Economics

So now we know what it all costs. The next question is ---- is it worth it? Well, we have made 11 litres of gin from $8.83 worth of sugar and yeast and $1.26 worth of electricity, so that works out at 92 cents per litre or $1.05 for a 40 oz. bottle (1.14 litres). Not bad.

But how about all that equipment? Let us use the round figure of $1,000 for its cost and see how long it would take to pay this off from the savings we realize on making our own gin instead of buying it. If we produce and consume 1 litre of gin per week it has cost us 92 cents against maybe $20 if we'd bought it at a liquor store. So we save about $19 per week. At that rate it will take us 53 weeks (a year) to break even. After that the equipment is free and the cost of the gin would be 92 cents/litre in perpetuity. A payback period of one year would be considered extremely good in industry where 5 to 10 years is much more normal. Note that if one were consuming 2 litres of gin per week the payback period would be only 6 months.

Another way of looking at the economics of investing in the equipment is to compare it with the investment required to purchase the gin commercially instead of making it. At a commercial price of $20 per litre and a consumption of one litre per week the annual expenditure will be $1040. It would require a bank deposit of $30,000 to generate this $1040 assuming a 5% interest rate and taxation on the interest of 30%. So what it would boil down to is the question ---- would one rather put aside $30,000

in a savings account, earn $1500 in interest, pay $450 in tax and buy commercial gin with what is left or would one rather lay out $1,000 on equipment and use the $30,000 in some other way?

A considerable reduction in equipment costs will be possible if you already have facilities for carrying out a fermentation and if you adopt the single boiler option. Under these conditions you should be able to bring the costs down below $500.

To allay the concerns of the tax authorities who may fear that the equipment and process under discussion might be used for illicit commercial production of distilled spirits, consider the following: A full-time operation with this equipment could only produce 500 litres per year and would generate only $10,000 if each bottle were sold for $20. Being illicit, the selling price would likely be no more than $10, leading to total sales of $5,000. From that must be subtracted the cost of materials and the labour involved, suggesting that anyone considering going into the moonshining business would be well advised to take up some other line of work.

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