BOGGY BRE WERY
Prof. Powell Robinson of Texas A&M University and Prof. F. Robert
Jacobs of Indiana University prepared this case as the basis for class
discussion rather than to illustrate either effective or ineffective
handling of an administrative situation. Certain data have been altered
to protect their proprietary nature.
NOTHING COOLER THAN THE BOGGY
It’s a hot, humid spring afternoon in this South Texas town and a cold “Boggy” beer
fresh from the cellar of the Boggy Brewery sure tastes good. Herbert Siems, the 92
year old bartender at the Brewery Hospitality Room, comforts departing visitors with
an invitation to return and the promise, “We’ll save one for you.”
Employees of the brewery founded in 1909 on the site of a natural artesian well, still
heed the words of their late boss, Hermann Seele, “Drink all the beer you want, just
don’t get drunk.” Boggy Brewery can claim a few superlatives. It is the smallest,
second-oldest and last independent brewery in Texas. Hermann Seele, a native of
Bavaria, had been a brew master at the Pyramid Brewing Co. in Cairo, Egypt. In
1915, he bought the Boggy Brewery outright and began brewing a heavy lager beer
that quickly became a favorite of Germans and Czechs in the area.
When Hermann died in 1950, his daughter, Cecelie took over. “Miss Celie” extended
the packaging line to include non-returnable bottles as well as kegs and long-neck
bottles. Boggy was distributed only over a 75-mile radius from the brewery. ·
In 1970, the brewery embarked on a five-year expansion program that brought in cans,
increased capacity from 24,000 to 44,000 barrels (bbls) a year and changed the
formula of the beer. They had been brewing a heavy European lager type of beer, and
gradually lightened the formula to attract a younger crowd without alienating their
Copyright c 1993 (revised Nov., 1993). No part of this publication may be reproduced, stored in a
retrieval system, or transmitted in any form or by any means-electronic, mechanical, photocopying,
recording, or otherwise-without the permission of the authors.
In 1974, Boggy Brewery came full circle with the introduction of a dark “bock
beer” designed to compete with fast-growing European imports. Today, Boggy
Bock accounts for 80 to 85 percent of overall sales.
During the 1970s and 1980s the Boggy Brewery attempted to compete with the
leading brands by pricing its products competitively, and it had some help from
the State of Texas. The state legislature passed the “Boggy Beer Bill” in 1971,
which granted a 25 percent state excise tax break to any brewery producing less
than 75,000 barrels a year. The excise tax rate is $6.00 per barrel. Boggy
Brewery was the only qualifying brewery. It scored another victory in 1979, when
a bill prohibiting manufacturers from selling directly to retailers was amended to
permit Boggy Brewery to sell to retailers if it has no wholesaler in the area.
The brewery was purchased in 1989 by Gustav Erichson, owner of Erichson
Importing Co., who also introduced Cerveza Noche Caliente to the United States
market. Under Erichson’s leadership the Boggy Brewery capitalized on the high
quality of Boggy beer and its “little brewery” status. This meant positioning the
beer to compete with the higher priced domestic and imported premium beers.
To keep up with increasing sales, in 1991 the Boggy Brewery purchased the
failing Gabriel Brewery in Wisconsin, dismantled the processing equipment, and
shipped it to Boggy Creek, Texas expanding the capacity of the brewery. In
1992, the brewery rolled out 57,000 barrels of beer. “Anheuser-Busch (brewer of
Budweiser) spills more than that,” quipped Johnny-Boy Enselmo, a regular at
the brewery’s hospitality room.
Boggy beer is distributed in less than half of Texas, but in almost every part of
the state that is wet. Its share of the beer market is 0.3 percent in Texas. “But
we don’t compare ourselves against other brands,” says Jimmy Maurie, the
assistant brew master. “We compare ourselves against ourselves.” Last year, a
flat year for most brewers, Boggy beer sales rose about 20 percent. Where 10
years ago most of the sales growth emanated from college campuses, today the
growth is coming from the major metropolitan areas of the state. In addition,
distributors from Atlanta, Memphis and Nashville are test marketing Boggy
Premium and Boggy Bock.
The Boggy Brewery now faces a dilemma. Marketing predicts an annual sales
increase of 15-20 percent in the Texas market alone for the next several years.
However, it is unclear whether the brewery can handle this increased demand
without once again expanding its capacity. Furthermore, the forecast demand for
out-of-state sales is very unpredictable. Ifcapacity is expanded and out-of-state
sales do not materialize, the limited resources of the brewery will have been
wasted. However, if demand picks up and there is not enough capacity, then
valuable marketing opportunities will be lost.
THE BREWING PROCESS
The brewery employs 41 full-time workers. The manufacturing processes are
divided into the brewing and cellar processes which make the beer, and the
packaging process which prepares the beer for shipment.
The brewing process starts in the malt mill where malted barley is augured to
crack kernels of malt making easy access to the soluble starches in the grain. The
malt is then weighed on a hopper scale and dumped into the mash cooker tank
with com and hot water from the on-site artesian well. It takes about 50 minutes
to load the mash cooker which holds up to 125 barrels (bbls). of mash. The
mixture of ingredients determines whether the beer will be Boggy Premium or
The mash is then agitated and heated to gelatinize the starches, and then
eventually convert the starches into fermentable and non-fermentable sugars. The
resulting concoction, called “sweet wort,” looks like sudsy dishwater but smells
better than anything Mom ever cooked up. At this point approximately 2.5 hours
have passed since the workers began loading the cooker.
The mash tank has a false bottom that, with the malt, acts as a strainer to clarify
the sweet wort as it passes into Brew Kettle No. 1 (there is no Brew Kettle No.
2). It takes 2 hours to strain the wort, and another 30 minutes to clean up the
mash cooker before the next batch. The 100 bbls of mash yields approximately 75
bbls of sweet wort. The spent grain, high in protein, is fed to cattle owned by the
Brew Kettle No. 1 is a 75-barrel (31 gallons in a barrel) kiln that resembles a
huge undersea diving bubble. The kettle is made of stainless steel coated with
copper. Hops are fed into the kiln where they are mixed with the sweet wort and
brewed vigorously for one hour. The hops give the beer its distinctive flavoring,
increase foam retention, and act as a preservative. After brewing, the wort is
drained into a whirlpool tank for clarification where a vortex effect funnels
coagulates and proteins to the bottom of the tank. Next, the clarified wort is
pumped into the cellar where it passes through a cooler which lowers the
temperature of the wort from 212 degrees F to 54 degrees F. The wort is then
pumped into a fermenting tank.
During peak demand periods four employees are assigned to the mash preparation
and brewing activities each working day. Each brewer is given complete
responsibility for a single brew cycle which begins with cleaning and loading the
mash cooker, and ends when the wort is pumped into a fermentation tank. The
brewers are assigned to sequenced work-shifts where each brewer’s workday
starts approximately two hours before it is their tum to clean the mash cooker.
The staggered work-shifts result in two employees working in the brewing
operations throughout most of the day. The brewing process usually operates 18
– 22 hours per day, five days per week.
It takes multiple brew kettles to fill up a fermenting tank. When a fermenting
tank is full, yeast is added and the fermentation cycle begins. The enzymatic action
of the yeast converts fermentable sugars into alcohol and carbon dioxide. The
fermentation cycle takes 10 days, after which the liquid is called beer. After
fermentation the beer is pumped through a cooler, which lowers the temperature
to 32 degrees F, into ruh2 storage. Here, secondary fermentation takes place and
the maturation of the beer begins. The beer stays in rub storage for 12 days. The
beer is then filtered (100 bbls per hour) to remove sedimentation, C02 injected,
and routed to finishing tanks where further maturation takes place.
The beer stays in the finishing tanks for at least 3 days. However, the brew
master prefers to keep it there for 5 days to maximize the clarity, and hence the
quality of the beer. The beer is then pumped through a finishing filter, which
polishes and brightens the beer, making it ready for bottling, canning and
kegging. Finally, the beer passes through government meters on the way to the
package release tanks which directly feed the packaging lines.
The beer cellar is manned one shift per day by two employees. During peak
seasonal demand periods, when capacity is tight, the employees work weekends
so that the intermediate product is transferred between storage tanks as soon as it
is ready. Each cellar employee averages eight hours overtime per week during
peak demand periods. The cellar operators do not work weekends during low
demand periods, since the quality of the beer only improves if it is left in the
processing tanks longer than the minimum required times.
The beer cellar consists of 16 fermentation tanks: 6 are 265 bbl tanks and 10 are
300 bbl tanks. The tanks require 20 percent “head space” for fermentation to
take place (e.g., a 300 bbl tank can ferment up to 240 bbls at a time). For ruh
storage, there are six 250 bbl tanks, seven 300 bbl tanks and four 225 bbl tanks.
The 225 bbl tanks are constructed such that they can also be used for
fermentation, but not the other ruh tanks. There are five 250 bbl finishing
storage tanks. The ruh and finishing tanks need at least a 10 percent head space.
There are seven package release tanks: four 250 bbl bottling/canning tanks and
three 200 bbl racking tanks for kegs.
The total process takes approximately 28 days and is continuously monitored to
insure the highest possible product quality. As Jimmy Maurie explains, “We
could speed up the fermentation and aging processes by raising the fermentation
Ruh is an industry term for beer that is undergoing secondary fermentation or maturation.
temperature using chemicals and additional filters for clarification, and
adding the hops during cold filtering. This would drop the processing
time to 11-14 days. However, we prefer the natural brewing, fermentation,
and clarification processes which just take longer. Any other way and the
quality of the beer would not be as good, and we wouldn’t be brewing
Boggy beer. A brew master from one of the major breweries fondly put it
this way. ‘The Boggy Brewery follows the time honored tradition of
brewing beer, where we manufacture it.”
THE PACKAGING PROCESS
The beer is packaged in four different containers (long-neck returnable
bottles, short-neck disposable bottles, cans, and kegs) and two flavors
(premium and bock). Typically only a single bottle type is run each day,
and changeovers from one bottle type to the next are done at the end of the
day. In addition, the packaging lines are completely flushed after each day’s
operation. One barrel equals two kegs or 330.7 12-ounce bottles/cans.
Thebottle fillinglineruns at 270bottles/minute. Empty bottles are
automatically removed from cases and placed on aconveyor line. The
bottles are cleaned and sterilized prior to filling. After filling, the bottles
are crowned and run through a pasteurizer. Finally, each bottle is fill
inspected, labeled, either six-packed or cased, casecoded, and stacked on
apallet for immediate shipping or storage.
A relatively new piece of equipment, recently added to the bottling line is
the bottle scale which weighs each bottle. “You can’t be more than an
eighth of an ounce off,” Bernadette, the brewery’s tour guide explained.
“If you’re under, you’re cheating the consumer. If you’re over, you’re
cheating the government out of taxes.”
The canning line runs at 300 cans/minute and is similar to the bottling line.
Cans are fed from the warehouse, sterilized, filled, and lidded. They are
then sent through the pasteurizer, fill inspected, six-packed, cased, and
stacked on pallets. Twelve workers are assigned to the bottling and canning
operations. When the day’s packaging operations are completed, workers
are reassigned to other duties to fill out their eight hour workday, if
The kegging process is not as automated as the bottling and canning lines.
The oak keg plugs are pulled out using a press with a large cork screw.
The kegs are then cleaned and sterilized on a transfer line. Kegs are
manually quality inspected using a special light to see inside the keg.
The kegs are fed directly to a racking station where 4 kegs are filled
sequentially by a single operator. The keg is first positioned on a stand and
a filling nozzle attached. While the keg fills, the operator moves to the next
keg, removes the nozzle and hammers in a new oak plug to seal the keg.
The operator ejects the keg from the stand by stepping on a lever which starts
it rolling. The operator then positions a new keg, attaches a filling nozzle and
moves on to the next keg. Three workers capture the rolling kegs and stack
them on pallets for shipment. Kegs are prepared at a rate of 100 kegs/hour,
eight hours per day. Kegs are currently racked only two days per week,
with off days being used to clean and inspect the equipment and kegs.
However, the racking station could operate 5 days per week.
The plant engineer is currently evaluating a new filling platform for the
racking station. The platform’s cost is $6,000 installed. The new platform
mechanically positions the kegs for stacking. This would allow the kegging
process to operate with one filler and two stackers. However, the new filling
platform will reduce the filling rate to 85 kegs per hour.
The brew master or assistant brew master schedules each days “brews.”
Currently, three or four brews are run each day. The formal system requires
that customers place orders 30 days in advance of shipment. However, to
keep customer service levels high, the brew masters also study historical
demand patterns to determine the total volume and mix of premium and bock
beer. The brew master calculates how much of his order backlog can be filled
from beer currently in the process tanks.
When insufficient beer is available, a brew of the proper type is scheduled.
The brew masters schedule the bottling, canning and keg packaging lines
based on the orders scheduled for delivery during the next week. To keep
the beer as fresh as possible and minimize finished goods inventory levels,
the output rate of the packaging operations closely matches the demand rate.
No more than a 2 weeks supply of beer is kept in finished goods inventory at
Accounting estimates the annual cost of carrying inventory at the brewery is
30 percent of the inventoried item’s direct cost of goods sold. The beer has a
four month shelf life after which its quality begins to noticeably decline.
MEETING TIIE DEMAND FOR BOGGY BEER
Demand for Boggy beer has grown dramatically over the past several years.
Table 1 contains the monthly sales data in barrels for 1991 and 1992. The
percent of sales of each package type are: 15% cans, 35% kegs, and 50%
bottles. The average weighted sales revenue and direct cost of goods sold
per barrel at the brewery are $80.00 and $50.00, respectively, excluding the
state excise tax.
The brew masters are interested in determining whether the facility can
accommodate the forecast demand growth over the next few years. The
brewery targets a five day work week for all employees, but any process can
operate on weekends during an emergency. Average employee wages are
$9.50 per hour for regular time. Overtime is 150 percent of regular time
wages. Employee benefits are approximately 70 percent of regular time
The capacity of the brew kettle can be expanded to hold 100 barrels of wort at
a cost of $8,000 to $10,000. However, the heating system and water pipes
that feed the hot artesian water into the kettle would also have to be modified
at a cost of
$5,000. The lead time for expanding the kettle is approximately eight weeks:
six weeks for scheduling the work and ordering the materials, and two weeks
for performing the modification.
Fermenting, rub, finishing, and package release tanks are available for
approximately $100 per barrel of capacity. This price includes installing the
tanks and getting them ready for operation. The brew masters anticipate that
any new tanks purchased would have a 600 bbl capacity. This would simplify
management of the process and be in line with the increasing volume of the
brewery. Lead time for purchasing and installing the tanks is 12-18 months.
THOUGHT QUESTIONS TO GET STARTED
1. Prepare a flow chart of the brewing and packaging processes used at
2. Determine the capacity of all the processing and packaging resources for
which you are given data. Assume the firm operates 50 weeks per year and
that holidays are spread out evenly through the year. What is the daily and
monthly throughput capacity of the brewery?
3. In 1992, the firm varied its monthly production rate to match each month’s
demand (e.g., June’s sales are brewed in May and packaged in June)? Do
you like this production schedule? Why or why not? Suggest how you would
resolve any problems.
4. What if, the firm had utilized a constant production rate (i.e., 4750
bbls/month) in 1992; and brewed 4750 bbls in December 1991 for packaging
in January 1992. Evaluate this production schedule? (Hint, determine the
beginning and ending inventory levels in the worksheet below. January is
done for you. The production quantity indicates the amount packaged. All
entries are in barrels.)
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