Case Study for a Small Farm Cidery

James Matson – Matson Consulting

Joan Walker – Matson consulting

803.233.7134 | AIKEN, SC | MATSONCONSULT.COM October 16, 2013

Case Study for a Small Farm Cidery

The Family Farm Dilemma

803.233.7134 | AIKEN, SC | MATSONCONSULT.COM

Family farms face a common problem.

Background

Case study for the feasibility of a small farm

cider in Nelson County, Virginia.


Hard Cider Case Study

$12.17 $55.00


Average Wholesale Price of

a Bushel of Apples

Value of 5 bottles of hard

cider sold at $11.00 per bottle.

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.

Market Growth


-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

2008 2009 2010 2011 2012

6,401,562 6,927,690

7,612,897

9,420,955

17,322,156

Gall

on

s

Year

U.S. Production of Hard Cider

Cidery Description


Small Farm Cidery

• Producing between 4,500

and 8,400 gallons

On-Going Snapshot

• Focusing on the break

even point

Combination of industry

elements

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

Expense Breakdown


Variable Costs46%

Equipment Costs3%

Facility Costs12%

Marketing Costs10%

General/Administrative Costs21%

Unforseen Costs8%

Apple Expense


Blend of cull, juicing and heirloom apples

Average cost per bushel

$12.17

Variable Expense Breakdown


Apple Purchase

Fee, 15.4%

Bottling Materials, 11.

3%

Variable Labor, 15.5%

Utilities and Gasoline

, 1.3%

Taxes, Lab and Other

Costs, 4.1%

Break Even


Break even sales of 4,800 gallons per year.

This requires around 1,600 bushels of apples.

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=zVvZim0g-3WDhM&tbnid=3LHazbuEFSqp0M:&ved=0CAUQjRw&url=http://www.ipadenclosures.com/blog/posts/applecashregister&ei=E_VWUufzGYPe8ATFj4BA&bvm=bv.53760139,d.eWU&psig=AFQjCNHnp2ImuD-IWvXECk0HNTGnTGHPIQ&ust=1381516935697867

Net Income


$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

Year 1 Year 2 Year 3

$1,414

$14,113

$46,204

Net

Inco

me (

$)

Variations in Apple Prices

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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.

Variations in Apple Prices Cont.


Earnings (Loss) EBITDA ($)

Bushel Price Year 1 Year 2 Year 3

100%

Increase In

Apple Prices $24.34 ($5,000) $3,000 $24,000

With an 100% increase in apple prices, the sales level required to breakeven

increases by 400 gallons.

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.

Expansion


U.S. hard cider sales are increasing -

A receptive consumer marketplace exists.

Rural development opportunities –

Growth of youth participating in agricultural practices.

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