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Brewing Report: The Economics of Barrel Aging

by Angela Rose on March 4, 2018, 03:47 pm MST

As demand for barrel-aged beers skyrockets, many varieties sell for more than $1 an ounce, but their production comes with increased costs as well.

Though the origin of barrel aging beer in the U.S. is unclear -- some insist it started in the 1990s with Goose Island's Bourbon County Stout while others give credit to Sam Adams' Triple Bock -- the popularity of the style is growing with consumers and brewers alike.

At the 2016 Great American Beer Festival, held in Denver, the Wood- and Barrel-Aged Strong Beer category was one of the most competitive, with 159 entries. That number increased to 175 in 2017. Chicago's Festival of Wood and Barrel-Aged Beer, which began in 2003, featured more than 150 brewers at its 2016 gathering. The 2017 festival included 206 breweries and cideries pouring their best barrel-aged offerings.

In October 2017, Sam Adams released the 10th vintage of Utopias, a 28 percent ABV barrel-aged barleywine. The brewery produced 13,000 bottles for 2017 priced at $199 each. The same month, Colorado's WeldWerks was selling bombers of its Medianoche Reserve, a 14 percent ABV barrel-aged imperial stout, for on-site enjoyment in their taproom for $40 each.

But there's a reason why brewers charge a steeper price for these suds blessed by wood than many of their brews crafted using standard methods -- and it's not just because of the hype that surrounds the release of so-called white whales. Simply put, barrel-aged beers cost more to produce.

To get a better picture of the factors that lead to this increase in production cost, CompanyWeek checked in with professionals at three breweries known for their barrel-aging programs: Avery Brewing Company, The Lost Abbey, and Jessup Farm Barrel House.

Photo Courtesy Jonathan Castner

A cornerstone of Avery's model

Avery Brewing Company, founded by Adam Avery in Boulder, Colorado, in 1993, began its barrel aging program in 2005 with an experiment to see how several Avery beers would develop when aged in wood.

"Steve Wadzinski, who is now our brewing engineer, and Andy Parker, our barrel herder, got some barrels from California and filled them with Hog Heaven, Salvation, and Reverend," says Bernardo Alatorre, Avery's production manager. "They called it the Crucifixion Series because it was the Holy Trinity in wood."

Though Alatorre says very little of what was produced in those early stages actually made it to the taproom for consumption, the Avery team learned a lot about the barrel-aging process as they investigated the results of using different adjuncts, barrels, aging times, and the addition of microbes for souring.

"Since then, the program has grown into a sizeable effort," Alatorre says. "Now, it is basically the cornerstone of what we do as a business model."

The brewery produced close to 6,000 barrels of barrel-aged product in 2017, including the beers in their Botanicals and Barrels series, their annual barrel releases (namely, Uncle Jacob's Stout, Rumpkin and Tweak), and special Barrel Series releases. Total annual production of all Avery beers was 63,000 barrels.  

Photo Courtesy Jonathan Castner

Alatorre notes that some of the brewery's barrel-aged beers retail for $1 an ounce or more, so while 10 to 15 percent of their production is dedicated to barrel aging, the dollars those beers bring in account for a significantly higher percentage of total revenues.

As for why these beers cost the brewery more to produce, he says the reasons are numerous -- beginning with the ingredients for the base beer. Because many of the company's barrel-aged beers are sours, for example, they require an inoculum.

"We use a proprietary blend that we started with one of the companies here in Denver," he says. "But we need pitchable volumes, which means very large amounts of inoculate. That can cost us a few thousand dollars."

Other beers in Avery's barrel series utilize base recipes that require large quantities of high-priced spices and sugars. And because some of them are in the neighborhood of 15 to 16 percent ABV, lack of efficiency is also an issue.

"Brewhouses are made to basically deal with standard beers that are anywhere from 4 to 8 percent alcohol," Alatorre explains. "In the case of heavy alcohol beers, you cannot put any water on them to starch your grain and extract all of the sugars. So, there are a lot of inefficiencies that also need to be accounted for."

Photo Courtesy Jonathan Castner

The barrels in which the beer is left to age are another cost -- and not a small one.  "If you are talking about fresh barrels, it's a little over $100 per piece of wood," he says. "It can go all the way to $250, $300, or more for something like a specialty-smoked scotch or any high-end wine barrel. And some of those barrels cannot be reused. A bourbon barrel for example, which hovers anywhere between $115 and $200 or sometimes more depending on what you get, may be single use and then disposed of."

All those barrels take up space. Avery's warehouse, which currently houses over 3,000 barrels but has the capacity to hold many more, is 42,000 square feet.

"Storage space is one of the largest costs," Alatorre says. "And that storage space needs to have at least some sort of temperature control." Avery's warehouse has 24/7 ventilation that rolls air vertically to prevent temperature differentials between barrels at the bottoms of the racks and those at top. He notes that horizontal displacement of air is also important to avoid hot and cold spots.

"Debarreling and cleaning require a lot of labor," Alatorre continues. "And you have to time everything correctly. If you don't debarrel at the right point, you either waste barrel character because you debarreled too early or you get some deterioration because you kept it in there for too long."

"You have to keep in mind that everything you've paid for -- from barrels to ingredients to labor -- is going to be stranded for months at a time," he concluded. "There is a significant investment when you do barrel-aged beers. They take a while before you see returns."

Photo Courtesy The Lost Abbey

The Lost Abbey finds barrel-aged enlightenment

Co-founded by Tomme Arthur and Vince and Gina Marsaglia in San Marcos, California, The Lost Abbey has been making barrel-aged beers since its doors opened in 2006.

"At the time, we committed to purchasing a mixture of bourbon, brandy, and French oak barrels to start our program," says Arthur, who is also the director of brewery operations. "We joked that we had one of the largest barrel aging programs on the West Coast, as very few people were using oak at a high level back then."

Since its early days, The Lost Abbey's barrel program has yielded well over 75 unique barrel-aged beers and blends including small batch releases, annual non-sour releases, and annual sour or wild beers. Arthur says the brewery currently has about 1,300 oak barrels with at least half turned over annually for around 1,000 barrels of finished barrel-aged beer produced each year. It's a number he is hoping to increase in the future.

Photo Courtesy The Lost Abbey

"Production costs are hard to pin down," Arthur says. "We know what a barrel costs. Our beer costing for the pre-barrel portion of the process is simple enough to see. The harder parts to gauge are cost per square foot, employee time, and even evaporation."

For Lost Abbey, one of the biggest additional costs incurred with producing barrel-aged brews is rent. "Southern California isn't a cheap place for letting beer hang out in a warehouse for months on end," Arthur explains. "In order to produce sour beers, we have a dedicated 10,000-square-foot space across our parking lot. This allows us the best opportunity to isolate the microbial beers from our non-sour ones."

He notes that the brewery's spirit barrel-aged beer releases require increased labor from their quality manager in the form of additional testing and sampling to ensure the product is free from contaminants.

"All told, there are a ton of additional costs -- including the dumping of bad barrels -- that are part of any barrel-aged beer program," he says. "Our barrel-aged beers have always been the highest priced beers per ounce that we make at the brewery. They reflect a commitment to amazing flavors and expression."

Photo Courtesy Jessup Farm Barrel House

Nuance over strength at Jessup Farm

Gordon Schuck and Brad Lincoln of  Funkwerks founded Jessup Farm Barrel House in Fort Collins, Colorado, in 2015. Located in a 130-year-old barn, barrel aging was part and parcel of the brewery's model from the very beginning.  

"Our primary focus has been clean barrel-aged beers of moderate strength," says Jeff Albarella, head brewer and Jessup Farm partner. "Traditionally, most people associate barrel-aged beers with beers like Bourbon County Stout and others that are 10 percent ABV or more. Our beers tend to be more nuanced, with the barrel a part of the whole rather than a dominant character in the flavor profile."

Over the past two years, Albarella has produced around 50 different barrel-aged beers at Jessup Farm. In 2017, he says about 75 percent of the brewery's production was barrel-aged beers, or just shy of 400 barrels.

"We like to take a beer and either ferment it with different yeast strains, age it in different types of barrels, or finish it after barrel aging with different spices or fruits to produce different beers that are variations on a common theme," says Albarella.

As expected, producing such variety comes at a price. In addition to ingredients -- such as grain, hops, yeast, water, spices and fruits -- and the time required to brew each base beer, Jessup Farm has to invest in barrels. "I'd say they are typically around $200 each," Albarella says. "Some barrels are imported or very rare, and those can go upwards of $400 and $500."

Photo Courtesy Jessup Farm Barrel House

Fortunately, the brewery is usually able to use barrels multiple times. "We're looking for a little bit more nuance so, for a lot of our beers, especially the ones we make repeatedly, we rotate some new barrels into a blend and kick some older more neutral barrels out," Albarella says. "We don't have to buy fresh barrels every time and can get multiple uses even for our clean beers."

Racks to hold the barrels and specialized equipment for barreling and debarreling are also necessary purchases. "It's not a large sum of money, but it is more than zero," he notes.

Albarella also has to factor loss in to the costs. "You're not going to harvest every ounce of beer," he says. "Some is lost through evaporation, and there is waste associated every time you move beer. If it is contaminated, you have to dump a whole batch. Those are all added costs you really need to consider and build into your plan."

Tips from the pros

If you're just getting ready to buy your first pieces of wood, here are a few tips from brewers experienced in barrel aging to get you started.

Always begin with good beer. "You need to focus on having a high-quality base beer," says Avery's Alatorre. "Barrel aging is not going to fix a subpar beer. Also, don't go extremely big with your first attempts. Obviously basic porters and stouts are easier to manage. But a Belgian quadrupel or something lighter in color and body can also work well in some barrels."

Albarella says, "You don't want to put bad beer out there, so be prepared for failure and be ready to dump beer. If you don't have a laboratory, learn to really trust your palate. That's the really the best way to detect any off flavors or contamination. Being a barrel-aged beer is not a guarantee of forgiveness from the general public."

Photo Courtesy Jessup Farm Barrel House

Invest in quality barrels. "Look for the best quality barrel that you can afford," Alatorre says. "That sounds like a cliché, but it is not. It will pay you back by not leaking and by giving nicely finished tones and notes to the beer."

Albarella of Jessup Farm Barrel House says he has had a lot of success selling used barrels on the secondary market. "We've built up an email list of our customers and send out email blasts when we have barrels available for sale," he explains. "People are happy to buy them from us, and we recoup a lot of the cost that we put into the barrel by reselling it."

Taste the barrels throughout the aging process. "You need to check your beer every week," says Alatorre. "Sample it and submit it through the best palates that you have on your team to determine what is working and what isn't. Some beers might be ready in a few weeks; others might take longer. It's like harvesting crops. It has to be done at the right moment because otherwise you are going to be wasting a lot of time and effort."

Keep your barrels and brewhouse clean. "It's a biological environment," Alatorre explains. "The barrel is an ecosystem in itself. It needs to be very clean and segregated from the rest of the brewing process. Don't mix barrels with regular package. Don't put them next to your packaging line, packaging equipment, or yeast source or you'll risk contamination."

Photo Courtesy Jessup Farm Barrel House

Finally, pay attention to the market. "You can't just throw anything but the kitchen sink into a beer," says Alatorre. "There are considerations. Not only do we get feedback from people who buy beer in our taproom and the opinions of our research and development group, but we also have a very savvy person in sales who tells us what is pulling right now."

The Lost Abbey's Arthur agrees. "Gone are the days when barrel-aged beers were seen as unique," he says. "Today they are everywhere, so you have to know the market. Know what it truly needs and how best your beer fits into those situations. We've begun increasing our sour beer production and have dialed back on our spirit barrel releases because the shelves have become littered with bourbon barrel-aged beers."

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