Agriculture – Cidernomics

Vintage (Cidrage?): The Surest Sign of a Cider Underdog

December 26, 2016 @AppleEllie5 Comments

We set up our first bottling line during June of 2008, seven months after pressing, and 8 months after the apples were harvested at Scott Farm and Champlain Orchards. In our 800 square foot basement we had a pallet of bottles in cartons, a little bottle sparger that screwed onto the tap over our basement sink, a plastic bottle tree to dry the bottles, a hose that ran from the tank through a pump to a small filter to our little 4-head gravity filler, then finally a hand corker resting on a piece of plywood set on two saw horses. Friends and family had volunteered to come and help our first bottling in return for ice cider.

The team: One person sparging bottles, one person at the filler, one person on the corker, and a final person wiping the bottles and putting them back into the cartons. We would pull them out again for labeling and capsuling another day. Four people working a good eight hours to bottle a little over two thousand bottles. Not to mention two hours to get everything sanitized and set up, and another ninety minutes at the end to clean everything up. Let’s just say that labor efficiency wasn’t our priority that day – although we noticed a clear linear relationship between good tunage on the boom box and the pace of the line. The only casualty was the guy on the corker, who couldn’t raise his right arm above his waist for two days afterward. As his wife I took a little heat for that. But hey, we were done for the year – one day of bottling for inventory with a retail value of a little over $26,000. One day, one year, one batch of ice cider.

As a cider producer, we are technically a Winery, so we are subject to federal wine regulations, yet we cannot use a number of wine terms on our labels because we use apples instead of grapes. We produce our ciders with the same techniques and values as used by vintage wine makers, one harvest = one cider, but are prevented from communicating that on our labels with a ‘vintage’ date. Or maybe we need a new word, since ‘vintage’ itself has ‘vin’ referring to grape wine in it. Perhaps we should argue for the ability to have a ‘cidrage’ date?

There are all sorts of differences between a cider made in one annual batch from fresh, harvest-pressed apples and aged for at least 6 months before release, versus a cider made from concentrate or from apples pressed out of cold storage, fermented quickly for 2 weeks and released 2 or 3 weeks after that. Regardless of whether the outcome is pleasing to your palate in either case, a ‘cidrage’ cider is an underdog cider because of the significant economic disadvantages of producing one batch per year. What are those disadvantages? One is lower asset utilization, the other is higher working capital requirements. In this post I’m going to cover asset utilization. I’ll cover working capital later.

In my last post ‘Breaking Bad or Breaking Even‘, I described how equipment is considered an asset, to be expensed over 7 years. Now consider the impact of producing multiple 4 week batches of cider one after the other throughout the year, rather than one batch per year for the same volume of product. If Cidery A produces 2,000 gallons of one ‘cidrage’ cider once per year, they might invest in two 2,000 gallon tanks, one of which will be full most of the year (the other is to pump into). Cidery B produces 2,000 gallons of 4-week cider. That means they can produce about 10-12 batches per year, so they only need to invest in two 200 gallon tanks. Even though the cost of the 2,000 gallon cost is less than 10 times the cost of the 200 gallon tank, Cidery B has significantly lower equipment costs, so their fixed costs are lower, their break-even volume is lower, and their profitability is higher at each volume of production.

Bottling equipment is a little more complicated, but basically Cidery B can size their bottling equipment for a 200 gallon bottling day, whereas Cidery A may need to use larger equipment capable of bottling 2,000 gallons in only 1 or 2 days. So just to reiterate, for the same annual gallons of production, a true ‘cidrage’ producer can incur 4 to 5 times the equipment cost of a 4-week cider producer. Now that’s an underdog for you.

Apple choices: What’s in YOUR cider?

December 10, 2016December 11, 2016 @AppleEllie2 Comments

It all started for me because I wanted to plant some apple trees. Just at the time I was mulling over what and how, we happened to visit my sister-in-law in Montreal. After dinner she pulled out a gorgeous skinny bottle and said “you must try this!” It was Neige, an ice cider from the original, premier producer in Southern Quebec, and it was freeking delicious. I looked at my better half across the table and said “yes we’ve got to try this!” Fateful words.

So, apples? Yes…but.

Concentrate? Left-over storage grocery apples? Fresh-harvested grocery apples? Organic apples? Bio-dynamic apples? Heirloom apple varieties? Bittersweet cider apple varieties? Abandoned or un-managed apple trees? Wild apples?

There are apple trees involved in every one of those options, but it’s an amazing range of options. At one end of the spectrum: low cost, predictable supply, juice consistency, low flavor. At the other end: scarcity, biennial-ism, high cost, variability of sugar/acid/tannin levels, more flavor (hopefully?).

There is much to be discussed about the economics and markets for growing apples. I’m not going to deal with that now, but here’s a quick view of what’s out there from the perspective of someone deciding what kind of cider to make. And if you are growing your own apples, you have to do the same comparison, and recognize that farming apples and manufacturing cider are two VERY different businesses, although in the same value chain.

China is the largest apple grower in the world, producing 37 million tons per year, 70% of which is Fuji. The US is the second largest producer at a mere 4 million tons, with 67% grown for the fresh market – Red Delicious, Gala and Granny Smith being the top three varieties. The top 5 apple growers in the U.S. are all in Washington state, with over 5,000 acres each. The labor costs associated with picking mean that the US is not an efficient producer of apple juice concentrate. Most apple concentrate used in hard cider production comes from Argentina, Italy, France, Turkey, or Poland. US orchards work mightily to make sure as high a % as possible of their crop makes the grade for sales to the grocery market, as that is where they can get the highest price. The other 33% goes to processing. Washington State has enormous bulk juice processing and cold storage facilities. You can buy tanker trucks full of bulk juice pressed out of cold storage pretty much all year round.

The largest two apple growers in Vermont are 400 and 300 acres, respectively. Then there’s my friend Steve Wood, who back in the late 1980s top-grafted trees in his family’s 60 (not a typo, not 600, 60) acre New Hampshire orchard over to British bittersweet and American heirloom varieties that had NO possibility of being sold to the grocery store market, with the crazy idea that they might be better suited for making specialty hard ciders. Finally, at the far extreme, Andy Brennan at Aaron Burr cidery in the Hudson Valley of NY, makes a cider from apples foraged from a couple of trees growing wild on Maine’s Isle Au Haut. OK those apples were “free”…all like 5 bushels of them, all like 500 miles away of them.

Buyers at stores and restaurants sometimes screw up the courage to ask me why the ciders in 750ml wine bottles are SO expensive. Here’s an approximate price comparison (vetted with other producers so a pretty good ballpark) for a gallon of liquid going into a tank to be fermented into cider –
– Frozen foreign concentrate, reconstituted with water = $0.70
– Bulk juice from left-over grocery apples, pressed out of cold storage = $1.80+
– Harvest-pressed grocery store apples in New England = $4.00+
– Heirloom and Cider variety apples, harvest-pressed at small scale = $10.00+

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In the case of ice cider, we use our Vermont winter weather to do a natural concentration outdoors before fermentation during which we lose 80% of the volume of juice we started with. That increases the cost of the gallon of liquid going into the tank by a factor of 5 times.

And all of this begs the question “does it taste any better”? Hmmm, depends what the cider maker does with it, and who’s tasting.

The worst-case scenario is when you plant 1,000 trees of 42 different varieties on 3 acres in a biodynamic management program and hire someone 3 days per week during the season to do the work. That’s the route we chose of course. The $64 tomato has nothing on the $100 bushel of apples! While we wait for the trees to grow and start producing apples at their full potential (soon? I hope?), we purchase fresh apples – a mix of heirloom, cider, and grocery varieties – from 4 other regional orchards and press them, usually within 6 – 10 weeks of harvest. So we’re operating at the base cost of somewhere in between the two bars on the right hand side of the chart, MULTIPLIED BY 5.

It makes it especially rewarding when you are giving a tasting of ice cider at the farmer’s market and the elegant lady who’s been listening and nodding to your explanation finally takes a sip and says “That’s delicious! What grapes do you make this from?”

What is Cidernomics?

November 25, 2016November 28, 2016 @AppleEllieLeave a comment

“How do the economics of small, low-tech, agriculture-based manufacturing work? There is so much romance about these kinds of businesses, but really, what does it take to ensure a happy ever after?”

It had snowed 8 inches overnight as predicted. I was glad I had parked the UHaul truck on the side of the highway where at least I had a chance of getting it going. I scraped the snow off our old Toyota Highlander, started it up and drove very slowly down the mile of ice-covered dirt road from our farm, down and up and down again, the last hill having a grade of about 8% and landing abruptly perpendicular to the rural highway. If you lose control coming down the hill, you have to be grateful for the lack of traffic in Vermont’s Northeast Kingdom that allows you to just come to a stop right across the middle of a State highway without worrying about being obliterated, or even just cursed out. This morning I used the engine braking feature and only slid a few feet as I turned at the end, managing to line myself right up behind where I parked the truck on the shoulder of the South-bound side. I left the Toyota, hauled myself into the truck, started it up (it was a balmy 28F), and got on my way.

So began my first foray into buying apples to produce Ice Cider in the basement of our farmhouse, perhaps to sell commercially, although at that point we didn’t have grand plans. Ice Cider is a sweet, dessert-wine style alcoholic cider that was developed in Southern Quebec in the late 1990s. It was November 2007, we had acquired an abandoned farm that Spring about 8 miles from the Canadian border, and we thought Ice Cider should be a Vermont product too. I thought it would be fun to try it out ourselves. I took a short course on cider making at Cornell, I ran some numbers, I bought an apple press, and now it was Thanksgiving week, the weather could be relied upon to be below freezing for the next four months, and I was ready to get started.

I wanted to buy enough apples to make about a 100 gallons of Ice Cider. That turns out to be more apples than you would ever buy as a consumer, but not enough to make you a meaningful wholesale customer for an orchard. It took me multiple times calling the two orchards I was interested in for them to return my calls, answer my questions, and agree to sell me the apples in the packing format I could handle – no 600 lb. bins that would require a fork lift to unload. Commercial orchards will pack apples in bushel boxes (40 lbs.) for stores and restaurants, but they sell those packed onto pallets to a distributor who does the actual selling to said stores and restaurants. The orchards themselves don’t deal with the individual accounts and aren’t necessarily set up to respond. They certainly don’t deliver!

Therefore the truck.

What would these apples end up costing by the time I had retrieved them from the sunny, snow-free Champlain Valley and got them back up the icy hill to my Northeast Kingdom basement? How much would that mean once they were pressed, the juice frozen outside, a small bit of super concentrated juice extracted, then partially fermented? What about packaging – bottles, corks, labels, capsules, boxes? Then equipment, labor, and marketing? It was one big question whether we could actually make something that tasted good enough for someone who didn’t know and love us to hand over real American dollars for it. It was a whole other question whether doing so would be something that would ever prove to be financially sustainable.

How do the economics of small, low-tech, agriculture-based manufacturing work? There is so much romance about these kinds of businesses, but really, what does it take to ensure a happy ever after? What are the key success factors? What are they up against? From a broader perspective, is it a viable rural economic development strategy to encourage more of them? I don’t know all the answers, but I’ve learned a lot. So I’m going to share my experiences, and perhaps we can start a dialogue that leads to some useful insights.

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