The Cost of Craft

One of the biggest hurdles, at least psychologically, to distillers and brewers using local malt or grain is the perceived increase in cost.

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Let’s do the math, though. For distillers, we’ll round up and estimate that it takes about 1,000 lbs of grain to produce a barrel of whiskey. (Your mileage will vary, obviously, based on the grain, fermentation, distillation methods, etc.)

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At 3-4 years, if you yield 40 gallons at 60 percent ABV, you can fill about 270 bottles at 45 percent. This means that you have slightly less than four pounds of grain dedicated to each finished bottle. (Again, this is an estimate and your yield will vary.)

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Jason Perkins of Copperworks Distilling in Seattle uses about $3.35 in ingredients per bottle of malt whiskey. He calculated that an increase in cost for their locally sourced grain from 40 cents/pound to $1/pound, more than doubling the expense, would add $2.30 to the cost of a bottle.

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“Can I charge $2.30 more for that bottle of whiskey? Absolutely,” he said. “I can probably charge $15 or $20 more for that bottle of whiskey. It has a story, and an environmental and local impact that other whiskeys don’t have. Now I’ve got a flavor differentiator, I’ve got a story differentiator, I’ve got a social responsibility differentiator, and I can probably sell that whiskey for a lot more, not just $2.30 more.”

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He noted that, while local grain currently costs more, by investing in his local grain economy it will bring down the cost of grain in the long-term by helping to grow local businesses.

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“Right now it’s a privilege, and the reason that we can do it is that it differentiates from the market,” Perkins said. “If everyone is doing it, if everyone in my region is making whiskey from that malt, we’re supporting the local malthouse and the farmers enough that we don’t have to pay $1/pound anymore, we’re can go back to paying to 40 cents a pound, plus we’re all buying local malt. Now the money is staying local.”

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Meanwhile on the brewery side, the cost increase for a beer is even more slight. Brewers Association Supply Chain Specialist Chris Swersey said the BA benchmark for craft beer malt usage is 70 to 72 pounds per barrel. At 248 pints in 31 gallons, that’s less than .3 pounds of grain per pint.

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At 50 cents per pound of bulk malt, that’s 15 cents of malt per pint of beer. Even tripling that cost to $1.50/pound, that’s adding 30 cents to the ingredients cost per pint. Compare that to the value of the story, the value of supporting local jobs.

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It may require some consumer education, but at a time when a pint of pale ale can run to six or seven dollars, keeping business local and providing a product that stands out from the pack can pay for itself.