The market
The global beer market represents just under $110 billion in revenue worldwide. In 2011, market volume was projected to increase by 2.5%. China and Africa saw growth of 5% during the same period, and Latin America nearly 3%. China is the world's largest beer consumer, followed by the United States and Russia, placing Germany fifth behind Brazil. The Czech Republic leads in per capita consumption, followed by Ireland and Germany. While European beer sales have fallen by 7% over the past five years, sales of non-alcoholic beer have increased by 37%. With 5.8 liters per person in 2010, Spain is the world leader in per capita non-alcoholic beer consumption, with a market share of 13%. The sector is dominated by four brewers who control just over half of the 1.8 billion hectoliter global market. These major players generate 70% of the sector's profits. The Belgian company Anheuser-Busch InBev, based in Belgium, sold some 350 million hectoliters in 2010, just under 250 million hectoliters, well ahead of SABMiller. Heineken brews just over 200 million hectoliters and Carlsberg around 125 million, while the Chinese brewer Tsingtao sells 50 million hectoliters annually. The market share of the top ten brewers rose from 37 percent of the global total in 1998 to 62 percent in 2004, and it continues to grow. All the major brewers are establishing a presence in China, with InBev already owning 30 breweries in 8 provinces by 2011. The globalization of beer has transformed this once artisanal and locally produced beverage into a branded product like soap and detergents, heavily supported by advertising. This evolution is confirmed by advertising expenditures. Procter & Gamble and Unilever are the world's largest advertisers. Personal care brands have recently overtaken the automotive industry as the leading brand, closely followed by brewers Anheuser-Busch InBev and SABMiller. While major brands are globalizing, an estimated 4,000 microbreweries and breweries are nibbling away at market share and profiting from global players in niche markets. The success of these small operations demonstrates the ability to maintain craftsmanship and pursue quality at a premium price. Belgium still has seven monastic breweries that have been in production for centuries and continue this practice with remarkable commercial appeal. Despite strong global demand and readily available investment funds, these breweries are not prepared to increase production, clinging to their exceptional quality based on traditional methods. Several craft breweries in Flanders (Northern Belgium) still harvest wild yeast every year. It is estimated that in Flanders alone, a region with a strong brewing tradition, more than 3,000 different yeasts are available for beer fermentation.
Innovation
Globalization has forced brewers to seek economies of scale through standardization. The traditional brewing process, according to the highly regarded German Purity Law, stipulates that beer is brewed from malt, hops, yeast, and water. Instead of barley, brewers began using rice, a much cheaper commodity. Master brewers at large conglomerates, supported by sophisticated laboratories, then decided to outsource starch extraction and introduce enzymes to accelerate starch modification and stability. Temperature modulation further reduced fermentation time from several weeks to one week or less. This represents a considerable saving of time and space, allowing throughput to be increased tenfold with the same basic equipment. The reduction in space and time leaves few new opportunities for further cost reductions. Perhaps the time has come to generate more revenue. Jim Lueders studied brewing at the Doemens Brewing School in Munich, Germany. After graduating in 1990, he visited and studied over 200 breweries and related facilities in 15 countries. He views the brewing industry as a craft industry that reveres quality, allowing him to master every step of the process to make exceptional beer. He has developed detailed expertise in business plan creation, facility sizing, equipment selection and installation, training new operators, product mix selection, and operational fine-tuning. He has always faced the pressure to reduce costs and has had to do his best. However, when he was introduced to the concept of generating more revenue from the brewery's existing resources, a new business model emerged. George Chan has been involved with the Tunweni brewery in Tsumeb, Namibia, since 1996, where the concept of integrated agriculture based on the five kingdoms of nature was tested in cooperation with the Ohlthaver and List Group. He then took time to develop a new business that generates more revenue and thus reduces investment risk.
The first cash flow
Jim has the experience to design, build, and operate a small brewery that can cost as little as $120,000. Combined with a restaurant, this business can increase food sales by 25%. The break-even point is between 3,000 and 6,000 barrels per year. When beer is sold directly to the customer, the break-even point can only be reached at half that quantity. One of the major costs is the bottle-filling lines, with equipment that will cost at least $60,000. Jim often offers small aluminum or glass kegs that customers return for refills, reducing the investment while also lowering the cost per pint for customers. With over 20 traditional projects implemented in the United States, Mexico, the Caribbean, and Japan, and equipped with this new knowledge, Jim purchased land in Stevensville, Montana, and began acquiring secondhand equipment, from a century-old wooden barn to copper kettles salvaged from bankruptcy. He started adding value to each of his waste streams, beginning with spent grain. Rich in fiber and protein, this waste represents 92 percent of the dry weight of malted barley, meaning that only eight percent has been given value. Devoid of starch, this residue is partly mixed into bread dough, as has been done for centuries in Germany, and partly used as a substrate for growing mushrooms. The spent substrate, after the mushrooms are harvested, is enriched with amino acids. A feed that was initially of poor quality and given to cattle ranchers to cover transportation costs is now being converted into a high-quality nutrient for the chickens and pigs Jim plans to raise and farm. The pig manure and wastewater used to clean the drums, tanks, and pens are fed into a digester that produces biogas. The digester's slurry is then used to feed algae in the shallow ponds. This process contributes to the production of benthos, phytoplankton, and zooplankton, ideal for feeding fish. Breweries typically require 5 liters of water for every liter of beer. This water is ideally used for fish farming. A process where building materials and equipment are recycled for the building and operations, and where everything that enters the facility is used to generate more food, water, energy, and jobs, meets the basic requirements of the blue economy. In January 2012, Jim released his first batch of craft beer and exclaimed that the process was only just beginning.
The opportunity
The beer brewing project, as described and implemented by Jim, bears a strong resemblance to the coffee project discussed earlier (Case 3). Jim has the advantage of being able to deliver turnkey operations, reducing investment and risk while simultaneously increasing revenue. This makes particular sense in high-growth regions like China and Africa, where there is a thirst for beer, but also water scarcity and a need for food security. If Jim's program becomes the norm, the brewery will become a catalyst for local economic development. The Bhutanese non-alcoholic buckwheat beer Pawo, offered in cooperation with Japanese supporters, further demonstrates that beer does not necessarily have to be associated with alcohol, which could represent another option for entrepreneurs. Jim has offered to support this initiative to ensure it meets the highest technical standards and the most discerning palates in the world. The Magic Beer Brewery produces traditional or non-alcoholic beer, bread, and mushrooms. But, since mushroom production could reach significant volumes due to the massive amount of waste generated, this waste can be processed on-site into vegetarian sausages. Now, with beer, bread, and sausages, it seems a true Bavarian festival is about to become a money-maker, while also offering healthy and enjoyable products that create jobs. It's such a surprise to many that this is even considered possible that the concept has been hailed as magical. The power of entrepreneurs lies in making what others thought impossible a reality.
