How Much Money Are Your Coolers Generating For You?

How Much Money Are Your Coolers Generating For You?

Warehouse coolers are expensive to build and maintain, but in the beer business they cannot be avoided. Draft beer needs to be kept at a certain temperature in order to maintain its integrity, and in today’s market, there are more draft beer options than ever.

The craft brewing industry grew 15{4af29eef6daee617c6de5a219d33b65aa7855320174b104e5b0e7e5833d9bed2} by volume and 17{4af29eef6daee617c6de5a219d33b65aa7855320174b104e5b0e7e5833d9bed2} by dollars in 2012, for a beer industry share of 6.5{4af29eef6daee617c6de5a219d33b65aa7855320174b104e5b0e7e5833d9bed2} and 10.2{4af29eef6daee617c6de5a219d33b65aa7855320174b104e5b0e7e5833d9bed2}, respectively. In 2012, there were 2,347 craft breweries operating in the US—98{4af29eef6daee617c6de5a219d33b65aa7855320174b104e5b0e7e5833d9bed2} of the total 2,403 breweries. Just to help convey the prevalence of craft beer in today’s market, take a look at this table:

Typical Number of total beverage SKUs per distributor:

Year             # of SKUs
1996            190
2003           200
2007           262
2009           470
2011             535.5
2013            656.5

Many distributors face the challenge of trying to accommodate these additional varieties of beer within limited space in their keg cooler. Since warehouse coolers are already costly to maintain, how do you actually increase craft beer sales without draining your pocket book on a new, or larger, cooler?

Let’s walk through a hypothetical example.

Say that a distributor has a keg cooler approximately 2,200 square feet in size. The initial cost to construct this space would be (based on an average of $200/square foot) about $440,000.

Using a calculation of a 12-month rolling average of $0.1022 per kilowatt hour, which, according to the Energy Information Administration, is the average cost in the United States for commercial electricity, we can estimate a cost of about $32,000/year in operational costs for this size cooler.

Now, within this space you can fit about 1,700 standard size kegs, housed on industrial static racking. Each keg may be worth anywhere from $75 – $185 based on the brand. For our purposes, let’s average the cost per keg at $150. So your 2200 square foot cooler can house approximately $255,000 worth of product at any given time.

If you wanted to double your capacity by increasing the size of your warehouse, you would need to estimate an additional cost of $440,000 to build the space and then upwards of $64,000/year to operate. The cost of additional racking must be considered as well.  (For standard selective rack, one of the least expensive rack options, it costs about $50 to $75 per pallet position, according to “Rules of Thumb,” a pricing guide published by TranSystems).

Your maximum inventory levels can increase to 3,400 kegs (valued at $510,000).

Now, imagine you could take your existing racking and compact it, eliminating idle aisles and doubling capacity in your current space. There is no added construction costs, and operational costs remain steady at $32,000/year. Cost of additional racking and mobile systems would need to be considered, but in the end you are bringing inventory value up to $510,000, without spending $440,000 on expansion and keeping operational costs in line.

Think about mobilizing your keg shelving and generating some additional revenue from that warehouse cooler space!  If you’d like an evaluation of your warehouse (or cooler) for spatial and operational efficiencies, please contact a Storage Specialist today.