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Case Study for a Small Farm Cidery

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Joan Walker with Matson Consulting presented this PowerPoint on Oct. 16 at the Third International Conference on Food Studies in Austin, Texas. In her presentation, Walker explores the feasibility of adding a small-scale cidery onto an existing orchard and farm. The presentation shows what it would take for this type of operation to break-even and the scenarios that can impact the venture.

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Case Study for a Small Farm Cidery

  1. 1. James Matson – Matson Consulting Joan Walker – Matson consulting Case Study for a Small Farm Cidery 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM October 16, 2013
  2. 2. The Family Farm Dilemma  Family farms face a common problem. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  3. 3. Background  Case study for the feasibility of a small farm cider in Nelson County, Virginia. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  4. 4. Hard Cider Case Study $12.17 Average Wholesale Price of a Bushel of Apples $55.00 Value of 5 bottles of hard cider sold at $11.00 per bottle. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  5. 5. History of Hard Cider    Safe and abundant substitute for water during colonial times. Growth in beer popularity coupled with prohibition lead to market decline. A recent resurgence has occurred. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  6. 6. Market Growth U.S. Production of Hard Cider Gallons 17,322,156 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 - 6,401,562 2008 9,420,955 7,612,897 6,927,690 2009 2010 2011 2012 Year 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  7. 7. Cidery Description  Small Farm Cidery •  On-Going Snapshot •  Producing between 4,500 and 8,400 gallons Focusing on the break even point Combination of industry elements 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  8. 8. Product Information Item Retail Wholesale Premium 750 ml bottles $17.00 $10.20 Everyman 750 ml bottle $11.00 $6.60 Everyman Cider in kegs (price/gal) $19.00 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  9. 9. Expense Breakdown Unforseen Costs 8% General/Administrative Costs 21% Variable Costs 46% Marketing Costs 10% Facility Costs 12% Equipment Costs 3% 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  10. 10. Apple Expense   Blend of cull, juicing and heirloom apples Average cost per bushel  $12.17 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  11. 11. Variable Expense Breakdown Taxes, Lab and Other Costs, 4.1% Utilities and Gasoline , 1.3% Apple Purchase Fee, 15.4% Variable Labor, 15.5% Bottling Materials, 11. 3% 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  12. 12. Break Even  Break even sales of 4,800 gallons per year.  This requires around 1,600 bushels of apples. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  13. 13. Net Income Net Income ($) $46,204 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $14,113 $1,414 Year 1 Year 2 Year 3 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  14. 14. Variations in Apple Prices Earnings (Loss) EBITDA ($) Bushel Price Year 1 Year 2 Year 3 Baseline $12.17 $20,000 $33,000 $71,000 50% Increase In Apple Prices $19.05 $7,500 $18,000 $47,000 75% Increase In Apple Prices $21.30 $1,000 $11,000 $36,000 EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  15. 15. Variations in Apple Prices Cont. Bushel Price 100% Increase In Apple Prices $24.34 Earnings (Loss) EBITDA ($) Year 1 Year 2 Year 3 ($5,000) $3,000 $24,000 With an 100% increase in apple prices, the sales level required to breakeven increases by 400 gallons. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  16. 16. Viable Business Option  Positive study results   Results follow industry norms. Steady increase in profits.  Apple prices are a small percentage of overall costs.  Lower barriers to entry. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  17. 17. Expansion  U.S. hard cider sales are increasing   A receptive consumer marketplace exists. Rural development opportunities –  Growth of youth participating in agricultural practices. 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM
  18. 18. Additional Information For more information on hard cider download our “Feasibility Study for a Small Farm Cidery in Nelson County, Virginia” Visit: http://matsonconsult.com/publications.html 803.233.7134 | AIKEN, SC | MATSONCONSULT.COM

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