A brief history of packaging at South City Ciderworks
Four years ago we started the company with 12-ounce printed cans of our semi-sweet cider, South City Cider, now known as The Original Blend. A year into business we heard from our customers they wanted some drier options, so we started bottling our dry and dry-hopped ciders in 500ml bottles. The bottles provided us an easier way to test out the market without needing to commit fully to the quantities of cans. It also enabled us a path into some new retailers who preferred glass over cans. But what’s the right thing for our future?
Up until a few years ago, 22-ounce bottles were all the rage for craft beer and cider producers. As a consumer, I was happily spending $7 on a single 22-ounce bottle just to try something new or different. I didn't particularly like the larger format, and always kicked myself once I calculated the per ounce cost, but I still bought it. It wasn’t the best value but was often the only way to try a new craft brew. Many small manufacturers couldn't afford to put their products into 6-packs of 12-ounce bottles. Bottling could be done in small quantities and with a lower upfront equipment costs, so it was the only real option to get products on the store shelves.
In 2002 Oskar Blues was the first craft brewery in the US to package in cans. For a while, this was a big deal. Craft had only been in bottles while cans had been left to the huge companies pushing out volume beer. Not to say I haven’t enjoyed walking out of a store with a 30-pack in each hand, but for a long time, it was just the light beers and macro producers in cans. Sixteen years later we're still seeing the shelves stocked with bottles and cans from all size of producer. Consumers are also realizing that canned products stay fresh longer because there’s no chance of oxygen or light ever touching the product. Oskar Blues started the trend which many craft companies big and small have now followed. It took more than just consumer acceptance to make it work though. It took the growth of mobile canners to truly bring craft-in-can to consumers.
Mobile canning companies buy a canning line on wheels that they can transport to craft beer and cider makers in their region. They plug into the wall, clean and sanitize the system, hook up to the tank, and fresh cans come rolling off the line. These companies enable small manufacturers, like us, to get our products into multi-packs and on to store shelves. Combine the relatively low cost of cans (when compared to bottles) and the offerings of mobile canning companies and you now have an avenue for craft producers to get multi-packs in front of consumers instead of on the single unit shelf at the bottom of the beverage cooler.
With mobile canners, we can keep our capital investment costs down but is it actually more price? Is it a better deal for the consumer? Is it a better model for the producer?
Let’s take a look.
As a consumer, I might buy one 22-ounce bottle for $7.50 at the grocery store. The grocer would have bought a case of 12 bottles from the distributor or directly from the producer for around $64 (or $5.30 each bottle). For this example, let's say the producer uses a distributor to get their products to market. Distributors typically take 30% gross profit from the sale. So that distributor would have paid around $45/case to the manufacturer or $3.75/bottle. Calculating the packaging costs, we’ll include the bottles, the box, the labels, and caps totaling roughly $7/case. Add another $10 for ingredients and a few dollars for taxes and producer is left with $19/case of profit. This doesn't account for labor, equipment, rent, insurance, or shipping but it should give you an idea of what goes into the cost. The Huffington Post wrote an article on why craft beer costs so much. And while cider doesn't have as many ingredients, our main ingredient (apple juice) amounts to a similar if not higher cost per unit. It may be worth a look for those of us who like pictures. https://www.huffpost.com/entry/craft-beer-expensive-cost_n_5670015
So let's compare the costs for consumers and producers for the 22-ounce bottles vs a 4-pack of 16-ounce cans.
22-ounce bottles (12/case)
Price of single bottle on shelf: $7.49 (34.3 cents/ounce)
Cost per case to grocer: $64.00
Distributors cut: $19.20
Revenue per case to manufacturer: $45.00
COGs per case: $19.00
Profit per case: $26.00
COGS% = 42.2%
16-ounce labeled cans (24/case)
Price of 4-pack on shelf: $14.99 (23.4 cents/ounce)
Cost per case to grocer: $63.00
Distributors cut: $18.90
Revenue per case to manufacturer: $44.00
COGs per case (with mobile canner): $24.00
Profit per case: $20.00
COGS% = 54.5%
If the producer wanted to keep their same COGS for the 4-pack cans as they had for the 22-ounce bomber, that producer should be selling the case to the distributor for around $57. This would price the 4-pack of 16-ounce cans to the consumer at $19.40 on the shelf. Hard to swallow? Well, as a consumer, I'm hard-pressed to spend more than $14.99 per 4-pack. But doing the math as a producer, I know how thin the margins are and I'm hopeful consumers continue to seek craft products in all forms. So what’s the right format?
We're constantly paying attention to changes in consumer demands, industry trends, and our bottom line. Our goal is to get our products into your hands in the most economical way possible while maintaining our bottom line. So whenever we explore packaging changes, we think through all the options. Do we go with 12-ounce bottles, 500ml bottles, 22-ounce bottles, 12-ounce cans, 16-ounce cans, 750ml bottles?? With so many options, here are a few questions we ask ourselves before proceeding.
What do our customers prefer?
What’s economical for our bottom line and for our customer’s bottom line?
What do we prefer?
At the grocery store, consumers seem to be leaning away from individual bottles and towards multi-packs. In restaurants and bars, 12 and 16-ounce packages both do well and are an expected size.
Mobile canning is expensive but gives us a path to get our products to market. Bottling is time intensive but costs less. Consumers seem open to either as long as costs remain reasonable. Specialty and high-end products seem to still have some room for people to enjoy unique and surprising things.
I personally prefer a 12 or 16 ounce serving over a 22. I’m also leaning towards multi-packs when I shop. At a bar or restaurant, I’m good with either size.
We’d love to be in a 6-pack of 12-ounce cans, but given the math, I’m not sure the average consumer is ready to pay $20 for a 6-pack, and we can’t make it for less, yet... There are extremes that will work for some, as I saw on a recent trip to the grocery store where I found a local IPA in a 4-pack of 16-ounce cans for $24.99. As a consumer, I see this and think that’s a bit crazy. But as a producer I know it’s just the reality of what things cost to make and not that crazy. Hell, I’ll easily pay $15 for a bottle of wine which is about 25 ounces. In 4-pack of 16-ounce cans of that same wine I’d have to pay $37.85. So maybe those cheap macro beers have had more impact on consumers than we know.
My parting words for supporting craft
Single pack bottles and 4-packs give you as a consumer a chance to try something new from craft producers with minimal commitment in dollars and product needing consumption. These same packages give us, the producers, a way to get our products into your hands and hearts and gives us a way to try small batch and specialty releases. We’ll never be the same price as the big brands, but if the math works out for you, it may be worth those few extra dollars just to try us out,,, and come back and buy out the shelf. We’ll love you forever for it. Cheers!