilities (Water, Electricity, Steam, Propane) ~$100/barrel

• Total $/Barrel:

• W/ National Malt: $1,070/barrel

• $30 Malt = 2.8% of cost

• W/ Local Craft Malt: $1,100

• $60 Craft Malt = 5.5% of Cost

Making Bourbon

• Dump/Drain Barrel after 2 years

• Est 10% Loss 1st Year, 4% Loss Every

Year After

• 66 Original PG x 86% Remaining =

56 Recovered Proof Gallons

• 6 x 750ml Bottles at 85 Proof, Est 1

Proof Gallon/Case

• Bottled 336 bottles

• W/ National Malt: $1,070/336 btl

• $3.18/bottle

• $30 National Malt Cost = $0.09/btl

• W/ Local Craft Malt: $1,100/336 btl

• $3.27/bottle ($0.09 diff)

• $60 Craft Malt = $0.18/btl

Every craft bourbon distillery should be

using local and unique craft malts.

Making Single Malt Whiskey

Example All Malted Barley Mash Bill:

• 500 gallons of fermentation

• Need ~1,050 pounds of grain

• Get to 8% ABV Beer (or 16 Proof)

• 500 gal x 16 PF = 80 Potential Proof Gallons before Cuts

• Yield ~66 Proof Gallons after Heads and Tail Cuts

• 53 gal bbl filled with 125 Proof

Making Single Malt Whiskey

• 100% Malted Barley = 1,050 lbs

• National Malt: ($630)

• Craft Malt: ($1,260)

• Yeast + Enzymes = ($50)

• New 53 Gallon Barrel = ($250)

• Total $/Barrel:

• W/ National Malt: $930/barrel

• $630 Malt = 68% of cost

• W/ Local Craft Malt: $1,560

• $1,260 Craft Malt = 80% of Cost

Making Single Malt Whiskey

• Labor

• Head Distiller: $20/hr x 8 hours = $160

• Assistant Distiller: $15/hr x 6 hours = $90

• Total Labor: $250/barrel

• Utilities (Water, Electricity, Steam, Propane) ~$100/barrel

• Total $/Barrel:

• W/ National Malt: $1,280/barrel

• $630 Malt = 49% of cost

• W/ Local Craft Malt: $1,910

• $1,260 Craft Malt = 66% of Cost

Making Single Malt Whiskey

• Dump/Drain Barrel after 2 years

• Est 10% Loss 1st Year, 4% Loss Every

Year After

• 66 Original PG x 86% Remaining =

56 Recovered Proof Gallons

• 6 x 750ml Bottles at 85 Proof, Est 1

Proof Gallon/Case

• Bottled 336 bottles

• W/ National Malt: $1,280/336 btl

• $3.81/bottle

• National Malt Cost = $1.88/btl

• W/ Local Craft Malt: $1,910/336 btl

• $5.69/bottle ($1.88 diff)

• Craft Malt = $3.75/btl

Do Good Distillery

Do Good Distillery

Quality Inputs = Quality Outputs

• Beechwood Smoked Malts

• Peat Smoked Malts

• Cherry Wood Malts

• Pilsner, Chocolate, Crystal Malts

• Use local grains whenever possible

(1:30 clip)

• https://youtu.be/wXILEyDK40Q

(Full 6min)

• https://youtu.be/gLqRJ9hbhUw

Connecting with Distillers

• “Goal is to make high quality

spirits, made with the best possible

ingredients.”

• Why choose the cheapest possible malt?

• “Competition in the spirit space is

fierce. Need to differentiate our

products.”

• Use a custom, craft malt that will make your

products stand out.

• “We take pride in being your local spirit.”

• Enhance your story with sourcing local grains and

supporting local jobs. Come and visit our farm.

Summary

• For Craft Bourbon Distillers, using craft malt at 5-15% of a mash bill is an insignificant impact to Cost of Goods.

• For American Single Malt Distillers, the extra $ cost/bottle will get a higher shelf price.

• Craft Malts are NOT going to be the lowest cost malt option.

• Instead focus on the value they supply to brewers and distillers.

• Craft distillers know they need to differentiate their products

• Use local, high-quality products made from high-quality ingredients

Thank you!

Donald Snyder

Donald@Whiskeyresources.com