AMS Microbrewery

Project
2014 Envisioning Proposal

Aaron Bailey AMS Councillor

Michael Kingsmill AMS Design

[email protected]
[email protected]

Table of Contents
I.

Executive Summary ............................................................................................... 2

Introduction and Timeline
Definitions

II.

Description of Business......................................................................................... 3
Company Ownership/Legal Entity
Location
Features
Proposed Products

III.

Market Analysis ..................................................................................................... 5

British Columbia Market Analysis
Online Survey Analysis
Target Audience and Product Positioning
Pricing

IV.

Sales and Revenue ................................................................................................. 8

Projected Draft Beer Sales Volumes
Projected Revenues

V.

Operations and Costs ........................................................................................... 11

Operational Models
Potential Partnerships/Tenancies
Construction and Equipment Costs
Production & Pre-production Costs

VI.

Conclusion ............................................................................................................ 17

Executive Summary
Introduction and Timeline
Over the course of the last three years, the UBC Alma Mater Society Council has been
actively exploring the idea of creating one of the first on campus establishments for brewing and
supplying craft beer products to its constituents. The project was originally envisioned as an addition
to the Pit Pub establishment being constructed within the new AMS Student Union Building, slated
to open in late 2014. On the recommendation of AMS Council, First Key Consulting was engaged in
May 2011 to conduct a comprehensive feasibility analysis and market assessment for an AMS
Brewpub associated with the Pit Pub, and upon their recommendation, 1.1 million dollars from the
Student Spaces Fund was earmarked by a Council resolution in 2013 to support the construction
and operations of the business.
As plans for the Student Union Building progressed, and the budget was further restricted, it
was deemed that the Brewpub project would be financially unfeasible for the Society to pursue as a
part of the New SUB due to limits on size and growth. However, due to continued support from
students and Councillors, the project was reimagined as a component of the UBC Farm Centre, set
to open in January 2017. Negotiations on behalf of the AMS with the UBC Farm were made by an
ad-hoc Brewery Committee, and a Memorandum of Understanding was drafted in May 2013.
At the AMS Council meeting on November 20th, 2013, the VP Finance noted that the
original motion providing funds from the Student Spaces Project to the Farm Brewery initiative was
no longer in order due to the specific mandates of the fund. In order to maintain momentum in
negotiations with the UBC Farm, the ad-hoc Brewery Committee once again appealed to AMS
Council with the support of the brUBC club and successfully passed a resolution on December 4th
to include a question in the upcoming referendum to support the Brewery initiative.
In order to prepare for the continuation of the project upon a successful referendum
outcome, this updated business proposal has been generated. Much of the information is contained
within the original First Key consultation and is complemented by in-house calculation completed
by the AMS Design Office pending additional funds to finance a full revaluation by First Key.

Definitions
A Microbrewery is a small-scale brewery that packages its beer in kegs, growlers, bottles, or
cans for on- and off-premises sales and off-premises consumption. A small-scale brewery in
Canada typically produces between 3,000 and 50,000, but no more than 150,000 hectoliters
of beer per annum.
A Brewpub is also a microbrewery, but with an on-site tavern component, where patrons
can purchase and consume beer on-site. A brewpub may also have significant off-site sales
revenue in addition to end-use sales to retail customers on-site.
AMS MICROBREWERY PROJECT JANUARY 2014

Description of Business
Company Ownership/Legal Entity
The AMS Microbrewery will be constructed as a component of the new UBC Farm Centre.
As such, the land upon which the facility is built will be leased from the University of British
Columbia according to terms outlined in the Memorandum of Understanding. The project will be
led by a Microbrewery Steering Committee consisting of representatives from all three involved
parties (the AMS, UBC, and any other partners). The Steering Committee will be responsible for
creating Terms of Reference and overseeing construction and implementation of the AMS
Microbrewery MOU.

Location
The AMS Microbrewery would be located at the UBC Farm (3461 Ross Dr, Vancouver, BC
V6T 1W5) on the south side of the UBC Vancouver Campus as a part of the proposed UBC Farm
Centre. As the first AMS property on the south end of campus, the microbrewery presents a unique
opportunity to draw student interest to an area of campus that is infrequently visited, currently.
Below is a map showcasing the location of the proposed microbrewery, indicated by the red balloon:

Features
The Microbrewery space will be partitioned into the following sections:
General Office Space
Administration Area
Commons Area
AMS MICROBREWERY PROJECT JANUARY 2014

Tasting Room
Laboratory Space
Lunch Counter Storage Area
Malting Area
Fermenting Area
Processing Line
Tapping Area
Refrigerated storage
Keg Inventory Area
General Storage
Loading Deck
Waste Disposal Area
Academic Space
As such, the AMS Microbrewery would serve three main purposes
1. Production and sale of craft beer
2. Academic programming relating to Brewmastery, related Agriculture and
Microbiology, and/or Fermentation Science/Engineering as lead by UBC
3. A vessel for partnership with UBC Farm initiatives and events, raising
awareness and interest in the farm among UBC students.

Proposed Products
Based on local beer consumption trends, First Key proposed a number of potential beers
that would leverage the possibility of using locally grown ingredients, potentially from the UBC
Farm itself. Designed to be smooth, full-bodied, and easy drinking, the beers would complement
foods served at many on campus establishments, as well as serve to be a high-quality stand-alone
brew. The proposed beers (names pending) were the AMS Lager, AMS Ale, AMS Special Lager
(Bohemian Pilsner), AMS Special Ale (North American Wheat Ale); as well as two seasonal
options; a California Pale Ale and a North American Harvest Wet-Hopped Ale produced
using fresh, whole hops grown at the UBC Farm. Full details about proposed attributes and
flavour/aroma notes for each beer can be found in the original First Key consultation report.

AMS MICROBREWERY PROJECT JANUARY 2014

Market Analysis
British Columbia Market Analysis
Microbreweries in British Columbia exhibit the highest growth of all beer-producing
sectors. From 2006 to 2010, the microbrewery sector grew at an average annual rate of
14.9% (BC Liquor Distribution Branch Quarterly Market Review December 2010).
Although the overall beer market has been stagnant, microbreweries have seen increases in
draft (7.65%) and packaged (40.12%) sales, indicating a shifting preference towards higher
quality, locally produced brews.

Online Survey Analysis

As a component of their 2011 consultation, First Key conducted an online survey of 949
UBC Undergraduate students, mainly between the ages of 19 and 22 years old. 59% of
respondents identified as male, while 41% identified as female.
The survey was used to gauge interest in the possibility of a Brewpub, however many of the
questions pertain to the construction of a microbrewery in general.
Slightly more than half of the interviewees consume beer once or more per week
69% of respondents were in favour of converting the Pit Pub into an establishment
including a microbrewery. Most concerns were centered around the potential loss of
casual atmosphere associated with the Pit, which would not be an issue with a brewery
establishment on the UBC Farm.
8 of 10 respondents who purchased keg beer did so from a microbrewery
establishment
2/3rds of those surveyed indicated a willingness to pay a premium for quality
products brewed on-site.

Further analysis may be necessary to better understand the interest in beer brewed on campus,
however the initial survey provides valuable insight into the beer culture that thrives at UBC.

Target Audience and Product Positioning

Currently, the AMS target market for beer sales is legal age, undergraduate drinkers through
the Pit Pub. Secondarily, the Gallery lounge also reaches to graduate students and UBC Faculty and
Staff. Ideally, the new AMS Microbrewery would maintain the same target markets by supplying its
products to both establishments in the New SUB, as well as the possibility to expand marketing
through keg sales to other on-campus establishments such as Koerners Pub and Mahoney and Sons.
The brewery would also offer two new and exciting opportunities for business revenue: reaching out
to the nearby communities in the UNA, Point Grey, and Kitsilano, as well as Special Occasion
License holders through off-site keg sales and commercial sales of small-volume growlers or
bottles/cans to students or community members.
AMS MICROBREWERY PROJECT JANUARY 2014

Based on results from the First Key online survey, lagers and ales were the most popular
beer styles (24% and 23%, respectively), however there was also a very significant interest expressed
for light, stout, wheat, and flavoured styles. The intention of a wide variety of products would be to
slowly shift the beer culture on campus away from large-scale commercial beers and towards locally
produced craft beers. For those with more developed palates, the seasonal option would provide
and opportunity to appreciate diverse styles of brew making not frequently seen in British Columbia.
Approximately half of surveyed individuals said that certified organic ingredients were
very/somewhat important in their decision to support microbrewed products while 80% noted that
beer produced in a sustainable manner was important to them. Locating the AMS
Microbrewery at the UBC Farm provides beneficial gateways to satisfying both of these desires due
to on-site hop cultivation and the existing drive for the UBC Farm Centre to achieve LEED-Gold
certification upon its completion. Throughout development of the brewery project the AMS would
strive to uphold the highest degree of sustainability in construction and operations as attainable by
the Societys budget for the initiative.

Pricing
Pricing for the AMS Regular lager and ale was set to match comparable competitors such as
Molson Canadian; while the AMS Special lager and ale were set to prices comparable other domestic
specialty brews such as Rickards Red and White. The AMS Seasonal beers are priced to match
mainstream craft beers such as Okanagan Springs 1516. As such, the AMS Microbrewery would
offer quality, locally produced craft beers at prices as low as typical commercial brews. An
indisputably great value for good beer, which we predict will help transition market demand towards
AMS brand products.
Prices were set for both potential on-tap supplies at the Pit Pub and Gallery locations, as
well as off-site keg sales. Prices for bottling/canning or growler sales require further consultation
with First Key.
Table 1 - Projected Price for On-Site Draft to Tap Products

2017

2018

AMS Lager

$15.84

$16.16

AMS Ale

$15.84

$16.16

AMS Special Lager

$17.75

$18.11

AMS Special Ale

$17.75

$18.11

AMS Seasonals

$18.84

$19.22

2019

2020

2021

Price per 56oz Jug

AMS MICROBREWERY PROJECT JANUARY 2014

Weighted Average per Jug $16.53

$16.82

Table 2 - Projected Price for Off-Site Keg Products

2017

2018

AMS Lager

$162.84

$166.08

AMS Ale

$162.84

$166.08

AMS Special Lager

$182.00

$185.64

AMS Special Ale

$182.00

$185.64

AMS Seasonals

$183.37

$187.04

Average Price per Keg

$168.23

$171.26

2019

2020

2021

Price per 50 liter Keg

AMS MICROBREWERY PROJECT JANUARY 2014

Sales and Revenue

Projected Draft Beer Sales Volumes
Original sales volumes predicted by First Key were based on declining trends in volume sold
at the Pit Pub and Gallery over the last few years due to a changing demographic of student
populace and the establishments losing their luster since the Pit Pubs renovation in the summer of
2006. Upon opening of the New Student Union Building and the proposed Brewpub, they predicted
a spike in consumption and sales consistent with that following the Pits 2006 renovation.
Considering that the brewery will be opening a few years following the New SUBs grand
opening, spikes in on-tap consumption have been downplayed slightly to still account for excitement
around the new product while being realistic with patronage in the Pit and the Perch (formerly the
Gallery). Keg sale predictions are extrapolated from the relatively constant original predictions made
by First Key in 2011. Relevant historic sales volumes can be found in the First Key report.
Table 3 - Volume of Draft to Tap Sales by Product

2017

2018

2019

2020

2021

Total

Hectolitres On-Site Draft

to Tap
AMS Lager

124

144

AMS Ale

106

119

AMS Special Lager

53

50

AMS Special Ale

47

44

AMS Seasonals

35

31

Total Hectolitres OnSite

365

388

Table 4 - Volume of Keg Sales by Product

2017

2018

2019

2020

2021

Total

AMS Lager

31.5

33.0

34.5

34.5

34.5

168.1

AMS Ale

27.0

30.0

28.5

28.5

30.0

144.1

AMS Special Lager

13.5

12.0

12.0

12.0

10.5

60.0

Hectolitres Off-Site Keg

AMS MICROBREWERY PROJECT JANUARY 2014

AMS Special Ale

12.0

10.5

10.5

9.0

9.0

51.0

AMS Seasonals

9.0

7.5

7.5

7.5

7.5

39.0

Total Hectolitres OnSite

93.0

93.0

93.0

91.5

91.5

462.2

Projected Revenues
Based on projected volumes and pricing structure, Gross Revenue Projections are as follows:
Table 5 - Gross Revenue per Brand On-Site Draft to Tap

2017

2018

AMS Lager

112,743

140,478

AMS Ale

96,637

116,047

AMS Special Lager

54,150

54,759

AMS Special Ale

48,133

47,914

AMS Seasonals

38,321

36,331

Total Revenue

349,983

395,529

Average Price per HL

958

1020

2019

2020

2021

Total

Gross Revenue per

Brand On-Site Draft
to Tap

Table 6 - Gross Revenue per Brand Off-Site Kegs

2017

2018

2019

2020

2021

Total

AMS Lager

9,337

10,271

10,952

11,171

11,395

53,127

AMS Ale

8,003

9,337

9,048

9,229

9,909

45,525

AMS Special Lager

4,500

4,200

4,284

4,370

3,900

21,254

AMS Special Ale

4,000

3,675

3,749

3,277

3,343

18,044

AMS Seasonals

3,023

2,645

2,698

2,752

2,807

13,923

Gross Revenue per

Brand Off-Site Kegs

AMS MICROBREWERY PROJECT JANUARY 2014

Total Revenue

28,863

30,128

30,730

30,799

31,353

151,873

Average Revenue per

HL

310.23

323.83

330.30

336.47

342.52

328.60

Table 7 Total Revenue

2017

2018

Draft to Tap

349,983

395,529

Kegs

28,863

9,337

Gross Revenue

378,846

404,866

2019

2020

2021

Total

Revenue

Less BC Prov. Mark-up

Net Revenue

Note that revenues listed do not include potential revenue from growler or small-container sales,
which would require further investigation.

AMS MICROBREWERY PROJECT JANUARY 2014

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Operations and Costs

Operational Models
In order to accommodate changes in the microbrewery plans, the ad-hoc Brewery Committee reviewed and deliberated upon multiple
models to manage the commercial operations of the space. They differ in amount of liability for the Society and financial benefits. The various
models are outlined below:
1. AMS Owned and Operated:
This option would correspond to plans originally designed with First Key Consulting, where the AMS would be responsible for financing
the construction, capital investment for equipment, pre-production costs, and labour/operational costs. The AMS would be sole
proprietor of the microbrewery and responsible for in-house managing under the Societys business portfolio.
Benefits:

Full control over branding, marketing, and operational decision making for the microbrewery

Following payment of initial investment, 100% of generated profits would return to the society

Concerns:

Unlimited liability

Lack of knowledge pertaining to operating a Brewery

Substantially higher investment necessary from students (construction costs, equipment costs, and pre-production costs)

Production costs would have to be paid from the AMS operating budget before the business would be profitable

AMS MICROBREWERY PROJECT JANUARY 2014

11

2. AMS Owned and Operated with Managing Partner

In this model, the AMS funds the construction, equipment, pre-production, and inputs to production, but production costs and
management of the business, as well as branding and marketing, are done jointly with an experienced partner or partner organization.
Revenues are divided between the partner and the Society based upon a predetermined contract.
Benefits:

No labour or operational costs

Experienced partner will speed time spent in pre-production and streamline startup

Less liability for the Society in terms of management

Concerns

Inputs would still need to be provided from the AMS operating budget

Control of branding and marketing would be divided between the AMS and the partner

Revenue and profits would be divided, reducing the profit margin of the Society.

3. AMS Owned, Tenant Operated and Managed

With this model, the AMS would be responsible for covering construction and equipment costs, but the partner would cover all other costs.
In theory, the space would be leased to the tenant to produce beer to supply the UBC market, and in return the Society would collect
monthly rent, and a negotiated percentage of sales revenue from the tenant. Ideally, the tenant would work with the Society to include
some AMS branded beers in the product line-up, however all marketing and branding decisions would be made by the tenant.
Benefits:

AMS MICROBREWERY PROJECT JANUARY 2014

12

Least liability for the Society

No added weight to the Societys business portfolio

Upon repayment of the construction loan from the referendum fee levy, the business would immediately be profitable

Flexible, contractual control over tenants of the space

Concerns:

Smaller profit margins

Least control over branding and marketing

Potential Partnerships/Tenancies
With regards to the second and third operational models proposed above, two different types of partnerships were envisioned, each with their
advantages and disadvantages:
1. Established Microbrewery
This agreement would involve an established microbrewery acting as a partner of the Society. Benefits to the partner would include access to a
niche market of students, the opportunity to expand promotion through a satellite location, and positive PR associated with a unique project
involving educational components.
Advantages:

Easier to identify potential partners and negotiate

Arguably more expertise and capital necessary to ease pre-production and start up

Disadvantages

AMS MICROBREWERY PROJECT JANUARY 2014

13

Less flexibility in terms of negotiated brand development and marketing

May have ulterior motives for expansion beyond commercial scope of the project

Potential source of concern on behalf of the University

2. Entrepreneurial Brewmaster
A tenancy with a trained and experienced brewmaster seeking to begin their own mincrobrewery would serve as an alternative. Benefits to the
tenant would include a low cost entry point into a thirsty, new market of University students and the support of an organized student union behind
them.
Ideally, we would be seeking an individual with 5 or more years working experience as an assistant or head brewmaster at an established
microbrewery who was interested in branching off and beginning their own business.
Advantages:

More enticing option for a new entrant into the industry versus an established brewery

Better opportunity to work with the partner towards brand development, marketing, and integration into the UBC community

Disadvantages:

A difficult prospect search relative to an established microbrewery

Steeper learning curve for the partner as a new entrant

AMS MICROBREWERY PROJECT JANUARY 2014

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Out of the proposed operational models, our suggested model for implementation is number 3: AMS Owned, Tenant Operated and Managed,
with an entrepreneurial brewmaster as the tenant. We believe that this option provides the most tangible benefits to the Society, while limiting
liability, cost, and risk.

Construction and Equipment Costs

The following table articulates estimates for structural construction costs run in-house, and equipment costs (plus applicable taxes) for the
construction of the microbrewery. In following the suggested operational model above, the only cost to the Society would be that listed below,
with the investment being repaid in time through the fee levy resulting from a successful referendum. The tenant would ideally cover all other costs,
thus the AMS would simply be an investor of capital into the business venture.
NO.

HEADING

ITEM

DETAIL

UNITS

RATE

BUDGET

A.1

ARCHITECTURAL

BREWERY INTERIOR
FINISHES

4,135.00

$15.00

$62,025.00

B.1

STRUCTURAL

STRUCTURAL WORK

4,135.00

$85.00

$351,475.00

C.1

MECHANICAL

MECH. SOW AS PER FIRST

KEY REPORT

4,135.00

$15.00

$62,025.00

D.1

PLUMBING

PLUMB. SOW AS PER

FIRST KEY REPORT

4,135.00

$20.00

$82,700.00

E.1

ELECTRICAL

ELEC. SOW AS PER FIRST

KEY REPORT

4,135.00

$18.00

$74,430.00

SUB
TOTAL

SUB TOTAL

NOTES

$632,655.00
BREWERY
EQUIPMENT

F
F.1

EQUIPMENT PURCHASE

$310,000.00

F.2

EQUIPMENT DELIVERY &

PLACEMENT

$25,000.00

F.3

MINIMUM
SUSTAINABILITY
FEATURES

$10,000.00

SUB

AMS MICROBREWERY PROJECT JANUARY 2014

FIRST KEY REPORT

$345,000.00

15

TOTAL
G

SOFT
COSTS

G.1

ARCHITECTURAL
FEES

$632,655.00

15%

$94,898.25

G.2

STRUCT.
ENGINEERING
FEES

$351,475.00

20%

$70,295.00

G.3

MECH.
ENGINEERING
FEES

$144,725.00

25%

$36,181.25

G.4

ELEC.
ENGINEERING
FEES

$74,430.00

25%

$18,607.50

G.5

FIRST KEY DESIGN

FEES

LS

$37,000.00

G.6

PERMIT FEES

5.00%

$31,632.75

$632,655.00

SUB
TOTAL
H

QUOTE

$288,614.75

RECAP

H.1

GST TAX

GST CHARGE

$921,269.75

5%

$46,063.49

$46,063.49

BASE BUILDING +
CONSULTANTS

H.2

PST TAX

NET PST CHARGE

$977,655.00

7%

$68,435.85

$68,435.85

BASE BUILDING +
BREWERY EQUIP.

H.3

TOTAL EST.
PROJECT COSTS

H.4

PROJECT
CONTINGENCY

TOTAL EST.
PROJECT COSTS

AMS MICROBREWERY PROJECT JANUARY 2014

$1,380,769.09
$1,380,769.09

5%

$69,038.45

$69,038.45
$1,449,807.54

16

Please note that the above costs do not incorporate legal fees and associated with reviewing the MOU, signing tenancy agreements, or any other
unforeseen expenses. We predict an additional $25,000 as a liberal estimate. Also, the cost of federal and provincial taxes as shown require further
professional consultation, but serve as estimates for our present purposes.

Production & Pre-production Costs

Although the location and layout of the proposed AMS Microbrewery has changed, the specifications and associated costs of operations and
production should fall in line with those proposed in the initial First Key report. Differences in net profits and results would stem from only a few
distinct areas:
Slightly modified sales numbers in lieu of an opening not coupled with the New SUB.
A lack of consideration of growler and small-container sales, pending consultation.
Ideally, further consultation will be conducted in subsequent months following the referendum in order to better update costs of construction,
pre-production, and ongoing operations. Following our proposed operational model, these costs would be the responsibility of the tenant, and as
such, would not be factored into final profits generated by the Society. For now, please refer to the First Key report for best estimates.

Conclusion
As per the suggested operational model, total cost to the Society would be $1,449,807.54, for construction, equipment, and installation costs.
The investment by the Society would initially come from a loan agreement with the University and be repaid through the fee levy in the upcoming
2014 AMS Referendum.
Return to the Society would be immediate, and would be comprised primarily of rental fees estimated at $45/square foot per annum, as well as a
to-be-determined percentage of revenue as a return on the capital investment (equipment cost) in the tenants business. Until updated numbers for

AMS MICROBREWERY PROJECT JANUARY 2014

17

volume and revenue are available, the net benefit to the Societys endowment is presented below based simply on constant rental fees alone over a
5-year period:

Rental Cost/Square
Foot ($)

Square Footage

Total
Rental
Revenue
per
Month

Total
Rental
Revenue
per
Annum

4,135
4,135
4,135
4,135
4,135

$15,506.25
$15,506.25
$15,506.25
$15,506.25
$15,506.25

$186,075.00
$186,075.00
$186,075.00
$186,075.00
$186,075.00
$930,375.00

Rental Revenue
2017
2018
2019
2020
2021
Total 5 Year Revenue

$45.00
$45.00
$45.00
$45.00
$45.00

As shown, overall financial contribution to the Society from rental revenue alone would be $930,375.00 over a 5-year period.

AMS MICROBREWERY PROJECT JANUARY 2014

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