Hard Cider Business Benchmark Survey

This study enables cider makers to identify areas for potential cost savings to allow their businesses to operate with more profitable margins and to further understand the current state of the cider production marketplace.
Hard Cider Business Benchmark Survey - Articles

Updated: August 16, 2018

Hard Cider Business Benchmark Survey

Abstract

Hard cider continues to be a burgeoning industry for the United States and Canada. As the market expands, continued research is necessary for commercial cider makers to gauge their operating costs in comparison to other industry participants. Currently, there is a dearth of research in this field. In an effort to explore information regarding operational costs for the benefit of the cider industry the Cider Benchmark Survey has collected data from cider businesses of varying sizes across the United States and Canada and analyzed results to provide a clearer picture of operating costs for the industry.

This comparative study was done to enable cider makers to identify areas where they could take advantage of cost savings to allow their businesses to operate with more profitable margins and to further understand the current state of the cider production marketplace.

Procedure

Following three years of providing educational opportunities with the international hard cider industry it was now time to assess the state of these enterprises as well as identify areas for further educational enhancement. A nine question electronic survey (appendix) was promoted to past program participants and industry supporters. Commercial hard cider business owners, apple growers, head cider maker employees of hard cider businesses and producers in the process of opening a hard cider business from across the United States and Canada, responded to an electronic Cider Bench Marks survey between the dates of June 20, 2017 to July 10, 2017. Two hundred seventy-six respondents participated. The information presented here represents results from using simple filtering as well as two factor cross tabulation.

Results and Discussion

Hard apple cider was once America’s beverage of choice—a mainstay of early colonists, homesteaders and immigrants. Industrialization and migration to cities favored the economics of beer, however, and with the temperance movement and Prohibition, cider fell from prominence. Only in recent years has it experienced resurgence. (Raboin, 2017) Growth across the entire craft beverages sector has influenced cider’s market gain.

According to a Nielson study presented at the U.S. Cider Makers Association Conference 2017, the global hard cider industry represents 21.5 million cases of product worth $1.3 billion dollars retail with the majority of current consumers being younger than 45 years old and illustrating greater gender equity than beer consumers (Brager and Crompton, 2017). The United States Association of Cider Makers (USACM) also reported in December 2017 that regional cider brands experienced significant growth in the first three quarters of 2017 (Sarcone, 2017). This data indicates that when national brands are removed from the analysis, local and regional brands combined to show growth across the entire cider sector.

“According to the Nielsen data commissioned by USACM for their members, Quarter 3 of 2017 (vs. Q3 of 2016) shows a substantial increase in off-premise sales of regional cider brands, with sales up 35.6%,” (Sarcone, 2017). Specifically the greatest increase in regional brand sales was seen in Texas, which increased by 73% compared with Q3 2016, North Carolina, which saw an increase of 55% and Oregon, which increased regional sales by 49% (Sarcone, 2017).

Benchmark business management data is evolving for this recently reemerged alcoholic beverage market sector. The information reported here adds to what has recently been collected through Nielson commissioned by the USACM, Northwest Cider Survey 2016, Northwest Cider Association and the Hard cider in the north central region: Industry survey findings, UW-Madison Center for Integrated Agricultural Systems, 2017

For the purposes of this exploration, Hard Cider is considered to be the fermented juice of apples. Although regional cider is indicating sector growth, this segment of the beverage industry is relatively small. As an example, hard cider in the U.S. has a market share compared to beers of less than 2%.

A bushel of apples is expected to yield 11 – 15 gallons of fresh cider. According to Pullman (2016) cideries can expect a sales ratio (produced/sold) of 1.6. This is calculated taking the amount of cider produced and then adjusting for amount actually marketed and bringing revenue. Significant cost control is achieved by more effective monitoring and management of no sales, breakage, spoilage, and returns.

This bench mark study represents industry contributors who grow their own apples to those who strictly purchase their juice in bulk. Of the 276 cider businesses surveyed, 27% percent of them are producing between 1,000 to 5,000 gallons a year; with 14% of business producing 5,000 to 10,000 gallons of cider per year. Combining these volume level producers into one segment of cider makers producing between 1,000 and 10,000 gallons of cider per year represents 41% of respondents to this survey. Results from this group are discussed most extensively below, however smaller break out data is also represented in their respective class by gallons produced annually. Smaller segments discussed below include producers making less than 1,000 gallons of cider per year, 10,000 to 20,000 gallons per year, 20,000 to 50,000 gallons per year, 50,000 to 100,000 gallons per year and over 100,000 gallons per year are also discussed.

Total Volume of Cider Produced Annually

1,000 to 10,000 gal./yr. Producers

(41% of 276 respondents)

Cost of Juice (1,000-10,000 gal/year producers)

Considering data from the forty one percent of cider producers making 1,000 to 10,000 gallons of cider a year, the average cost of juice is $4.18/gallon.

On-site Processes (1,000-10,000 gal/year producers)

Forty percent of those surveyed are purchasing bulk fresh juice, then ferment and package on site. Thirty-six percent of those surveyed grow their own apples, press, ferment and package on site. Therefore, 76 percent of producers in this group are fermenting, packaging and marketing on site.

Variable Materials Cost (1,000-10,000 gal/year producers)

Keg cost

Purchase vs Lease

Eighty percent of respondents are purchasing their kegs at the average cost of $69.48. Eighteen percent of respondents are leasing their kegs with an average cost of $61.50 annually. Conclusions can be drawn from this data that it is more cost effective to purchase kegs than to lease them with the leasing costs being a difference of $7.98/keg. This cost savings can offset overhead costs for future production and distribution.

Keg Cap

Of the group surveyed, 40% of them purchase their keg collars for an average of $.44/each.

Label Cost

82% of respondents pay an average of $.25 per label.

Total Annual Labor Costs (1,000-10,000 gal/year producers)

Of the 30 respondents to this questions in the 1,000 to 10,000 gal/year production range, annual labor costs for business operations averaged $46,857 with $100,000 being the maximum annual labor cost reported and $2,500 being the minimum annual labor cost reported.

Market Channels Utilized (1,000-10,000 gal/year producers)

Based on the information collected, cider businesses are marketing their products in various channels of wholesale and retail markets. Of the 52 respondents who answered, 4 sell bulk wholesale, 33 sell wholesale kegs and 38 sell wholesale bottles and cans. Retail markets are also being utilized with 15 respondents reporting that they sell retail kegs, 34 selling retail bottles/cans and 31 selling their cider by the glass in a tasting room.

10,000 to 20,000 gal./yr. Producers

(11.72% of 276 respondents)

Cost of Juice (10,000-20,000 gal/year producers)

Considering data from the 15 cider producers making 10,000 to 20,000 gallons of cider a year, the average cost of juice is $3.49/gallon.

On-site Processes (10,000-20,000 gal/year producers)

Sixty percent of those surveyed in this producer volume segment grow their own and purchase fruit, press, ferment, package and market on site. Forty percent of those surveyed in this segment purchase bulk fresh pressed juice, ferment, package and market on site.

Variable Materials Cost (10,000-20,000 gal/year producers)

Keg cost

Purchase vs Lease

Of eight respondents purchasing kegs, representing 80 percent of this producer volume segment, the average cost of purchasing kegs is indicated to be $98.79. Two respondents, of this producer volume segment, indicated they are leasing kegs. One respondent reported lease cost at $4.25 per use and another at a daily rate of $.10 per day.

Keg Collar & Cap

Of this producer volume segment, six indicated they are purchasing keg collars and caps at an average of $.18 per collar and three indicated they are purchasing keg caps an average of $.08 per cap.

Label Cost

Eight respondents pay an average of $.24 per label.

Total Annual Labor Costs (10,000-20,000 gal/year producers)

Of the 9 respondents to this questions in the 10,000 to 20,000 gal/year production range, annual labor costs for business operations averaged $121,111 with $375,000 being the maximum annual labor cost reported and $50,000 being the minimum annual labor cost reported.

Market Channels Utilized (10,000-20,000 gal/year producers)

Based on the information collected, cider businesses are marketing their products in various channels of wholesale and retail markets. Of the 15 respondents who answered, 2 sell bulk wholesale, 13 sell wholesale kegs and 11 sell wholesale bottles and cans. Retail markets are also being utilized with 10 respondents reporting that they sell retail kegs, 11 selling retail bottles/cans and 11 selling their cider by the glass in a tasting room.

20,000 to 50,000 gal./yr. Producers

(10.94% of 276 respondents)

Cost of Juice (20,000-50,000 gal/year producers)

Considering data from the 13 cider producers making 20,000 to 50,000 gallons of cider a year, the average cost of juice is $2.95/gallon.

On-site Processes (20,000-50,000 gal/year producers)

Seventy-one percent of those surveyed in this producer volume segment purchase bulk fresh pressed juice, ferment, package and market on site.

Variable Materials Cost (20,000-50,000 gal/year producers)

Keg cost

Purchase vs Lease

Of nine respondents purchasing kegs, representing sixty-nine percent of this producer volume segment, the average cost of purchasing kegs is indicated to be $103.71. Four respondents, of this producer volume segment, indicated they are leasing kegs at an average cost of $46.75 annually.

Keg Collar & Cap

Of this producer volume segment, nine indicated they are purchasing keg collars and caps at an average of $.24 per collar and $.14 per cap.

Label Cost

Seven respondents pay an average of $.20 per label.

Total Annual Labor Costs (20,000-50,000 gal/year producers)

Of the 11 respondents to this questions in the 20,000 to 50,000 gal/year production range, annual labor costs for business operations averaged $163,636 with $400,000 being the maximum annual labor cost reported and $75,000 being the minimum annual labor cost reported.

Market Channels Utilized (20,000-50,000 gal/year producers)

Based on the information collected, cider businesses are marketing their products in various channels of wholesale and retail markets. Of the 13 respondents who answered, 7 sell bulk wholesale, 13 sell wholesale kegs and 11 sell wholesale bottles and cans. Retail markets are also being utilized with 11 respondents reporting that they sell retail kegs, 13 selling retail bottles/cans and 11 selling their cider by the glass in a tasting room.

50,000 to 100,000 gal./yr. Producers

(5.47% of 276 respondents)

Cost of Juice (50,000-100,000 gal/year producers)

Considering data from the 6 cider producers making 50,000 to 100,000 gallons of cider a year, the average cost of juice is $2.63/gallon.

On-site Processes (50,000-100,000 gal/year producers)

Fifty-seven percent of those surveyed in this producer volume segment grow their own fruit, press, ferment, package and market on site.

Variable Materials Cost (50,000-100,000 gal/year producers)

Keg cost

Purchase vs Lease

Of two respondents purchasing kegs, representing 40 percent of this producer volume segment, the average cost of purchasing kegs is indicated to be $49. Three respondents of this producer volume segment indicated they are leasing kegs, however data reported is inconclusive to determine lease cost.

Keg Collar and Cap

Of this producer volume segment, five indicated they are purchasing keg collars and caps at an average of $.34 per collar and the four indicating they purchased caps at $.23 per cap.

Label Cost

Five respondents pay an average of $.13 per label.

Total Annual Labor Costs (50,000-100,000 gal/year producers)

Of the 4 respondents to this questions in the 50,000 to 100,000 gal/year production range, annual labor costs for business operations averaged $177,500 with $240,000 being the maximum annual labor cost reported and $70,000 being the minimum annual labor cost reported.

Market Channels Utilized (50,000-100,000 gal/year producers)

Based on the information collected, cider businesses are marketing their products in various channels of wholesale and retail markets. Of the six respondents who answered, three sell bulk wholesale, five sell wholesale kegs and five sell wholesale bottles and cans. Retail markets are also being utilized with four respondents reporting that they sell retail kegs, four selling retail bottles/cans and four selling their cider by the glass in a tasting room.

100,000 gal./yr. or more Producers

(13.28% of 276 respondents)

Cost of Juice (over 100,000 gal/year producers)

Considering data from the 15 cider producers making over 100,000 gallons of cider a year, the average cost of juice is $2.22/gallon.

On-site Processes (over 100,000 gal/year producers)

Seventy percent of those surveyed in this producer volume segment purchase fresh pressed juice, ferment, package and market on site.

Variable Materials Cost (over 100,000 gal/year producers)

Keg cost

Purchase vs Lease

Of six respondents purchasing kegs, representing 66 percent of this producer volume segment, the average cost of purchasing kegs is indicated to be $75.77. Six respondents, of this producer volume segment, indicated they are leasing kegs however data reported is inconclusive to determine lease cost.

Keg Collar & Cap

Of this producer volume segment, five indicated they are purchasing keg collars and caps at an average of $.13 per collar and the four indicating they purchased caps at $.11 per cap.

Label Cost

Seven respondents pay an average of $.10 per label.

Total Annual Labor Costs (over 100,000 gal/year producers)

Of the seven respondents to this question in the over 100,000 gal/year production range, annual labor costs for business operations averaged $290,000 with $780,000 being the maximum annual labor cost reported and $134,000 being the minimum annual labor cost reported.

Market Channels Utilized (over 100,000 gal/year producers)

Based on the information collected, cider businesses are marketing their products in various channels of wholesale and retail markets. Of the 16 respondents who answered, five sell bulk wholesale, 13 sell wholesale kegs and 15 sell wholesale bottles and cans. Retail markets are also being utilized with 10 respondents reporting that they sell retail kegs, 10 selling retail bottles/cans and 12 selling their cider by the glass in a tasting room.

Conclusion

Research results represent a snapshot of cider makers at a range of volume-based annual production levels. There is a broad market of wholesale and retail outlets available for producers in each volume category. In the 1,000 to 10,000 gal/yr producer volume level, there is money to be saved for those leasing kegs vs purchasing kegs as the keg purchase price is less than $8.00/year difference. This can save considerable overhead costs in future years as sales and growth continue. The majority of cider makers, whether growing their own apples and pressing juice or purchasing juice in bulk, are fermenting, packaging, and marketing cider on site. This leads to the conclusion that the current small scale cider maker (1,000 to 10,000 gal/year) falls into the craft beverage category and could leverage their brand as a local product. These producers are utilizing all market channels with the majority selling wholesale kegs and bottles/cans, retail kegs, retail bottles/cans and tasting room by the glass sales.

As the industry is evolving and adapting to consumer demands, continued growth of the North American fermented fruit juice is projected to remain. There is evidence suggesting profitability at all levels of production and all marketing channels. A continuing challenge for those involved in the production of fruit suitable for fermenting, fermenting, packaging and distribution may be the effective and efficient deployment of available resources. The relative youth of the N.A. hard cider beverage segment will benefit from continued and refined industry benchmark study.

Acknowledgements

Thank you to those who participated in the Hard Cider Benchmarks Study.

References

Brager, Danny and Crompton, Matt. (2017) U.S. Cider Trends [PowerPoint Slides]. Retrieved from ciderassociation.org

Pullman, Madeleine and Harris, John. (2016). Craft Beverage Business Management.

Raboin, Matt. July, 2017, Cider Study in the North Central Region: Industry Survey Findings. UW-Madison Center for Integrated Agricultural Systems.

Sarcone, Kristen. December 2017. ‘Tis the Year of Regional Cider. Hard Cider News.

Authors

Hard Cider Agricultural International Development Farmers' Market Development Social Media Retail Farm Marketing Value Added Product Marketing and Business Development

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