Cost Accounting

U.S. Bank of Washington: Financing the Redhook Ale Brewery

Submitted by

Atul Mishra

10125011

The Redhook Ale Brewery:

Established in 1981 as a regional microbrewery, Redhook Ale began its commercial operations in 1982 and by mid 1985 demand exceeded production capacity. Redwershook was able to capture significant market share because of general growth of per capita draft beer consumption. Moreover, most of the segment was dominated by European imports. Redhook was able to sell freshly made beer with local flavors in European tradition. Though the domestic beer market experienced flat sales growth in 1988 and 1989, microbrewery sales grew by 30%-50% per year. This growth was at the expense of imports.

Scale of Operations:

• Microbrewery:

A microbrewery is a brewery which produces a limited amount of beer and is associated with innovation and uniqueness by consumers.

In the U.S, the Brewers Association uses a limit of 15,000 US barrel a year to define a microbrewery.

• Craft Brewery:

A craft brewery in the US is a small, independent and traditional brewery which can produce up to 6 million US beer barrels per year.

Redhook would turn into a Craft brewery from a Microbrewery after its proposed expansion.

Products:

• Ale:

Ale is a type of beer brewed from malted barley using a warm fermentation with a strain of brewers' yeast. The yeast will ferment the beer quickly, giving it a sweet, full bodied and fruity taste. Most ales contain hops, which help preserve the beer and impart a bitter herbal flavor that balances the sweetness of the malt. Ale is conventionally used to mean a bitter tasting barley beverage fermented at room temperature.

• Porter:

Porter is a dark beer, made from malt browned or charred by drying at a high temperature

• Lager:

Lager is a type of beer made from malted barley that is brewed and stored at low temperatures. Lagers are lighter, less bitter and are considered to be thirst-quenching. Thus they appealed...