Economics

So now we know what it all costs. The next question is — is it worth it? Well, we have made 11 litres of vodka from $12.74 worth of sugar and yeast and $1.26 worth of electricity, so that works out at $1.27 per litre. Not bad.

But how about all that equipment? Let's assume a figure of $600 for its cost and see how long it would take to pay this off from the savings we realize on making our own vodka instead of buying it. If we produce and consume 1 litre of vodka per week it has cost us $1.27 against maybe $20 if we'd bought it at a liquor store. So we save about $18.75 per week. At that rate it will take us 32 weeks to break even. After that the equipment is free and the cost of the gin would simply be the cost of the ingredients, $1.27/litre, in perpetuity. A payback period of 8 months would be considered extremely good in industry where 5 to 10 years is much more normal.

Another way of looking at the economics of investing in the equipment is to compare it with the investment required to purchase the vodka 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 vodka with what is left or would one rather lay out $600 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 already have various instruments and measuring devices. Under these conditions you should be able to bring the costs down below $400.

The figures used above are simply an example of how to look at the costs and benefits of making your own spirits. In the United States, for example, where vodka is relatively cheap, the savings would be less and the payback period that much longer. Using figures appropriate for where you live — i.e. the cost of making the equipment and the local price of vodka, sugar, etc. — you can work out the savings for yourself.

To allay the concern of 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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Making Your Own Wine

Making Your Own Wine

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