Outsourcing Bottling Operations - Silver Peak Brewery
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Outsourcing Beer Bottling Presented by: Ann McKenzie Jeff Bennett Daniel Herr
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Short presentation in UNR's BADM 701 about possibility of exporting bottling operations for Silver Peak Brewery in Reno, Nevada.
Transcript of Outsourcing Bottling Operations - Silver Peak Brewery
Outsourcing Beer Bottling
Presented by:Ann McKenzieJeff BennettDaniel Herr
Overview
• History/Background• Process/operation to outsource• Challenges• Outsourcing Analysis• Conclusion
History
• Silver Peak Brewery• Founded 1999 • Three Reno locations• Owners: Trent Schmidt, Brewmaster, and Dave
Silverman, Chef
Process to Bottle
• Pump beer from storage tanks into bottles• Cap, label and pack bottles • Refrigerated storage facility• Refrigerated distribution trucks
Bottling Options
1. Build facility:• Bottling equipment• Refrigerated storage facility
2. Outsource to a bottler
3. Mobile bottling provider• Build refrigerated storage facility
• Production Capacity• Refrigeration / Storage Capacity• Distribution Channels• Forecasting / Demand Management• Product Mix• Fermentation Lead Times • Capital financing• Sales and Marketing
Challenges
• Bottling process is specific to beer• Distribution costs are highly variable• Shelf space is a premium and negotiated on a high level• No glass bottles. Plastic and can bottling only.• Typically only subcontract for distribution and private
labels.
Challenges
• 1 U.S. Gallon = 128 oz.• 1 Barrel = 31 Gallons• 1 Barrel = 3,968 oz.
(330.67 - 12 oz. Beers) (55.11 – 6 pack 12 oz. Beers)• Estimated bottled beer demand would require between
6000 and 8000 additional barrels to be produced.
Assumptions
• Mobile Bottling Solution - .045 cents per bottle• Includes bottles, caps and labels.
Outsourcing Solutions
• Eliminates new facility (Estimated Cost $65.00 per sq. ft)• Eliminates the entire bottling line (Estimated cost $50,000)
Rotary Rinser
Long Tube Filler
Head Crowner
Exterior Bottle Rinser
Air Wash Dryer
Rotary Labeler
Outsourcing Solutions
To Outsource or Not to…
• We’ve established:• We want to grow market penetration• We want to bottle the beer• There are many factors & decisions involved
• Determine Outsourcing with Break Even analysis• Based upon number of Bottles
Break Even
Built it
• Act. cost of $287k in yr 1• Zoning & Permitting• Building Construction• Bottling Equipment• Full Time Employee
• + Annual Costs• Assumes virtually
unlimited production capacity
Outsource it
• $0.045 / bottle
• Limited no. bottling operation times per year
• Inconvenience for customers
• Needs more warehousing
Break Even
• Outsource if:• < 361,352 six-packs per year
0 2 4 6 8 10 12 $-
$200,000.00
$400,000.00
$600,000.00
$800,000.00
$1,000,000.00
$1,200,000.00
Build It
Outsource
Year
Cos
t of B
ottl
ing
Research
Research
Research
Research
?
?
%
$
#
7up Pricing
34%
30%
15%
11%
10%
Cost of Canning / Bottling
Cans
Syrup
Overhead (Water, Labor, Prod.)
Can Lids
Cardboard Cases
Silver Peak Pricing
10.0 100.0 1,000.0 10,000.0 $-
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
Silver Peak Pricing
Price / oz
Profit / oz
Volume
$ / V
olum
e
Production Optimization
Variables Constants
Inventory Turns 18.00 /year 31.00 gallons / barrel
Cold Storage (Usable) 250.00 sq-ft 15.50 gallons / keg
Increase Product Capacity 7,000.00 barrels 12.00 oz / bottle
Kegs in Circulation 6,000.00 kegs 128.00 oz / gallon
Local Store Shelf Space 60,000.00 sq-ft 6.00 bottle / pack
Cans / Pallet 8,169.00 cans / pallet
Pallet Size 11.06 sq-ft
Pattlet Stack Height 2.00 pallets
Keg Stack Height 3.00 kegs
Standard Keg Footprint 2.04 sq-ft
Buffer Arround Storage 6%
Pack Footprint 0.17 sq-ft
Profit - Kegs $ 0.065 /oz
Profit - Bottles $ 0.020 /oz
Production Optimization
Bottle 6-Packs Kegs
Produce 243,907.15 5,148.53 per year
Maximize $ 1.44 $ 128.96 profits / item
Total Profits $ 1,015,180.83
X = 6-packs Y = Kegs Maximim Current Value
Production Cap (gal) 0.5625 15.5000 217,000.0000 217,000.00
Cold Storage * Turns (sq-ft) 0.0041 0.6816 4,500.0000 4,500.00
kegs available - 1.0000 6,000.0000 5,148.53
local store space 0.1667 - 60,000.0000 40,651.19
Minimum
Kegs - 1.0000 - 5,148.53
Bottle 6-Packs 1.0000 - - 243,907.15
Example Profit Line 1.4400 128.9600 900,000.0000
Production Optimization
0 50000 100000 150000 200000 250000 300000 350000 400000 450000 -
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
Production
Storage
Max Kegs
$900,000 Profit Line
6-Packs
Keg
s (#
)
Feasible Area
Results
Bottle 6-Packs KegsProduce 243,907.15 5,148.53 per yearMaximize $ 1.44 $ 128.96 profits / itemTotal Profits $ 351,226.30 $ 663,954.53 $ 1,015,180.83
Recommendations
• Outsource if:• Less than 361,352 six-packs per year
• Results
• Outsource = YES!!!• For Now..
Bottle 6-Packs KegsProduce 243,907.15 5,148.53 per yearMaximize $ 1.44 $ 128.96 profits / itemTotal Profits $ 351,226.30 $ 663,954.53 $ 1,015,180.83
