Over the past couple of years, the Brumbaugh Appraisals team has had the pleasure of working on appraisal engagements with several breweries throughout the Carolinas and Virginia. With the ever-growing popularity of craft breweries and the success that many of these small businesses have had recently, it is an exciting time to be involved in the transactions that keep these breweries going.
A trend that we have noticed in the valuation of brewery equipment is that it tends to hold its value relatively well compared to other asset classes. For example, used restaurant equipment does not maintain a high value, and after a few years of use, it may be worth only a fraction of what it was purchased for. This is due to the oversupply of restaurant equipment in the marketplace. On the other hand, used brewery equipment in good condition will generally maintain a higher value. A rough estimate of the equipment value that is a couple of years old might be around 80% of its original cost.
There are several reasons that contribute to the stable value that brewing equipment holds. The first being long lead times for new equipment. A brewery that is in the market for new equipment will often have to wait 8-12 months to obtain a brand-new brewing system from a manufacturer. This is a factor of the specialized production that brewing equipment requires and the increased pressure on manufacturers from customers.
Simply put, the companies that manufacturer brewing equipment have a long list of orders to fill. This leads to the second reason why equipment values remain relatively high, increased demand in the secondary market. Breweries that have old equipment that they have either outgrown or no longer need, sell their old tanks and brewing systems to other businesses and hopeful brewmasters. The increased demand for used brewing equipment maintains the prices of used brewing equipment.
Overall, the brewing industry seems to be on the right track and is showing signs of continued growth in the coming years. A strengthening economy coupled with high demand for craft beer should enhance opportunities for established breweries to expand and for new ventures to make their mark.