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NOTHING COOLER THAN THE BOGGY
It’s a hot, humid spring afternoon in this South Texas town and a cold “ Boggy” beer fresh from the cellar of the Boggy Brewery sure tastes good. Herbert Siems, the 92 year old bartender at the Brewery Hospitality Room, comforts departing visitors with an invitation to return and the promise, “We’ll save one for you.”
Employees of the brewery founded in 1909 on the site of a natural artesian well, still heed the words of their late boss, Hermann Seele, “Drink all the beer you want, just don’t get drunk.” Boggy Brewery can claim a few superlatives. It is the smallest, second-oldest and last independent brewery in Texas. Hermann Seele, a native of Bavaria, had been a brew master at the Pyramid Brewing Co. in Cairo, Egypt. In 1915, he bought the Boggy Brewery outright and began brewing a heavy lager beer that quickly became a favorite of Germans and Czechs in the area.
When Hermann died in 1950, his daughter, Cecelie took over. “Miss Celie” extended the packaging line to include non-returnable bottles as well as kegs and long-neck bottles. Boggy was distributed only over a 75-mile radius from the brewery. ·
In 1970, the brewery embarked on a five-year expansion program that brought in cans, increased capacity from 24,000 to 44,000 barrels (bbls) a year and changed the formula of the beer. They had been brewing a heavy European lager type of beer, and gradually lightened the formula to attract a younger crowd without alienating their traditional drinkers.
In 1974, Boggy Brewery came full circle with the introduction of a dark “bock beer” designed to compete with fast-growing European imports. Today, Boggy Bock accounts for 80 to 85 percent of overall sales.
During the 1970s and 1980s the Boggy Brewery attempted to compete with the leading brands by pricing its products competitively, and it had some help from the State of Texas. The state legislature passed the “Boggy Beer Bill” in 1971, which granted a 25 percent state excise tax break to any brewery producing less than 75,000 barrels a year. The excise tax rate is $6.00 per barrel. Boggy Brewery was the only qualifying brewery. It scored another victory in 1979, when a bill prohibiting manufacturers from selling directly to retailers was amended to permit Boggy Brewery to sell to retailers if it has no wholesaler in the area.
The brewery was purchased in 1989 by Gustav Erichson, owner of Erichson Importing Co., who also introduced Cerveza Noche Caliente to the United States market. Under Erichson’s leadership the Boggy Brewery capitalized on the high quality of Boggy beer and its “little brewery” status. This meant positioning the beer to compete with the higher priced domestic and imported premium beers.
To keep up with increasing sales, in 1991 the Boggy Brewery purchased the failing Gabriel Brewery in Wisconsin, dismantled the processing equipment, and shipped it to Boggy Creek, Texas expanding the capacity of the brewery. In 1992, the brewery rolled out 57,000 barrels of beer. “Anheuser-Busch (brewer of Budweiser) spills more than that,” quipped Johnny-Boy Enselmo , a regular at the brewery’s hospitality room.
Boggy beer is distributed in less than half of Texas, but in almost every part of the state that is wet. Its share of the beer market is 0.3 percent in Texas. “But we don’t compare ourselves against other brands,” says Jimmy Maurie, the assistant brew master. “We compare ourselves against ourselves.” Last year, a flat year for most brewers , Boggy beer sales rose about 20 percent. Where 10 years ago most of the sales growth emanated from college campuses, today the growth is coming from the major metropolitan areas of the state. In addition, distributors from Atlanta, Memphis and Nashville are test marketing Boggy Premium and Boggy Bock.
The Boggy Brewery now faces a dilemma. Marketing predicts an annual sales increase of 15-20 percent in the Texas market alone for the next several years. However , it is unclear whether the brewery can handle this increased demand without once again expanding its capacity . Furthermore, the forecast demand for out-of-state sales is very unpredictable. If capacity is expanded and out-of-state sales do not materialize, the limited resources of the brewery will have been wasted. However, if demand picks up and there is not enough capacity, then valuable marketing opportunities will be lost.
THE BREWING PROCESS
The brewery employs 41 full-time workers. The manufacturing processes are divided into the brewing and cellar processes which make the beer, and the packaging process which prepares the beer for shipment.
The brewing process starts in the malt mill where malted barley is augured to crack kernels of malt making easy access to the soluble starches in the grain. The malt is then weighed on a hopper scale and dumped into the mash cooker tank with com and hot water from the on-site artesian well. It takes about 50 minutes to load the mash cooker which holds up to 125 barrels (bbls). of mash. The mixture of ingredients determines whether the beer will be Boggy Premium or Boggy Bock.
The mash is then agitated and heated to gelatinize the starches, and then eventually convert the starches into fermentable and non-fermentable sugars. The resulting concoction, called “sweet wort,” looks like sudsy dishwater but smells better than anything Mom ever cooked up. At this point approximately 2.5 hours have passed since the workers began loading the cooker.
The mash tank has a false bottom that, with the malt, acts as a strainer to clarify the sweet wort as it passes into Brew Kettle No. 1 (there is no Brew Kettle No. 2). It takes 2 hours to strain the wort, and another 30 minutes to clean up the mash cooker before the next batch. The 100 bbls of mash yields approximately 75 bbls of sweet wort. The spent grain, high in protein, is fed to cattle owned by the brewery.
Brew Kettle No. 1 is a 75-barrel (31 gallons in a barrel) kiln that resembles a huge undersea diving bubble. The kettle is made of stainless steel coated with copper. Hops are fed into the kiln where they are mixed with the sweet wort and brewed vigorously for one hour. The hops give the beer its distinctive flavoring, increase foam retention, and act as a preservative . After brewing, the wort is drained into a whirlpool tank for clarification where a vortex effect funnels coagulates and proteins to the bottom of the tank. Next, the clarified wort is pumped into the cellar where it passes through a cooler which lowers the temperature of the wort from 212 degrees F to 54 degrees F. The wort is then pumped into a fermenting tank.
During peak demand periods four employees are assigned to the mash preparation and brewing activities each working day. Each brewer is given complete responsibility for a single brew cycle which begins with cleaning and loading the mash cooker, and ends when the wort is pumped into a fermentation tank. The brewers are assigned to sequenced work-shifts where each brewer’s workday starts approximately two hours before it is their tum to clean the mash cooker.
The staggered work-shifts result in two employees working in the brewing operations throughout most of the day. The brewing process usually operates 18 – 22 hours per day, five days per week.
It takes multiple brew kettles to fill up a fermenting tank. When a fermenting tank is full, yeast is added and the fermentation cycle begins. The enzymatic action of the yeast converts fermentable sugars into alcohol and carbon dioxide. The fermentation cycle takes 10 days, after which the liquid is called beer. After fermentation the beer is pumped through a cooler, which lowers the temperature to 32 degrees F, into ruh2 storage. Here, secondary fermentation takes place and the maturation of the beer begins . The beer stays in rub storage for 12 days. The beer is then filtered (100 bbls per hour) to remove sedimentation, C02 injected, and routed to finishing tanks where further maturation takes place.
The beer stays in the finishing tanks for at least 3 days. However, the brew master prefers to keep it there for 5 days to maximize the clarity, and hence the quality of the beer. The beer is then pumped through a finishing filter, which polishes and brightens the beer, making it ready for bottling, canning and kegging. Finally, the beer passes through government meters on the way to the package release tanks which directly feed the packaging lines.
The beer cellar is manned one shift per day by two employees. During peak seasonal demand periods, when capacity is tight, the employees work weekends so that the intermediate product is transferred between storage tanks as soon as it is ready. Each cellar employee averages eight hours overtime per week during peak demand periods. The cellar operators do not work weekends during low demand periods, since the quality of the beer only improves if it is left in the processing tanks longer than the minimum required times.
The beer cellar consists of 16 fermentation tanks: 6 are 265 bbl tanks and 10 are 300 bbl tanks. The tanks require 20 percent “head space” for fermentation to take place (e.g., a 300 bbl tank can ferment up to 240 bbls at a time). For ruh storage, there are six 250 bbl tanks, seven 300 bbl tanks and four 225 bbl tanks. The 225 bbl tanks are constructed such that they can also be used for fermentation, but not the other ruh tanks. There are five 250 bbl finishing storage tanks. The ruh and finishing tanks need at least a 10 percent head space. There are seven package release tanks: four 250 bbl bottling/canning tanks and three 200 bbl racking tanks for kegs.
The total process takes approximately 28 days and is continuously monitored to insure the highest possible product quality. As Jimmy Maurie explains, “We could speed up the fermentation and aging processes by raising the fermentation.
temperature using chemicals and additional filters for clarification, and adding the hops during cold filtering. This would drop the processing time to 11-14 days. However, we prefer the natural brewing, fermentation, and clarification processes which just take longer. Any other way and the quality of the beer would not be as good, and we wouldn’t be brewing Boggy beer. A brew master from one of the major breweries fondly put it this way. ‘The Boggy Brewery follows the time honored tradition of brewing beer, where we manufacture it.”
THE PACKAGING PROCESS
The beer is packaged in four different containers (long-neck returnable bottles, short-neck disposable bottles, cans, and kegs) and two flavors (premium and bock). Typically only a single bottle type is run each day, and changeovers from one bottle type to the next are done at the end of the day. In addition, the packaging lines are completely flushed after each day’s operation. One barrel equals two kegs or 330.7 12-ounce bottles/cans.
The bottle filling line runs at 270 bottles/minute. Empty bottles are automatically removed from cases and placed on a conveyor line. The bottles are cleaned and sterilized prior to filling. After filling, the bottles are crowned and run through a pasteurizer. Finally, each bottle is fill inspected, labeled, either six-packed or cased, casecoded, and stacked on a pallet for immediate shipping or storage.
A relatively new piece of equipment, recently added to the bottling line is the bottle scale which weighs each bottle. “You can’t be more than an eighth of an ounce off,” Bernadette, the brewery’s tour guide explained. “If you ‘re under, you’re cheating the consumer. If you’re over, you’re cheating the government out of taxes.”
The canning line runs at 300 cans/minute and is similar to the bottling line. Cans are fed from the warehouse, sterilized, filled, and lidded. They are then sent through the pasteurizer, fill inspected , six-packed, cased, and stacked on pallets. Twelve workers are assigned to the bottling and canning operations. When the day’s packaging operations are completed, workers are reassigned to other duties to fill out their eight hour workday, if necessary.
The kegging process is not as automated as the bottling and canning lines. The oak keg plugs are pulled out using a press with a large cork screw.
The kegs are then cleaned and sterilized on a transfer line. Kegs are manually quality inspected using a special light to see inside the keg.
The kegs are fed directly to a racking station where 4 kegs are filled sequentially by a single operator. The keg is first positioned on a stand and a filling nozzle attached. While the keg fills, the operator moves to the next keg, removes the nozzle and hammers in a new oak plug to seal the keg.
The operator ejects the keg from the stand by stepping on a lever which starts it rolling. The operator then positions a new keg, attaches a filling nozzle and moves on to the next keg. Three workers capture the rolling kegs and stack them on pallets for shipment . Kegs are prepared at a rate of 100 kegs/hour, eight hours per day. Kegs are currently racked only two days per week, with off days being used to clean and inspect the equipment and kegs. However, the racking station could operate 5 days per week.
The plant engineer is currently evaluating a new filling platform for the racking station. The platform’s cost is $6,000 installed . The new platform mechanically positions the kegs for stacking. This would allow the kegging process to operate with one filler and two stackers. However, the new filling platform will reduce the filling rate to 85 kegs per hour.
The brew master or assistant brew master schedules each days “brews.” Currently, three or four brews are run each day. The formal system requires that customers place orders 30 days in advance of shipment. However, to keep customer service levels high, the brew masters also study historical demand patterns to determine the total volume and mix of premium and bock beer. The brew master calculates how much of his order backlog can be filled from beer currently in the process tanks.
When insufficient beer is available, a brew of the proper type is scheduled.
The brew masters schedule the bottling, canning and keg packaging lines based on the orders scheduled for delivery during the next week. To keep the beer as fresh as possible and minimize finished goods inventory levels, the output rate of the packaging operations closely matches the demand rate. No more than a 2 weeks supply of beer is kept in finished goods inventory at the brewery.
Accounting estimates the annual cost of carrying inventory at the brewery is 30 percent of the inventoried item’s direct cost of goods sold. The beer has a four month shelf life after which its quality begins to noticeably decline.
MEETING TIIE DEMAND FOR BOGGY BEER
Demand for Boggy beer has grown dramatically over the past several years. Table 1 contains the monthly sales data in barrels for 1991 and 1992. The percent of sales of each package type are: 15% cans, 35% kegs, and 50% bottles. The average weighted sales revenue and direct cost of goods sold per barrel at the brewery are $80.00 and $50.00, respectively, excluding the state excise tax.
The brew masters are interested in determining whether the facility can accommodate the forecast demand growth over the next few years. The brewery targets a five day work week for all employees, but any process can operate on weekends during an emergency.
Average employee wages are $9.50 per hour for regular time. Overtime is 150 percent of regular time wages. Employee benefits are approximately 70 percent of regular time wages.
The capacity of the brew kettle can be expanded to hold 100 barrels of wort at a cost of $8,000 to $10,000. However, the heating system and water pipes that feed the hot artesian water into the kettle would also have to be modified at a cost of $5,000. The lead time for expanding the kettle is approximately eight weeks: six weeks for scheduling the work and ordering the materials, and two weeks for performing the modification.
Fermenting, rub, finishing, and package release tanks are available for approximately $100 per barrel of capacity. This price includes installing the tanks and getting them ready for operation. The brew masters anticipate that any new tanks purchased would have a 600 bbl capacity. This would simplify management of the process and be in line with the increasing volume of the brewery. Lead time for purchasing and installing the tanks is 12-18 months.
THOUGHT QUESTIONS TO GET STARTED
- Prepare a flow chart of the brewing and packaging processes used at Boggy Brewery.
- Determine the capacity of all the processing and packaging resources for which you are given Assume the firm operates 50 weeks per year and that holidays are spread out evenly through the year. What is the daily and monthly throughput capacity of the brewery?
- In 1992, the firm varied its monthly production rate to match each month’s demand (e.g., June’s sales are brewed in May and packaged in June)? Do you like this production schedule? Why or why not? Suggest how you would resolve any problems.
- What if, the firm had utilized a constant production rate (i.e., 4750 bbls/month) in 1992; and brewed 4750 bbls in December 1991 for packaging in January Evaluate this production schedule? (Hint, determine the beginning and ending inventory levels in the worksheet below. January is done for you. The production quantity indicates the amount packaged. All entries are in barrels.)