CONTRACT BREWING CONSULTATION THE FUTURE OF THE GRADUATED MARKUP - - PowerPoint PPT Presentation
CONTRACT BREWING CONSULTATION THE FUTURE OF THE GRADUATED MARKUP SYSTEM Why Does This Matter? The Graduated Mark-Up System was established to improve gross margins for smaller brewers by helping to offset higher cost-of-goods. Brewing is
THE FUTURE OF THE GRADUATED MARKUP SYSTEM
smaller brewers by helping to offset higher cost-of-goods.
savings into their operation growing capacity and creating jobs.
up rate you pay.
$0.00 $0.20 $0.40 $0.60 $0.80 $1.00 $1.20 $1.40 $1.60 $1.80 1000 7000 13000 19000 25000 31000 37000 43000 49000 55000 61000 67000 73000 79000 85000 91000 97000 103000 109000 115000 121000 127000 133000 139000 145000 151000 157000 163000 169000 175000 181000 187000 193000 199000 205000 211000 217000 223000 229000 235000 241000 247000 253000 259000 265000 271000 277000 283000 289000 295000 301000 307000 313000 319000 325000 331000 337000 343000 349000
$/HL SIZE OF BREWERY (HL)
CURRENT VS. OLD MARK UP RATE
CURRENT MARK-UP RATE OLD MARK-UP RATE (PACKAGE ONLY) OLD MARK-UP RATE (DRAFT ONLY)
Wholesale Mark-Up Rate is based on the sum of: 1. The total volume of beer manufactured within the reporting brewery’s own production facilities for itself. 2. The annual worldwide production of any affiliated breweries (defined as 10% or more common
Wholesale Mark-Up Rate is based on the sum of: 1. The total volume of beer manufactured within the reporting brewery’s own production facilities for itself (same as today); 2. The total volume of beer the reporting brewery contract manufactures for other breweries and/or unlicensed third parties (new); 3. The total volume of beer any other breweries contract manufacture for the reporting brewery (new); 4. The annual worldwide production of any affiliated breweries (defined as 10% or more common ownership, same as today); and 5. The annual worldwide production of any breweries that the reporting brewery has a branding agreement with (new).
Mark-Up Rate: 5,000 HL = $0.40 They pay: 5,000 HL @ $0.40 Mark-Up Rate: 15,000 HL = $0.40 They pay: 15,000 HL @ $0.40 Mark-Up Rate: 35,000 HL = $0.47 They pay: 35,000 HL @ $0.47
Brewery A
5,000 HL 30,000 HL
Brewery B
15,000 HL
Brewery C
35,000 HL
CONTRACT PRODUCED FOR
Mark-Up Rate: 5,000 HL + 30,000 HL = $0.47 They pay: 5,000 HL @ $0.47 Mark-Up Rate: 15,000 HL + 30,000 HL = $0.48 They pay: 45,000 HL @ $0.48 Mark-Up Rate: 35,000 HL = $0.47 They pay: 35,000 HL @ $0.47
Brewery A
5,000 HL 30,000 HL
Brewery B
15,000 HL
Brewery C
35,000 HL
CONTRACT PRODUCED FOR
10,000 HL 10,000 HL
WWP of 100,000 HL
BRANDING AGREEMENT
Mark-Up Rate: 10,000 HL + 10,000 HL = $0.40 They pay: 20,000 HL @ $0.40
10,000 HL 10,000 HL
WWP of 100,000 HL
BRANDING AGREEMENT
Mark-Up Rate: 10,000 HL + 10,000+100,000 HL = $0.50 They pay: 20,000 HL @ $0.50
Foregoing investment into their own facility leads to agglomeration of production to a few large-scale producers.
Industry Risk By foregoing investment into their
facility, small brewers can become reliant on contract brewers who control their margins by how they choose to set or change rates. Government Risk We matter because we create jobs in communities across the province. Ultimately it undermines the spirit and integrity of the graduated markup is to allow existing brewers to invest in their business, continue to expand and create more jobs. Consumer Risk The magic of craft brewery connects the consumers to their community brewer and allows them to buy local and build local
experience of visiting the craft brewery is an integral part of
difference.
jurisdiction.
means they receive the benefits of markup savings without burden of capital investment into a facility.
cash flow gives them a competitive advantage over all BC craft brewers who are creating jobs.
“branding agreement”.
definition as: “an IP/Brand owner who does not
Recommend that any Shadow Brands pay full commercial rate of $1.08.