By Wayne Moore
You've been malting, and things are going well. Customers appreciate your product. However, sooner or later, you find yourself facing a challenge - you have reached your capacity limit. Expanding your operation can be a daunting task. Where should you start? What factors should you consider? I don't claim to have all the answers, but I have guided several malthouses through this process over the years.
Whether you're launching a new malting operation or expanding an existing one, it boils down to four main considerations:
- Capacity: How much malt do you need to produce?
- Methodology: How do you plan to create the malt?
- Infrastructure: Do you have or can you develop the necessary infrastructure to support production?
- Financing: Do you possess the financial resources to make it a reality?
Determining Your Annual Capacity Target
The initial section of this worksheet is a straightforward annual production volume calculator. By inputting target batch sizes, malting system types, vessel numbers, and production estimates, you can calculate the estimated annual maximum production. This process allows you to quickly evaluate different malting systems, configurations, and equipment sizes to understand their impact on estimated annual production volume.
Navigating Equipment Costs
Malting equipment expenses can vary significantly based on the equipment type and how you get it (i.e., Will you buy it or build it yourself?). While a fully integrated malting system would be ideal, it's also a substantial upfront investment. Opting for a smaller 3-ton vessel system will cost between $3,000 to $5,000 per ton of annual finished malt production, depending on the number of germination-kiln vessels (GKVs) installed. A 3-ton GKV can yield approximately 140 tons of finished malt operating 50 weeks per year.
Larger systems may require a higher initial investment but result in significantly more malt production, thereby reducing the cost per ton. A 10-ton system, for instance, would cost approximately $1,900 to $3,000 per ton of installed production capacity, depending on GKVs. To save on initial capital costs, you can consider taking on more of the system design and fabrication yourself, but this entails a trade-off in terms of time and personal effort. Exploring alternative malting methods, such as floor malting, might offer some cost savings, but it also necessitates more space and brings with it additional labor costs and the challenge of finding reliable staffing.
Considering Control Systems
Control systems are another crucial but costly consideration. A well-designed automation system can enhance malt consistency and reduce time spent in the malthouse. However, developing and integrating a comprehensive control system can be time-consuming and expensive. Costs can vary widely depending on the system's scope and level of automation. A basic (mostly manual) control system may cost around $50,000, while a fully automated system for an entire malting system could range from $250,000 to $300,000. Yes, it's a significant investment, but I did warn you!
Space and Utility Needs
Next, similar to Star Trek, we need to explore the concept of space. After narrowing down your production volume and equipment choices, it's crucial to assess not only the availability of space but also the infrastructure required to support your project.
Estimating the necessary building space becomes relatively straightforward once the malting equipment is chosen. However, that's only part of the equation. What about grain storage and handling, grain cleaning, malt processing, and malt storage requirements? Expanding your capacity will likely necessitate increased grain and malt handling equipment, along with additional storage and space-consuming elements.
Furthermore, you'll need to account for increased demands on power, gas, water, and wastewater facilities. It's not solely about securing more building space; you must also ensure that you have the requisite utilities to make it all function efficiently. The worksheet I've provided includes rough utility cost approximations, but please be aware that these are ballpark figures.
Financial Planning and Project Viability
The last component of this endeavor involves financial planning, as it all ultimately boils down to money. The financial side of the equation encompasses multiple variables, including the purchase costs of equipment and systems, expenses related to support equipment, equipment installation, building construction, and, if necessary, financing. It's crucial to consider the cost of money, too, unless you're independently wealthy (and if you are, why are you doing this?).
The worksheet offers two methods - the cost of financing or straight-line depreciation. Both are simplified approaches but factor in the cost of money. On the operational side of the financial equation, numerous cost variables come into play, such as labor, utilities, facilities, consumables, raw materials, and more. The referenced worksheet includes placeholders for most of these expenses, but estimating some of these cost variables may require educated guesses and assumptions.
The final questions to ask yourself are: "Does the project make sense? What's the bottom line? Can you make this work?" Once you have your annual production estimate and your annual cost estimates, you'll have a rough idea of what it will cost you to produce that malt. The wildcard questions are, "Can you sell it all, and at what price?" With those numbers, the worksheet calculates estimated annual income and a simple rate of return. That's the bottom line!
Using the Worksheet Effectively
Now, some disclaimers. The referenced worksheet is not a replacement for a comprehensive financial business plan. It serves as a straightforward planning tool to facilitate the quick evaluation of various options for malthouse expansion or construction. The worksheet provides placeholders for different categories, and while some cost estimates are ballpark figures, it should help you account for the myriad factors involved in building and/or expanding a malting operation. Please feel free to adjust the worksheet as necessary and reach out with any questions. Thanks for reading!